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liliimtiitf  ■'{'''■ 


FIELD 


ON 


THE    LAW 


OF 


Private  Corporations. 


BY 

GEORGE    W.    FIELD, 

AUTHOR  OF  ■•  A  TREATISE  ON  THE  LAW  OF  DAMAGES,"  ETC.,  ETO. 


REVISED  BY 

H .    G.     WOOD 


ALBANY,  N.  Y.: 
JOHN   D.   PARSONS,  Jr.,   PUBLISHER. 

1883. 


Entered,  according  to  act  of  Congress,  in  the  year  eighteen  hundred  and  eighty-three, 

By  JOHN  D.  PARSONS,  Jr., 

In  the  office  of  the  Librarian  of  Congress,  at  Washington. 

T 


WEED,  PARSONS  AND  CO  MP  A  NT, 
PRINTERS  AND  ELECTROTYPERS, 
ALBANY,  N.  Y. 


PREFACE, 


In  the  revision  of  this  work  the  object  lias  been  to  bring  into 
one  vohime  the  Largest  possible  amount  of  useful  and  practical 
matter,  without  essentially  impairing  the  plan  of  the  autlior  or 
destroying  the  symmetry  of  his  work.  Some  portions  of  tlie  original 
text,  which  it  was  believed  could  reasonably  be  dispensed  with, 
have  been  eliminated  and  replaced  by  other  matter,  and  other 
matter,  covering  just  one  hundred  and  two  pages  more  than  the 
original  work,  has  been  added  to  it.  The  original  work,  in  my 
judgment,  was  an  excellent  one,  and  much  better  adapted  for 
practical  use  by  the  profession  than  any  which  has  been  published. 
In  going  over  the  topics  treated  by  the  author  1  have  found  on 
every  page  evidences  of  careful  research,  conscientious  study  and 
an  honest  purpose  on  his  part  to  give  to  the  profession  a  book 
upon  the  vast  topics  covered  by  it,  which  should  be  of  value  to 
them,  and  I  sincerely  trust  that  my  labors  have  not  impaired  the 
symmetry  or  the  excellence  of  his  work.  If  my  task  had  been  to 
write  a  new  work  upon  the  subject,  my  plan  might  have  been 
somewhat  different  from  the  author's,  as  I  have  always  believed 
that  a  subject,  involving  so  many  nice  and  intricate  questions  as 
this  one  does,  cannot  be  satisfactorily  treated  in  a  single  volume, 
and  that  a  work  which  merely  covers  the  outlines  of  a  subject, 
and  confines  itself  to  the  mere  statement  of  general  rules,  is  never 
entirely  satisfactory  to  the  practicing  lawyer,  who,  in  the  prepara- 
tion of  .his  cases,  desires  to  find  the  exceptions  to,  or  the  adjudged 
application  of,  the  rules,  rather  than  the  rules  themselves,  with 
which  he  is  supposed  to  be  familiar.  I  know  that  the  tendency 
of  authors  latterly  is  to  condense  the  law  into  rules,  within  a 
brief  compass,  but  I  think  that  the  profession  will  agree  with  me 
that  mathematical  certainty  is  not  an  element  of  legal  rules  or 
propositions,  and  that  the  exceptions  to  these  rules,  are  of  as 


75599B 


iv  Preface. 

much  importance  as  the  rules  themselves,  and  that  it  is  the 
duty  of  an  author  to  note  these  exceptions  as  fully  as  possible, 
which,  upon  a  subject  which  has  attained  such  proportions  as  that 
involved  under  the  head  covered  by  this  treatise,  cannot  be  done 
in  a  single  volume.  Yet  I  believe  that  this  work  will  be  found 
to  be  of  more  practical  value  to  the  profession  than  any  other, 
and  that  it  will  serve  as  a  useful  guide  upon  many  heads  of  the 
subject  involved,  not  covered  by  any  other  work  upon  the  subject. 


TABLE  OF  CONTENTS. 


CHAPTER  I. 


WHAT  ARE  —  ORIGIN  AND  HISTORY  OF. 
Sec.  Page. 

1.  What  are  corporations,  and  kinds  of 1 

2.  Various  kinds  of  corporations    3 

3.  Distinction  between  public  and  private  corporations 6 

4.  Quasi  corporations 7 

5.  Origin  and  early  history  of  private  corporations 8 

CHAPTER  n. 

HOW  CORPORATIONS  ARE  CREATED. 

6.  Creation  an  act  of  sovereignty 9 

7.  Creation  by  royal  charter 10 

8.  Creation  by  act  of  parliament 11 

9.  Corporations  at  common  law  and  by  prescription 12 

10.  How  created  in  this  country 13 

11.  Power  of  congress  to  create 13 

12.  Sovereign  authority  of  legislatures 14 

13.  General  statutes  of  incorporation  .      .    15 

14.  The  national  banking  law 17 

15.  Of  the  power  to  delegate  authority  to  create 18 

16.  Of  the  power  of  territorial  legislatures  to  create 18 

17.  Corporations  by  prescription  in  this  country 19 

18.  Foreign  joint-stock  companies  may  be  corporations 20 

19.  The  corporate  name 23 

20.  The  location  of  corporations 26 

21.  Words  of  incorporation  in  royal  grants 27 

22.  Common-law  incidents  of  a  corporation 28 

23.  Acceptance  of  the  grant 28 

24.  Mode  of  acceptance 30 

25.  Same  continued 31 

26.  Acceptance  must  be  unconditional 31 


vi  Table  of  Contents. 

Sec.  Page. 

27.  Acceptance  under  general  laws . .    32 

28.  The  term,  "constating  instruments  " 33 

29.  Organization  of  a  corporation 36 

CHAPTER  III. 

PRIVATE    CORPORATIONS  —  NATURE  AND  CHARACTER  OF. 

80.  Distinction  between  public  and  private  corporations 38 

31.  Legislative  control  of  public  corporations 39 

32.  Private  corporations  —  doctrine  in  reference  to  legislative  control 

over 41 

33.  Immunity  does  not  exempt  property  from  legislative  control 45 

34.  Power  of  the  legislature  to  regulate  the  charges  of  railroads 46 

35.  Ground  on  which  legislative  power  is  predicated 48 

36.  Reason  for  the  exercise  of  such  power 51 

37.  Legislative  control  over  rate  of  charges  by  railroad  companies.  . .  53 

38.  Subsequent  grants  do  not  impair  the   contract  —  construction  of 

grants   <- 56 

39.  Reservation  of  power  in  the  legislature 59 

40.  Right  to  resume  based  upon  misuse  or  abuse  of  its  franchise 63 

41.  The  power  to  resume  cannot  be  exhausted 63 

42.  General  statutes  reserving  tlie  power 63 

43.  Amendments  of  charters . . ; 64 

44.  Repeal  of  charter 65 

45.  General  implied  powers  of  65 

46.  Powers  conferred  or  limited  by  statute ...  66 

47.  Corporate  powers  limited  to  the  object  of  the  grant 67 

48.  Distinctions  between  corporate  and  copartnership  associations  ...  70 

CHAPTER  IV. 

PERPETUAL    SUCCESSION. 

49.  The  doctrine  of  immortality 73 

50.  The  advantages  of  perpetual  succession 73 

CHAPTER   V. 

MEMBERS STOCKHOLDERS    AND    STOCK. 

51.  Composition  of  private  corporations 78 

52.  The  government  may  constitute  a  member 79 

53.  Admission  and  election  of  members  and  officers 81 

54.  Disfranchisement  and  expulsion  of  members 81 

55.  Quasi  corporations 82 

56.  Membership  under  general  statutes 90 

56a.  Certificates  of  stock,  nature  of,  etc 91 


Table  of  Contents.  vii 

Sec.  Page. 

57.  Management  by  directors <J4 

58.  Shareholders  are  members  —  right  to  vote 95 

59.  Transfer  books  of  company 97 

59a.  Rights  of  corporation  in  stock,  lien,  etc 100 

60.  Executor  of  stockholder,  rights  of 106 

61.  Right  to  vote  by  proxy  or  attorney 106 

62.  Matters  that  stockholders  are  presumed  to  know 107 

63.  Personal  liabilities  of,  under  statutes 108 

64.  Cause  of  action,  accnies  when 110 

65.  Intentional  deceit  as  to  organization,  etc 112 

66.  General  liabilities  of,  on  subscription  to  stock 114 

67.  Conditions  provided  bj'  the  constating  instruments 116 

68.  Special  disabilities  created  by  charter 118 

69.  Condition  must  be  complied  with 118 

70.  Conditional  subscriptions , 120 

71.  Company  may  accept  payment  in  labor,  etc 122 

73.  The  condition  may  be  waived 123 

73.  When  the  condition  is  void 123 

74.  Conditions  which  will  avoid  the  whole  contract 125 

75.  Conditional  subscriptions  continued 127 

76.  Fraudulent  subscriptions 130 

77.  Subscriptions  in  contemplation  of  incorporation 131 

78.  Fraud  in  relation  to  subscriptions 132 

79.  Rules  depend  upon  statutes  or  constating  instruments. 136 

80.  Defense  to  subscriptions  on  other  grounds .  137 

81.  Changes  in  charter.    . . 1 39 

82.  Assessments  and  calls  for  payments 141 

83.  Promise  to  pay,  effect  of,  by  whom  calls  should  be  made 142 

84.  Diversion  of  capital  to  other  pui'poses 143 

85.  Forfeiture  of  stock ...    145 

86.  Assessments  —  rules  in  relation  to 148 

87.  Power  to  lay,  cannot  be  delegated 149 

88.  Statutory  power  must  be  followed 150 

89.  Several  assessments  may  be  laid  at  one  time,  when 150 

90.  Notice  of  assessments  or  calls 151 

91.  Sufficiency  of 152 

92.  Rights  of  stockholders  to  dividends 153 

93.  Right  of  purcliaser  to  dividends 155 

94.  Effect  of  declaring  dividend 158 

95.  A  stockholder  may  sue  for  his  dividends 159 

96.  Income  on  stock  in  trust 159 

97.  Money  in  hands  of  directors 160 

98.  Right  to  sell  and  assign  shares 161 

99.  Transfer  of  stock 162 


viii  Table  of  Contents. 

Sec. 

100.  Power  of  attorney  to  transfer,  presumption  arising  from 170 

101.  Liabilities  of  assignees  to  corporations 171 

103.  Liability  of  purchasers  from  trustees 173 

103.  Right  of  trustee  to  pledge 173 

104.  Rights  of  cetstui  que  trust  against  purchaser 175 

105.  Stockholder's  right  to  vote  —  holding  stock  constitutes  right. . .  176 

106.  Right  of  stockholders  to  access  to  books 177 

107.  Holders  of  preferred  stock 178 

108.  "When  it  can  be  issued  —  dividends  on 178 

109.  Scrip  and  preliminary  subscriptions 179 

110.  Stock  defined,  etc 180 

111.  Issuing  certificates  of  shares 181 

112.  Certificates  unlawfully  issued 183 

113.  Fraud  in  issuing  stock  certificates 183 

114.  Shares  and  income  —  cliaracter  and  quality  of,  as  property 183 

115.  Interest  of  stockholders  in  corporate  property 184 

116.  How  stockholder's  interest  is  conveyed 185 

117.  Character  and  quality  of  certificates 186 

118.  Transfer  of  shares  —  how  made 188 

119.  Effect  of  assignment  and  delivery 190 

120.  Refusal  of  the  corporation  to  transfer 192 

121.  Contracts  for  the  transfer  of  shares 196 

122.  Liens  of  the  corporation  on  stock 197 

123.  Company  may  refuse  to  transfer,  when 198 

124.  Instances  where  corporation  has  been  held  justified  in  refusing 

to  transfer 199 

125.  Corporation  may  be  compelled  to  transfer 200 

126.  Stock  subject  to  execution  against  assignor,  until  transferred. .  ,  201 

127.  Stockholder's  right  of  action  against  the  corporation 202 

128.  When  stockholder  may  have  injunction  against  corporation. . . .  203 

129.  Liability  of  the  stockholders  in  equity  to  creditors 205 

130.  Overissued,  and  "watered  stock. " 206 

CHAPTER  VI. 

DIRECTORS. 

131.  Directors  —  election  of 211 

132.  Relation  of,  to  stockholders 213 

133.  Powers  of  directors 214 

134.  Same  continued 215 

135.  Board  of  directors  or  managers 216 

136.  General  powers  of  and  limitations  thereon 216 

137.  Implied  powers  of 217 

138.  Acts  not  within  the  scope  of  their  powers 218 


Tablk  of  Contents.  ix 

Sec.  Page. 

139.  Powers  conferred  by  the  fundamental  law 219 

140.  Powers  depend  upon  interpretation ►. . . .   221 

141.  Powers   not   conferred   upon  directors    remain  in  the  corporate 

body 221 

142.  The  directors  cannot  change  the  character  and  objects  of  the  cor- 

poration     223 

143.  Directors  as  agents 225 

144.  Distinction  in  Massachusetts 226 

145.  Rule  in  England  as  to  the  authority  of  directors 225 

146.  Delegation  of  authority 227 

147.  Ratification  of  agent's  acts 232 

148.  Same  continued 236 

149.  Effect  of  knowledge  of  unauthorized  acts 237 

150.  Effect  of  ratification 239 

151.  Directors  under  the  national  banking  law 239 

152.  Personal  liability  of  directors 240 

153.  Same  continued ' 242 

154.  The  fiduciary  character  of  directors 243 

155.  Same  continued 244 

156.  They  cannot  manage  the  affairs  of  the  corporation  for  their  per- 

sonal benefit 247 

157.  Contracts  by  directors  with  corporation 248 

158.  Instances  where  they  are  not  personally  liable 253 

159.  Where  they  act  without  authority 255 

160.  Liability  as  partners 256 

161.  Directors  de  facto 256 

162.  Compensation  of 257 

163.  Cannot  increase  their  own  compensation 259 

164.  Meetings  of  directors 266 

CHAPTER  VII. 

OFFICERS    AND    AGENTS    GENERALLY. 

165.  Necessity  for  corporate  agents 267 

166.  General  limitations  on  the  authority  of  agents 268 

167.  Directors  as  agents ...  268 

168.  Appointment  of  agents,  use  of  seal,  etc 269 

169.  What  is  within  the  scope  of  the  agent's  authority 271 

170.  Powers  implied  by  virtue  of  an  office 272 

171.  Powers  of  president 274 

172.  Authority  by  usage 277 

173.  Apparent  authority 277 


X  Table  of  Contents. 

Sec.  Page. 

174.  Distinction  between  executed  and  unexecuted  contracts,  where 

the  agent  exceeds  his  authority 278 

175.  Limitations  of  power  as  to  time 279 

if  6.  Mode  of  executing  contracts  by  agents 281 

177.  How  contracts  by,  should  be  executed 382 

178.  Id 286 

179.  Ultra  mres  contracts  by  agents  . .  . 286 

180.  Same  continued 287 

181.  Parties  dealing  with  an  agent  must  take  notice  of  his  authority..  .   287 

182.  Delegation  of  authority  by  agents 290 

183.  Same  continued 291 

184.  Powers  expressly  conferred 292 

185.  Ratification  of  acts  of  agents 292 

186.  The  doctrine  of  ratification  applicable  to  corporations 294 

187.  Same  continued 295 

188.  Personal  liability  of  agents 296 

189.  Forms  of  executing  power  by  agents 297 

190.  When  agent  personally  bound '. 298 

191.  Where  there  is  no  principal 298 

192.  Liability  of  agent  in  case  of  misrepresentation  of  his  authority.  . .   299 

193.  Matters  of  which  parties  dealing  with  agents  are  bound  to  take 

notice ....  301 

194.  Same  continued 302 

195.  Liability  of  agents  for  violation  of  duties 302 

196.  Compensation  of  officers  and  agents. 303 

197.  Frauds  of  officers  and  agents 308 

198.  Proof  of  agency 308 

CHAPTER  VIIL 

CORPORATE   MEETINGS. 

199.  How  the  will  of  the  corporate  body  is  expressed 310 

200.  Notice  of  corporate  meetings 311 

201.  Common-law  doctrine  relating  to  notices 313 

202.  Waiver  of  notice  —  presumptions 315 

203.  Adjourned  meetings 316 

204.  General  and  special  meetings 317 

205.  The  majority  at  corporate  meetings  may  express  the  corporate  will  318 

206.  Doctrine  in  case  of  a  pledge  of  stock  —  right  of  pledgee  or  trustee 

to  vote 319 

207.  Meeting  of  directors 321 

208.  Acts  of  an  irregular  meeting  may  be  valid 322 

209.  Can  the  directors  only  act  as  a  board? 322 

210.  Same  continued 324 

211.  What  constitutes  a  quorum 325 


Table  of  Contents.  xi 

Sec.  Page. 

212.  Same  continued 325 

213.  Majority  may  act 326 

214.  The  powers  of  directors 326 

215.  The  mode  of  expressing  assent  by  directors 327 

216.  Corporate  meetings  cannot  be  lield  outside  the  state 327 

217.  Directors  may  hold  meetings  outside  the  state 329 

218.  Jurisdiction  of  equity  to  restrain  by  injunction 331 

CHAPTER  IX. 

CORPORATE    CONTRACTS. 

219.  The  power  to  contract,  a  corporate  incident ;  construction  of  the 

power 335 

220.  Mode  of  exercising  the  power 336 

221.  Incidental  powers  of  a  corporation 338 

222.  Cases  illustrating  the  subject   340 

223.  Contracts  relating  to  bailments. ...    344 

224.  What  would  and  what  would  not  be  within  the  scope  of  an  agent's 

authority,  in  cases  of  bailments 345 

225.  Place  of  contracting  by  tlie  corporation 346 

226.  Place  of  contracting  by  directors 349 

227.  Corporate  bills  and  notes  ;  negotiable  quality  of  corporate  bonds.  350 

228.  Coupons  ;  their  incidents  and  qualities 353 

229.  Ultra  vires;  doctrine  of 355 

230.  Different  senses  in  which  the  term  is  used   360 

231.  Are    all   contracts  void,    entered  into   by    corporations,   beyond 

the  powers  conferred  upon  them  ? 361 

232.  Same  continued 366 

233.  Distinction  between  executed  and  unexecuted  contracts,  in  rela- 

tion to  ultra  vires 366 

234.  Same  continued 368 

235.  When  neither  party  can  avoid  a  contract,  although  ultra  vires. . .  .  374 

236.  Same  continued ...    375 

237.  238.  Form  of  action,  in  case  of  ultra  vires  contracts 377 

239.  The  doctrine  of  ultra  vires  applied  to  agents .  381 

240.  The  doctrine  of  ultra  vires^  in  cases  of  negotiable  instruments. . .  382 

241.  Necessary  or  implied  powers,  not  ultra  vires 384 

242.  Right  to  mortgage 388 

243.  Conclusion  as  to  ultra  vires  contracts 388 

CHAPTER  X. 

THE   CORPORATE   SEAL. 

244.  Definition  ;  history 392 


xii  Table  of  Contents. 

Sec.  Page. 

245.  History  of  private  seals 393 

246.  How  seals  came  into  use 394 

247.  Incident  of  a  corporation 394 

248.  Former  doctrine  as  to  corporate  seals 395 

249.  Origin  of  the  law  relating  to  corporate  seals 397 

251,  252,   253.   Corporate  seals  ;  present  doctrine  in  reference  to 400 

254,  255.  What  is  a  common  seal 404 

256.  By  whom  the  seal  should  be  affixed 406 

257.  Where  an  acknowledgment  is  required 407 

258.  Doctrine  in  relation  to  agents 407 

260.  The  seal  as  evidence 410 

CHAPTER  XL 

BY-LAWS. 

261.  General  principles  relating  to  by-laws 412 

262.  Requisites  of,  and  construction  relating  to  by-laws 413 

263.  By-laws  must  be  reasonable  and  not  oppressive,  nor  contrary  to 

the  laws  of  the  state 414 

284.  By-laws  in  restraint  of  trade 416 

265.  By-laws,  when  adojjted  by  the  corporate  body 417 

266.  By  laws  adopted  by  the  directors 417 

267.  Distinction  between  by-laws  adopted  by  the  corporation  and  those 

adopted  by  directors 418 

268.  By-laws  contrary  to  the  general  laws  of  the  land  void 420 

270.  Matters  that  may  be  regulated  by  by-laws 422 

272.  How  by-laws  are  made 425 

273.  Repeal  of  by-laws 426 

274.  Functions  of  by-laws —  effect  on  third  persons 427 

275.  Bj'-laws  regulating  the  transfer  of  stock 428 

277,  278.  Providing  for  a  corporate  lieu  on  stock 429 

279.  Notice  conferred  by  the  by-laws 431 

280.  By-laws  cannot  enlarge  or  abridge  the  rights  of  stockholders  . . .   431 

CHAPTER  XH. 

LIABILITY   OF  CORPORATIONS  FOR  TORTS. 

281.  282.  General  principles  relating  to  the  liability  of,  for  torts 432 

283.  Corporations,  when  liable  for  torts 434 

284.  Liability  of  principal  for  acts  of  agent 435 

285.  They  may  do  wrongful  acts,  or  direct  them  to  be  done 436 

286.  Frauds  of  corporations,  or  of  their  agents 436 

287.  Doctrine  of  ultra  vires  not  applicable  to  torts 438 

288.  Frauds  of  agents  for  which  the  corporation  is  liable 441 


Table  of  Contents.  xiii 

Sec.  Page. 

289.  Frauds,  etc.,  of  directors 442 

290.  Particular  acts  of  fraud  by  agents 443 

291.  Doctrine  where  the  corporation  is  the  occasion  of  the  loss  by  the 

fraudulent  act  of  a  servant 444 

292.  Corporations  enjoying  the  benefit  of  contracts  secured  by  the 

frauds  of  agents  will  be  responsible  for  such  frauds 445 

293.  Rule  in  England 446 

294.  Riglit  to  repudiate  a  contrnc  t  fnr   fraud  limited   to  the  original 

parties 449 

295.  Ratification  of  a  contract  effected  by  the  fraud  of  the  agent. . . .   449 

296.  Ratification  of  torts 450 

297.  Corporate  liability  for  other  other  wrongs 450 

298.  Assault  and  battery  ;    when  committed  in  line  of  duty  of  the 

agent 450 

299.  Distinction  between  torts  and  contracts  as  to  application  of  doc- 

trine of  nltra  vires 457 

300.  Liability  of  corporations  for  trespasses  to  property 457 

301.  Rule  in  Vance  v.  Erie  R.   Co 458 

302.  Liability  of  corporations  in  cases  of  the  negligence  of  agents.  .  .  459 

303.  Limitation  of  liability  in  case  of  negligence 460 

304.  Rule  in  Illinois  as  to  proximate  cause 462 

305.  Reason  for  rule  as  to    proximate  cause 463 

307.   Complications  arising  from  successive  negligence 464 

311.  Damages  generally,  in  cases  of  torts   467 

312.  When  injury  of  permanent  nature 468 

313.  Exemplary  damages 469 

315.  Application  of  the  doctrine  to  private  corporations 471 

316.  Extreme  doctrine  of  liability  for  exemplary  damages 472 

317.  Gross  negligence,  which  authorizes  exemplary  damages 474 

318.  Inconsistency  of  the  rule  in  its  application  to  corporations 474 

319.  Recent  examination  of  the  doctrine  of  exemplary  damages 475 

322.  Conflict  growing  out  of  the  diverse  rules 478 

323.  Damages  for  an  injury  resulting  in  death 479 

324.  Elements  of  damages  in  case  of  death  ;  what  it  is  competent  to 

show 480 

CHAPTER  XIIL 

SUIT    AT   LAW    BY   AND    AGAINST    CORPOKATIONS. 

325.  The  right  to  sue  and  the  liability  to  be  sued,  common-law  inci- 

dents     482 

826.  In  what  name  must  sue  or  be  sued 483 

327.  May  sue  and  be  sued  by  members 483 

329.  Where  suit  may  be  brought 485 


xiv  Table  of  Contents. 

Sec.  Page. 

330.  Foreign  corporations  not  citizens 487 

334.  When  suits  may  be  brought  in  the  federal  courts 491 

335.  A  corporation  may  be  an  alien  under  the  judiciary  act 491 

336.  It  may  be  a  citizen  under  the  constitution  of  the  United  States, 

and  tlie  acts  of  congress  relating  to  judicial  powers  and  the 

jurisdiction  of  the  courts 492 

338.  Corporations  considered  as  citizens  under  the  statutes  of  tlie 
United  States,   for  the  removal  of  suits  from  the  state  to  the 

federal  courts 494 

342.  Rights  in  courts  under  the  national  banking  law 497 

345.  Parties  to  a  suit 500 

346.  Process 501 

347.  Pleadings 502 

349.  When  a  party  dealing  with  a  corporation  is  estopped  to  deny  the 

corporate  existence 504 

350.  When  the  corporation  is  estopped  to  deny  its  existence 505 

351.  General  denial 505 

352.  Proof  of  incorporation .- 506 

354.   Corporate  records ,•••-. 507 

356.  Stockholders'  rights  in  equity 509 

CHAPTER  XIV. 

SUITS   IN   EQUITY   BY   AND   AGAINST    CORPORATIONS   AND   DIRECTORS. 

357.  Remedy  in  equity  by  and  against  corporations 510 

358.  Rights,  liabilities  and  remedies  of  various  parties 511 

359.  Rights  and  liabilities  of,  and  remedies  against,  directors 511 

363.  Stockholders'  liability  in  equity 515 

364.  Rights  of  stockholders  to  restrain  acts  ultra  vires 515 

365.  Creditors'  rights  in  equity  for  a  misappropriation  of  the  corporate 

fund 517 

367.  Doctrine,  generally,  as  to  parties  in  equitable  proceedings 521 

370.  Where  an  injunction  will  be  granted 523 

371.  Where  an  injunction  will  not  be  granted 524 

372.  Specific  performance  —  right  of  way 526 

CHAPTER   XV. 

EXECUTION   AND   THE   APPOINTMENT   OP   RECEIVERS. 

373.  The  common-law  doctrine  in  reference  to  execution 528 

374.  Where  the  same  doctrine  provides  for  a  sale  on  execution 531 

375.  Doctrine  as  to  the  subjection  of  stocks  to  execution 531 

376.  Statutes  generally  provide  for  the  garnishment  of  stockholders. .  .  532 

377.  Appointment  of  receivers , 535 


Table  of  Contents.  xv 

Sec.  Page. 

378.  Judgment  creditor's  right  to  a  receiver 535 

381.  Functions,  rights  and  duties  of  a  receiver  of  a  corporation 543 

CHAPTER  XVL 

AMALGAMATION   AND   CONSOLIDATION. 

384.  Amalgamation  —  meaning  of 545 

385.  The  EngUsh  doctrine  relating  to  amalgamation 546 

386.  Doctrine  in  this  country 547 

387.  Consolidation  must  be  authorized  by  legislative  authority 548 

388.  Where  legislative,  authority  is  conferred  after  the  creation  of  the 

corporation 549 

390.  Difficulty  removed  by  the  exercise  of  the  right  of  eminent  domam  550 
393.  Where  authority  to  consolidate  exists  at  the  time  of  the  creation 

of  the  corporation 553 

393.  Rule  as  to  the  requisite  concurrence  where  no  provision  is  made 

therefor 553 

394.  The  new  corporation  created  by  consolidation 554 

395.  Doctrine  as  to  the  creditors  of  the  consolidating  companies 557 

396.  Consolidation  of  companies  organized  in  different  states 558 

CHAPTER  XVII. 

EMINENT   DOMAIN. 

398.  What  the  right  of  eminent  domain  is 561 

399.  How  the  right  can  be  enjoyed 566 

400.  The  authority  to  grant  the  right  is  in  the  legislature 569 

401.  What  are  public  uses  which  justify  the  exercise  of  the  right 570 

403.  Who  is  to  determine  the  question  of  public  use 576 

403.  Limit  of  the  right 578 

404.  Who  is  to  determine  in  reference  to  the  extent,  amount  or  quan- 

tity of  property  to  be  taken 580 

406.  Where  the  corporation  takes  more  land  than  is  required 589 

407.  Compensation 591 

409.  Damages  —  mode  of  estimating   601 

410.  Elements  of  damages  which  may  be  considered 606 

411.  Lands  injuriously  affected  but  not  taken 606 

CHAPTER  XVIII. 

QUO   WARRANTO. 

413.  The  writ  of  quo  warranto  at  common  law 610 

413.  Proceedings  in  the  nature  of  quo  warranto 617 

414.  The  remedy  regulated  by  constitutional  and  statutory  provisions.  619 

415.  As  a  remedy  against  private  corporations   619 

416.  The  fact  of  non-user  or  mis-user  must  be  clear 631 


xvi  Table  of  Contents. 

See.  Page. 

417.  As  a  remedy  for  an  unlawful  usurpation  of  an  office  in  a  private 

corporation 623 

418.  Possession  and  user  of  the  assumed  office,  essential 026 

419.  Non-user  as  a  ground  for  forfeiture 626 

420.  Destruction  of  the  objects  of  a  corporation,  as  a  ground  of  for- 

feiture    627 

421.  Pleadings.     Evidence 627 

422.  Judgment 627 

423.  Nothing  forfeited  to  the  state  but  the  franchise 628 

CHAPTER  XIX. 

LIENS   ON    CORPORATE    PROPERTY    AND   THEIR   PRIORITY. 

424.  Corporate  mortgages  and  bonds  secured  thereby 629 

425.  Can  the  corporation  by  mortgage  or  trust  deed  give  a  lien  on 

property  to  be  thereafter  acquired 631 

426.  What  may  be  conveyed  by  mortgage . .  634 

427.  Rolling  stock,  character  and  quality  of 637 

429.  Mechanics'  and  constructors'  liens .- 641 

431.  Not  assignable 642 

432.  Priority  between  mortgage  and  mechanics'  liens 642 

CHAPTER  XX. 

DISSOLUTION. 

436.  Cause  for  which  corporations  may  be  dissolved  or  wnicn  consti- 

tute a  dissolution 648 

437.  Reserved  power  in  the  legislature  to  dissolve 648 

439.  Where  the  reserved  power  is  subject  to  a  condition 650 

440.  Expiration  of  the  time  limited  for  its  continuance 651 

441.  Neglect  or  abuse  of  powers 652 

443.  Mode  of  proceeding  in  such  cases 654 

445.  Dissolution  by  the  voluntary  act  of  members 658 

446.  When  the  majority  may  surrender  the  franchise 660 

447.  Dissolution  under  statutes  providing  for  the  winding  up  of  cor- 

porations   661 

449.  Dissolution  by  the  death  of  all  the  members 665 

450.  Effect  of  dissolution  generally  at  common  law 667 

451.  Effect  of  dissolution  upon  creditors 669 

452.  Forfeiture,  not  the  subject  of  collateral  inquiry 670 

453.  When  corporate  existence  mav  be  inquired  into,  collaterally 671 


Table  of  Contents.  xvii 

CHAPTER  XXI. 

MA17DAMUS. 
Sec.  Page. 

454.  The  writ  and  its  functions .  G72 

455.  The  writ  in  this  country G73 

456.  When  issued,  discretion  of  the  court 673 

457.  Practice  and  proceedings 673 

458.  Office  of  the  writ  to  compel  the  performance  of  duty 674 

459.  Concurrence  necessary  to  authorize  the  issuing  of  the  writ 677 

460.  When  it  will  not  be  issued 677 

461.  Resemblance  and  distinction  between,  and  injunction 679 

463.  Against  private  corporations  or  its  officers 679 

463.  Corporations  may  invoke  its  aid 684 

464.  To  compel  inspection  or  delivery  of  corporate  books  and  papers.  685 

465.  As  a  remedy  against  corporations 687 

466.  To  whom  the  writ  should  be  directed,  and  service 688 

CHAPTER  XXII. 

TAXATION. 

467.  Taxation  defined  and  necessity  of 689 

468.  Should  be  equitably  imposed 689 

469.  Difficulty  attending  taxation  of  railroad  property 691 

470.  Statutes  regulating  taxes  on  corporate  property 691 

472.  What  corporate  property  is  taxable  —  double  taxation 694 

473.  Corporate  property  subject  to  and  exempt  from  taxtion . 694 

474.  Exemption  statutes  sustained 697 

475.  Indications  that  the  doctrine  will  not  be  extended 703 

476.  Where  corporate  property  is  used  in  different  states 705 

477.  Exemption  of  United  States  stocks 706 

478.  Exemption  from  taxation  under  the  national  banking  law 710 

479.  Municipal  subscriptions  in  aid  of  corporate  enterprises,  and  tax- 

ation therefor 711 

CHAPTER  XXIII. 

NEGLIGENCE  AND  WRONGFUL  ACTS  OP  AGENTS  OR  SERVANTS. 

480.  Corporate  liability  for  negligence  and  wrongful  acts  of  agents  and 

servants 716 

481.  Illustration  of  the  rule 717 

482.  The  maxim  q^ui  facit  per  aliumfacit  per  se,  especially  applicable  to 

corporations 718 

483.  Cases  Ulustrating  the  maxim 719 

487.  Real  test  of  liability 724 

c 


xviii  Table  of  Contents. 

Sec.  Page 

488.  Implied  powers  of  agents 729 

489.  Matters  to  be  considered  in  determining  whether  the  act  is  within 

the  scope  of  the  agent's  authority 731 

490.  Contractor's  and  contractee's  Uability 732 

491.  Liability  in  case  of  a  nuisance  attaches  only  when  a  nuisance  nec- 

essarily results 730 

493.  Corporations  bound  to  the  same  degree  of  care  as  natural  per- 
sons —  degree  of  care 738 

493.  Not  insurers  against  all  casualties 739 

494.  Care  required  of  railroad  corporations  in  relation  to  engines,  cars, 

track,  etc 741 

495.  Duty  of  railway  company  as  to  stations 751 

496.  Instances  of  negligence  where  the  corporation  was  held  liable. . .  751 

497.  Duty  of  railroad  corporation 754 

499.  Injuries  received  in  getting  upon  a  train 760 

500.  Accommodations  —  contributory  negligence 761 

501.  Duty  to  passengers -. 762 

502.  Grounds  upon  which  liability  is  predicated 763 

503.  Liability  for  willful  wrongs  of  agents 767 

504.  Liability  of  railroad  corporations  for  delay  in  running  trains  .  . .  775 

505.  Liability  for  negligence  in  constructing  or  repairing  railroads,  or 

for  nuisances 677 

506.  Engines  and  machinery 783 

507.  Application  of  the  maxim  sic  utere  tuo  ut  alienum  non  Icedas 783 

508.  Contributory  negligence 784 

509.  Consequential  damages 785 

510.  Injury  to  persons  and  property  by  running  of  trains 786 

511.  Trespassers  on  the  tracks 791 

512.  Different  rule  as  to  children 792 

513.  Injuries  to  animals 793 

515.  Instances  of  liability  for  other  torts  of  servants 795 

.  516.  Liability  to  indictment 796 


TABLE  OF  OASES  CITED. 


Aaron  V.  Sec.  Ave.  R.  Co 4(i9 

Abbey  v.  Chase 297,  500 

Abbot  V.  American  Hard  Rubber  Co.  215 
218,  223,  524 

Abbott  V.  Aspinwall ,   ...  112 

Abbot  V.  Baltimore  Steam  Jack.  Co  . . .  3.59 

Abbott  V.  Hermon 395,  4U3 

Abbott  V.  Merriam 303 

Abby  V.  Billups 282,  337 

Aberdeen  Female  Acad.  v.  Aberdeen..  649 

Aberdeen  Rwy.  Co.  v.  Blailiie 2.50 

Ackerman  V.  Desha  Co 675,  678 

Aclierson  v.  Erie  R.  Co 473 

Aoome  V.  Am.  Min.  Co 504 

Adams  V.  Cole 732 

Adams  V.  Mayor,  etc 413 

Adams  V.  Wicassett  Bank 40 

Adler  V.  Milwaukee,  etc.,  Co... 537,  664,  669 

Adley  V.  Whitestable 413 

Adriancev.  Roome 227,289,419,  431 

Aetna  Ins.  Co.  V.  Maguire 289 

African  M.  B.  Church  v.  Duru 222 

African  Soc.  V.  Varick 20 

Atrges  V.  Nicholson 385 

Asfro  V.  Nicholson 350 

Agra   &  Masterman  Bk,  In  re 350 

Agricultural  Bk.  v.  Burr 34,  90,  181 

Agricultural  Bk.  v.  Commercial  Bk 346 

Agricultural  Bank  v.  Robinson 181 

Alabama  Bk.  v.  Conregys 316 

Ala.,  etc.,  R   Co.  v.  Kemy.. 566 

Ala.  &Tenn.  R.  Co    v.  Kidd 433 

Ala.  L.  Ins.  Co.  V.  Smith 387 

Albany  V.  Cunliflf  286 

Albany  Street,  Matter  of 579 

Albert  V.  Savings  Bank..  176,  359,  434,  450 

.Vldebert  v.  Leaf 531 

Alden  V.  N.  Y   Cent.  R.  Co 741 

Alden  V.  Pearson 771 

Alderley  v.  Storm  112 

Alderman  V.  Finley : "505 

Aldrich  v.  Boston,  etc.,  11'.  Co 773,  795 

Aldrich  V   Drury 578 

Aldrich  v.  Palmer 409 

Aldrich  V.  Press  Printing  Co 716,  796 

Alexanderv.  Baltimore 569 

Alexander  V.  Berney 25 

Alexander  V.  Cent.  R.  Co .523 

Alexanderv.  Sizer 285,  296 

Alexandria  Bk.  v.  Bk.  Columbia 410 

Alford  V.  Miller 219 

Alfridson  v.  Ladd  282 

Allison  V.  Chandler 466 

Allnut  V.  Inglis 51 

All  Saints'  Church  v.  Lovett.  .  10,  24,  256 

652 

Allton  V.  Mulledy 282 

Allyn  V.  Boston  &  A.  R.  Co.. ..  786,  787,  788 

Allegheny  V.  McClurkan 295,  355 

Allegheny  Co.  v.  Cleveland 560 

Allen  V.  Buchanan 43,    44 


PAGE. 

Allen  V.  Curtis 204,  513,  .516 

Allen  V.  Drew 690 

Allen  V.  London  &  S. Western  Rwy.  Co.  451 

721 

Allen  V.  McKeen 40,  45 

Allen  V    Montgomery  R.  Co...  148,  388,  631 

Allen  V.  Pegram 113 

Allen  V.  Sewall 112,  114 

Alton  V.  Mulledy 3:37 

Alton,  etc.,  R.  Co.  V.  Dietz 33 

Althorpf  V.  Wolfe 480 

Amant  v.  Turnp.  Co 528 

Ambergate,  etc. ,  Ry.  Co.  v.  Mitchell. ..  103 

America  Bk.  v.  McNiel 97,163,  191 

American  Bk.  v.  Embury 336 

American  Colonization  Soc.  v.  Gartriel.  485 

American  Express  Co.  v.  Sands 771 

American  Fire  Ins.  Co.  v.  Pringle 645 

American  Ins.  Co.  v.  Oakley  .  395,  403,  410 
American,  etc.,  R.  Co.  v.  Miles...  257 

American  R.  Frog  Co.  v.  Haven  106,  321,  685 

Ames  V.  Palmer 643 

Amesbury  v.  Ins.  Co 414 

Amesbury  Woolen  Man.  Co.  v.  Ames- 
bury  697 

Amey  v.  Allegheny  City 282 

Ammant  v.  New  Alexandria,  etc.,  R 

Co 6.38 

Amory  V.  Hamilton 295 

Amsden  V.  Dubuque  605 

Anacosta  Tribe  v.  Murbach 417 

Ancient  City  Club  v.  Miller 483 

Anderson  v.  Coonley 273 

Anderson  V.  Kanawha  Coal  Co 37 

Anderson  v.  Kerns  Draining  Co 571 

Anderson  V.  Longden 232,  280 

Anderson  v.  Newark,  etc.,  R.  Co ISO 

Anderson  v.  Newcastle  R.  Co 671 

Anderson  v.  Nicholas    93,  195,  532 

AndoverT.  Co.  v.  Gould 141 

Andover  Turnp.  Co.  v.  Hay 410 

Andrews  V.  Kneeland 372 

Andrews  v.  Ohio,  etc.,  R.  Co 133 

Andrews  v.  Union  Ins.  Co 423 

Androscoggin,  etc.,  R.  Co.  v.  Stevens.  694 

Andrus  v.  Howard 795 

Augell  v.  Silsbury 543 

Anglo-Australian  Co.  v.  British,  etc., 

Co 547 

Angio-California'.G.  M.  Co.  v.  Lewis  ..  153 

Annapolis  &  E.  R.  Co.  v.  Gantt 462 

Anthony  V.  Cleveland    355 

Anthony  V.  Leftwick 526 

Antisdell  v.  Chic,  etc.,  R.  Co 793 

Appleby  v.  Mayor 387,  3.55 

Applegate  V.  Earnest 638 

Appling  V.  Bailey 674 

Arberryv.  Beavers 673 

Arents  V.  Commissioners 353 

Argent  V.  Dean  &  Chapter  St.  Paul 454 

Argenti  v.  San  Francisco 375,  381. 


XX 


Table  of  Casks  Cited. 


PAGE. 

Arkenburg  V.  Wood 203 

Armingtoii  v.  Baruett 566,  509,  577 

Arms  V.  Conant 266.330,  350 

Armstrong  v.  Cooley 795 

Arnold  V.  Mavor   269,  395 

Arnold  v.  Haggles 181, 183.  189,  533 

Arnold  V.  Suffolk  Bk 96,198,  200 

Arrington  v.  Vart  Houton 673 

Arthur  V.  Commercial  Bk 215,  387 

Arthur  v.  Griswold 241 

Artz  V.  Chicago,  etc.,  K.  Co 788 

Ash  V.  Cummiugs 573 

Ash  V.  Doggy 527 

Ashbyv.  White 482 

Ashtabula,  etc.,  R.  Co.  v.  Smith,  32, 118,  121 

Ashton  V.  Atlantic  Bk 175,522 

Asiatic  Banking  Corp.,  Ex  parte 350 

Aspinwall  v.  Ohio,  etc.,  R....328,  346,  500 

Aspinwall  V.  Torrance 302 

Atchafalaya  Bk.  v.  Dawson... 650,  654 

Atchison  V.  Davidson 543 

Atchison,  etc.,  R.  Co.  v.  Stanford. 462,  409 
Atlienaeum  L.  Assurance  Co.,  ex  parte,  439 
Athenaeum  L.  Ass.  Co.  v.  Pooley..209,  233 

Athol  Music  Assoc.  V.  Carey 131 

Atkins  V.  Albree.. 156,  101 

Atkins  V.  Gamble 93 

Atkins  V.  Hunt 12 

Atkinson  v.  R.  R.  Co 528 

Atlantic  Cotton  Mills  V.  Abbott  119 

Atlantic  Delaine  Co.  v.  Mason...     141,  317 

Atlantic  Ins.  Co    v.  Sanders 313 

Atlantic  Mut.  F.  Ins.  Co.  v.  Young...  285 

Atlantic,  etc.,  R.  Co.  V.  Comm   190 

Atlantic,  etc.,  R.  Co.  v.  Dunn. 408,  474,  702 
Atlantic,  etc.,  R.  Co.  v.  Johnston  .  ..  250 
Atlantic,  etc.,  R.  Co.  v.  Sullivant.   ...  592 
Atlantic,   etc.,   Tel.  Co.  v.   Common- 
wealth   .  155 

Atlas  Bk.  V.  Nahant  Bk 537 

Atterberry  v.  Knox 487 

Attica  Bk.  V.  Manufac.  Bk... 430 

Atty.,Gen.,  Ex  parte  016 

Atty.-Gen .  v .  Barstow 655 

Atty.-Gen.  v.  Bay  State  Min.  Co 090 

Atty.-Gen.  V.  Birmingham 780 

Arty.-Gen.  V.  Boston,  etc.,  R.  Co 500 

Atty.-Gen.  V.  Bradford  Nav.  Co...  779,  780 

Atty.-Gen.  V.  Chic,  etc.,  R.  Co 47 

Atty.-Gen,  v.  Clerg.  Soc 659 

Atty  -Gen .  v.  Eastlake 516 

Atty.-Gen.  v.  Evart  Booming  Co .574 

Atty.-Geu.  v.  Hudson  R.  R.  Co 779 

Atty.-Gen.  V.  Ins.  Co 343,383,387 

Atty.-Gen.  v.  Metrop.  Bd.  of  Works  ..  780 

Alty.-Gen.  V.  Norwich,  etc 516,  6.53 

Atty.-Gen.  v.  Petersburgh,  etc.,  R.  Co.  612 

631,  658 

Atty.-Gen.  v.  Siddon 435 

Atty.-Gen.  V.Tudor  Ice  Co 373,  653 

Atty.-Gen.  v.  Uticalns.  Co 611 

Atty.-Gen.  v.  Wilson 242 

Att wood  V.  Small    437 

Atwater  V.  Woodbridge 40 

At  wood  V.  Merry  weather 514 

Auburn  Academy  V.  Strong 413,  421 

Auburn  PlankroadCo.  v.  Douglass..      339 

Augusta  Bk.  v.  Conrey 293 

Augusta  Bk.  V.  Augusta 711 

Augusta  Bk.  V.  Earl..  26,  32.5,  329,  338,  347 
384,  487,489,  495,  623 

Augusta  Bk.  V.  Hamblet 217,420 

Aurora  v.  West 41,  69,  351,  353 

Aurora,  etc.,  R.  Co.  v.  Miller 35 

Aurora  T.  Co.  v.  Holthouse 649 

Austin  v.  Daniels 303 

Austin  V.  Murray 416 

Auter  v.  Miller 526 

Aylesbury  R.  v.  Mount 173 


PAOE. 

Babb  V.  Reed 12 

Babcockv.  Beman 286,  297 

Babcock  V.  N.  J.  Stock  Yd.  Co .     70 

Bach  V.  Pac.  Mail  Steam  S.  Co 203,  306 

Bach  man.  In  re 171 

Backus  V.  Lebanon 43,  44,  .566 

Bacon  v.  Robertson 664,  008 

Badger  V.  Bank  of  Cumberland...  333,  374 
377.  394,  410 

Bagshavv ,  Ex  parte .54.5 

Bagshaw  v.  Eastern  N.  R.  Co.  508.  514,  521 

Bailey  v.  Hannibal,  etc.,  R.  Co 178 

Bailey  v.  Hollister II4 

Bailey  v.  Methodist  Epis.  Ch 649 

Bailey  V.  Miltenberger 565 

Baileyv.R  Co 179 

Bailey  V.  Strohecker 687 

Bailiffs,  etc.,  of  Ipswich  v.  Martia 269 

Baird  V.  Graham 731 

Baker  V.  Administrator 535 

Baker  V.  Backus H,  113,  612,  652,  671 

Baker  V,  Bolton 479 

Baker  V.  Freeman    336 

Baker  v.  Cotter 339 

Baker  V.  Johnson.   583,  597,  605 

Bakerv.  Utica 304 

Baldwin  V.  Bk.  Newburgh 374,  377 

Balfour  V.  Ernest 516 

Ball  V.  Lappins 675,  678 

Ballou  V.  Farnum 469 

Ballouv.  Talbot 383,  300 

Baltimore  V.  Baltimore 356 

Baltimore  v.  Baltimore,  etc. ,  R.  Co  . . .    66 

696,  698 

Baltimore  V.  Board  of  Police 41 

Baltimore  V.  Norman '. 105,  458 

Baltimore  V.  Pittsburgh,  etc.,  K.  Co...     63 

Baltimore  v.  Reynolds 338,  .380 

Bait  &0.  R.  Co.  V.  Blocher..  474,  705,  774 
Baltimore,  etc.,  R.  Co.  v.  Gallahue.483,  560 

Baltimore,  etc. ,  R.  Co.  v.  Glenn 560 

Baltimore,  etc.,  R.  Co.  v.  Lowell 191 

Baltimore,  etc.,  R.  Co.  v.  Marshall  Co.  653 

Bait.,  etc.,  R.  Co.  v.  Nesbit 594,  602 

Baltimore,  etc.,  R.  Co.  v.  State..  480,  791 
Baltimore,  etc.,  R.  Co.  v  Supervisors  560 
Baltimore,  etc.,  R.  Co,  v.  Wheeling  ...  203 

533 
Baltimore,  etc.,  R.  Co.  v.  Woodruff  . .    451 

Baltzenv,  Nicolay 399,  301 

Bancroft  v.  Consen 174 

Banet  V.  Alton,  etc.,  R.  Co 63 

Bangate  v.  Shortridge 164 

Bangor  R.  Co.  V.  McComb 605 

Bangor,  etc.,  R.  Co.  v.  Smith  .  ..33,  64,  483 

689,  694 

Bangs  V .  Mcintosh 535 

Bank  V.  Biningsville  Cotton  Co 285 

Bank  v.  Chambers 520 

Bankv.  Chillicothe 343 

Bankv.  Comm 339 

Bank  V.  Farnington 355 

Bankv.  Hammond 381 

BanlvV,  Kennedy 664 

Bankv.  Lanier 190,413,430,  533 

Bankv.  Lockwood 609 

Bank  V.  St.  John  ... ...    319 

Bank  V.  Wrenn 654 

Bank  of  Ala.  v.  Conegvs 323 

Bank  of  Cape  Fear  v.  Edwards 697 

Bank  of  Columbia  V.  Patterson 396 

Bank  of  Commerce's  Appeal 96 

Bank  Comrs.  v.  Bank 657 

Bank  of  Middlebury  v.  Rutland,  etc., 

R.  Co 334 

Bank  of  Mo.  v.  Merchants'  Bk 671 

Bankof  Mo.  V.  Snelling.... 678 

Bank  of  Kentucky  v.  Schuylkill  Bk. ..  373 
Bankof  St.  Mary  v.  St.  John 345 


Table  of  Cases  Cited. 


XXI 


Bank  of  S.  Carolina  v.  Ilanimond 371 

Bank  of  State  v.  Bk.  of  Cape  Fear  ....    42 

Bank  Tax  Case 711 

Bank  of  U.  S.  v.  Dandrid«e.31,  2G0,  279,  39ti 

41.^ 

Bank  of  U.  S.  v.  Davis 457 

Bank  of  U.  S.  v.  Dunn 217 

Bank  of  U.  S.  v.  Lyman 34 

Bank  of  U.  S.  v.  Planters'  Bk.  of  Ga. .     79 

Bankhead  v.  Brown  570,  577 

Banking  Co.  V.  Fisher 3.52 

Banks  V.  Poitoux 371,  39ti 

Banks,  etc. ,  v.  St.  John 520 

Bannon  V.  Baltimore  &O.R.  Co. 469,  474,  792 

Banorgee  V.  Hovey 337 

Baptist  Church  V.  Mulford.37],  395,  403,  410 

Barclay  V.  Quicksilver  Min.  Co 547 

Barclay  V.  Talman 659 

Barcua  v.  Hannibal,  etc.,  P.  R.  Rubber 

Co 266 

Bard  v.  Poole 328 

Bardstown,  etc.,  R.  v.  Metcalf  .339,  387,  631 

6a5 
Bargate  v.  Shortridge,188,  281,  383,  434,  4.50 

Barces  v.  R.  Co 757 

Barker,  E.x  parte 320 

Barker  V.  Allen 296 

Barker  V.  Mechanics  Fire  Ins.  Co.  283,  386 

Barnard  v   Stevens 458 

Barnard  v    Vermont  &  Mass.  R.  Co...  179 

Barnes  V.  Barnes 13 

Barnes  V.  Ontario  Bk 344,  ^86 

Barnetv.  Alton,  etc.,  R.  Co 147 

Barnet  v.  Smith 444 

Barn um  V.  Blackstone  Canal  Co 26 

Barrett  v.  Mead 35,  671 

Barrett  V.  Schuyler  Co 351 

Barrington  v.  Washington. Bk  ....  233,  374 

Barrow  V.  N.  &  C.  T.  Co 373 

Barrows  v.  Mass    ...     <>76 

Barrows  V.  Nat.  Rubber  Co 194 

Barry  v.  Croskev  .       ...   446 

Barry  v.  Merchants  Exch 334,342,  386 

Barstow  v.  City  R.  Co 2.57 

Bartlettv.  Kinsley .508 

Bartlett  v.  Medical  Soc    83,     89 

Bartlett  v.  Pentland 23 

Bartlett  V.  Tucker 300 

Barton  v.  New  Orleans 260,  303 

Barton  V.  Plankroad  Co 251 

Barton  v.  Port  Jackson  Plank  R.  Co..     244 

246,  390 

Bartonshill  Coal  Co.  V.  Reid    795 

Barwick  V.  Eng.  Joint  Stock  Bank 4-38 

441,  447,  724 

Bass  V.  Chicago,  etc.,  R.  Co 783 

Bassett  V    Carlton 482 

Bassett  v.  Porter 13 

Bassett  v.  St.  Albans,  etc.,  Co 151,  171 

Basshor  V.  Dressel 32 

Bateman  v   Mayor,  etc 335 

Batemauv    Mid-Wales  R.  Co 350 

Bates  V.  Androscoggin, etc. ,  R.  Co.  15.5,  179 

Bates  v.  Bank 371,  358,  410 

Bates  V.  Boston,  etc. ,  R.  Co 405 

Bath  V.  Miller 388,  631,  634 

Battershall  v .  Davis 131 

Battle  V.  Davis 543 

Bavington  V.  P.  &  S.  R.  Co 121,  134 

Baxter  v.  State  393 

Baxter  V.  T.  &  B.  R.  Co 788,  789 

Bayard  V.  Farmers,  etc.,  Bk 105,  176 

Bay  Citv  v.  State  Treasurer 685 

Bavlessv.  Orne 241,  303,  523,  654 

Bayley  V.  Ry.  Co 723,738,  763 

Beach  V.  Fulton  Bank... .  338,  436,  457,  717 

796 

Beach  V.Smith    116 

Beard  v.  Conn .  &  Pass.  R .  Co . .  753 


PAGE. 

Beardsley  V.  Ontario  Bank 530,  638 

Beardsley  v.  Smith 113 

Beardsley  v.  Swann 468 

Beaston  v.  Farmers'  Bank 219,  340 

Beaty  v.  Knowler ..66,  :«9 

Beaty  v.  Marine  Ins.  Co 3-5^5 

Beavan  v.  Earl  of  Oxford 92 

Beck  V.  Kantorowitz 139 

BecUel  V.  Union  Tp 713 

Beckett  V.  Houston 176 

Beckett  V.  Upton 779 

Beckwith  v.  Windsor  Man.  Co.   407 

Bedell  V.  L.I.  R.  Co 782.  783 

Bedford,  etc.,  R.  Co.  v.  Bowser 134,  137 

218,  247 
Beekman  v.  Sar.,  etc.,  R.  Co. .532,  561,  576 

580 

Beenev.  Cahawba,  etc.,  R.  Co 146,  148 

Beers  v.  Housatonic  R.  Co 451 

Beers  v.  Phoenix  Glass  Co "274 

Beisiegel  v.  R.  Co 788 

Belknap  v.  Boston,  etc.,  R.  Co. ...468,  471 

473 

Belfast,  etc.,  R.  Co.  v.  Moore 131 

Bell  V.  Midland,  etc.,  R.  Co 474 

Bell  v.  Shibley 543 

Bellefontaine,  etc.,  R.  Co.  v. Snyder.    792 
Bellmeyer    v.    Independent    Dist.    of 

Marshaltown 68 

Bellows  V.  Todd 266 

Belmont  v.  Erie  R.  Co. .243,  245,  256,  516,  535 

Beloit  Bank  V.  Beal 294 

Beman  V.  Rufford 518,634 

Bend  v.  Susquehanna  Bridge  Co.  ..171,  173 
Benjamin  v.  Elmira,  etc.,  R.  Co. ...338,  6,31 

6.39 

Benneson  v.  Bill .544 

Bennett,  Ex  parte 172 

Bennington  Iron  Co.  v.  Rutherford.   ..  504 

Benoist  v.  Carondelet 402,  407 

Benson  V.  Albany .     713 

Benson  v.  Heathorn  254 

Bentinck  V.  N'orf.  Estuary  Co .590 

Bentley  V.  Craven 139 

Berry  V.  Yates  ..        359 

Berryman  v.  Cin.  Southern  Ry.  Trus- 
tees   187 

Berthin  V.  Crescent 43 

Bethany  V.  Sperry 313 

Bethel  Bank  v.  Pahquioque  Bank 664 

Betts  V.  Menard 356 

Beverly  V.  Lincoln  Gas-light  Co. ...404,  485 

Bickering  f.  Ilfracombe  Ky.  Co  93 

Bickford  V.  First  Nat.  Bk 444 

Biddis  V.  James  507 

Bigelow,  matter  of 197 

Bigelow  V.  Hillman  .     . 436 

Bigelow  V.  North  Mo.  R.  Co 793 

Bill  V.  Dareuth,  etc  ,  R.  Co 303 

Bingham  V.  Weiderwax 667 

Binghamton  Bridge  Case  44,  29,  563 

Binney  V.  Plumlev 483 

Bird  V.  Bird's  Patent,  etc  ,  S.  Co  ..   ..    516 

Bird  V    Daggett 285 

Birkenhead,  etc.,  Rwy.  Co.  v,  Brown- 

rigg 79 

Birkett  V.  Whitehaven  Junct 752 

Birmingham,   Bristol  &  Thames  R.  Co. 

V.Locke  148 

Bish  V  Bradford 134 

Bish  V .  Joh  nson 141 ,  553 

Bishop  V.  Brainerd 13,  548,  554,  656 

Bishop  V.  Holcomb 166 

Bissell  V.  Mich.  Southern,  etc.,  R.  Co.  226 
277,  279,  365,  375,  383,  434,  517,  716 

Black  V.  Auditor    675 

Black  V.  Del.  etc.,  R.  Co 143,  215,  23:3 

311,  387,  516.  548,  550,  552,  660 
Black  V.  United  Co 339 


XXll 


Table  of  Cases  Cited. 


PAGE. 

Black  V.  Zacharie 91.  96, '164,  198,  429 

Blackliunrs  Case 44H 

Black  River,  etc  ,  R.  Co.  v.  Barnard  ...  15 
Black  River,  etc.,  R.  Co.  v.  Clarke.     .    116 

133,  50.5 
Blackstock  v.  N.  Y.,  etc.,  R.  Co  ..  434,  450 
Black  &  White  Smith  Soc.  v. Vandyke.    85 

89 

Blaclvwilder  V.  Loveless 526 

Rladen  v.  Phila 260 

Bladesv.Free 301 

Blair  v.  Rutherford    35,  120,  139 

Rlakev.  Ferris  733 

Blakev.  Hinkle 656 

Blake  V.  Livingston  Co  .   .     351 

Blakev.  R.  H.  Co 479,  653,  664,  670 

Blake  V.  Rich.., 578,588 

Blakemore  v.   Glamorganshire    Canal 

Nav.  Co 604 

Blanchardv.  Blackstone 271 

Blanchard  V.  KauU 355,  356 

Bland's  Case 609 

Blanding  V.  Burr  41 

Blatchford  v.  Ross    248.  535,  548,  553 

Blight  V.  Brent 184 

Bliss  V.  Anderson 204,  516 

Bliss  V.  Hosmer .564 

Bliss  V.  Matteson 248,   546 

Blodgett  V.  Morrill 134,  136,   443 

Bloodv.  Goodrich... 293,  337 

Bloodgood  V.  Mohawk  R.  Co....      433,  458 

569,  593,  597,  605 

Bloomfleld  Gas  Co.  v.  Richardson  —    571 

Blyth  V.  Birmingham  Waterworks  Co.  740 

Board,  etc.,  V.  Scearce 46 

Board  of  Education  v    Greenebaura . . .  401 

Board  of  Liquidation  v.  McComb 679 

Boardman  V.  Cutter 93 

Bodinev    Exchange  F.  Ins.  Co    388 

Bodwic  V.  Fennell 417 

Bogardus  V   Rosendale  Manuf.  Co 114 

Bohannon  V.  Binns    654,  671 

Boland  v.  Mo.,  etc.,  R.  Co 793 

Bolt  V.  Stennett 51 

Bolton  V.  Throgmorton 417 

Bond  V.  Mount  Hope  Iron  Co 176 

Bond  V.  Poole 350 

Bonaparte  v.  Camden,  etc. ,  R.  Co 561 

571,  605 

BonellisTel.  Co..  Re 333 

Bonesteel  v.  Mayor,  etc 380 

Bonk  V.  Clark 114 

Bonnell  v.  Wheeler 341 

Bonner  V.  State 678 

Booe  V.  Junction  R.  Co 140 

Booker,  Ex  parte 134,  303,  447 

Boon  V.  Chiles 508 

Boon  V.  Utica 355 

Booth  V.  Bunce 547 

Booth  V.Clark 543 

Booth  V.  Farmers  &  Mechanics  Bk.  . .  434 
Bordentown,  etcT.  Co.  v.  Imlay.  ..  133 
Boston  Glass  Manuf.  Co.  v.  Langdon..  73 
653,  657,  6.59,  666 
Boston  Mill  Dam  Co.  v.  Newman..  569,  571 

573,  .578 

Boston  Overseers,  etc. ,  v.  Sears 90 

Boston,  etc.,  R.  Co.  V.  Coram  . ...  155,  161 

690 
Boston,  etc.,  R.  Co.  v.  Gilmore...  530.  637 
Boston,  etc.,  R.  Co.  v.  Midland  R.  R. 

Co 618 

Boston,  etc.,  R.  Co.  v.  Salem,  etc.,  R. 

Co 58.  563,  566,  649 

Boston,  etc.,  R.  Co.  v.  Wellington 143 

Boston  Water  Power  Co. v.  Boston, etc., 

R.  Co    553,  563,  568 

Bosworth  V.  Budgen 417 

Bosworth  V.  Hearne 417 


PAGE. 

Boulard  V.  Calhoun 473 

Mow  V    Allenstown 13 

Bowen  V.  Irish  Presb.  Cong 411 

IJowen  V.  Morris 283 

Boweringv.  Shepherd 1.56 

Bowler  V.  Lane ..       .  473 

Bown  V.  County  of  Somerset 280 

Bowyerv.  Giles,  etc.,  Turnpike  Co 34 

Boyd  v.  Blankman 249 

Boyd  V.  Chesapeake 530 

Boyd  V.  Hall    108 

Boyd  V.  Plumb  ..   277 

Boyden  V.  IJrooklino 304 

Boylan  V.  Hagnel 93 

Boyland  v.  Mayor 355 

r.oynton  V.  Turner 446 

Brackett  v.  Lubke 733 

Brace  V.  Ormond 509 

IJradlee  v.  Boston  Glass  Co 282,  284 

Bradley  v.  Ballard 357,  373, 375,  386 

Bradley  V.  Boston  R.  Co 451 

Bradley  v.  Holdsworth 1.54,  184 

Bradley  v.  N.  Y.,  etc.,  R.  Co....  39,  58,  344 
Bradley  v.  N.  Y.,  etc.,  K,  Co.  ..339,  569,  571 

Bradley  V.  Richardson 483 

Bradly  V.  Buffalo,  etc.,  R.  Co 793 

Bradshaw  V.  Rogers 597 

Bradstreet,  Ex  parte 677 

Bradstreet  v.  Bank  of  Royalton 334 

Bradt  V.  Benedict 659 

Hrady  v.  Mayor,  etc 387,  334,  355,  394 

Brainard  V.  Clapp 587 

Brainerd  v.N.  Y.,  etc.,  R.  Co 3.51 

Brai nerd  V.  Peck 388,633 

Branch  Bank  Ala.  v.  Collins 260 

Branch  State  Bank  v.  Knoop 698 

Brandv.  R.  Co 762,791 

Brandon  Iron  Co.  v.  Gleason 6.57,  6.59 

Branham  v.  San  Jose ..  303 

Brannou  v.  Baltimore  R.  Co  474 

Branser  v.  New  Eng.  F.  Ins.  Co . . .     ...  486 

Brass  v.  Worth .234,  294 

Bredin  v.  Dubarry 237,  296 

Breedlove  v.  Martinsville  R.  Co ..  153 

Breedlove  v.  Wamack 446 

Brendell  v.  Buffalo,  etc.,  R.  Co 787 

Brent  v.  Bank 198,430 

Brewer  V.  New  Gloucester 40 

Brewer  V.  I'rop.,  etc 513 

Brewster  v.  Hartley. . .  319,  431 

Brewster  v.  Hough 690,  698 

Brewster  V.  Sime 176 

Brewster  v.  Stratman 314 

Brick  Pres.  Church  v.  Mayor 417,  419 

Brickner  v.  R.  Co 794 

Briggs  V.  Penniman 114,  671 

Briggs  V.  Johnson 678 

Brightwell  V.  Mallory..   158,  189 

Brigham  V.  Blead        99 

Brignoli  v.  Chic,  etc..  R.  Co 7.50,  751 

Bridge  Co.  v.  Grand  Junction  R.  Co  . .     4.59 

Bridge  Co.  v.  Hoboken  Co 339,  563 

Bridge  Co.  v.  Loomis 469 

Bridge  Co.  V.Lowell     563,566 

Bridgeport  V.  Bishop 695 

Bridgeport  v.  R.  R.  Co 67,  286,355,  711 

Bridgeport  (Mty  Bank  v.  Empire,  etc., 

R.  Co 167,190,383,387 

Bridges  v.  N.  London  R.  Co 758 

Brinkerhoff  v.  Brown 659 

Brinley  v.  Blann 411 

Bristol  V.  Chic  ,  etc.,  R.  Co 694 

Bristol ,  etc . ,  R.  Co .  v.  Locke 146 

British  American  Land  Co.  v.  Ames. . .  485 

British  Sugar  Ref.  Co.,  Re 313,  823 

Broadbent  v.  Imp.  Gasl.  Co 779 

Broadnox's  Case 417 

Broadway  Bank  v.  McElrath  ..91,  190,  201 
Broadwell  v.  Broadwell 527 


Table  of  Cases  Cited. 


xxiu 


Brockway  v.  Allen 28.'3, 

Brokawv.  N.  J.,  etc.,  R.  Co..  ..443,  450, 

Bromley  V.  Coxwell 

Brotisoii  Agricultural,    etc.,  As3'n.  v. 

Ramsdell  ..     

Brooklyn  C.  R.  Co.    v.  Brooklyn  City 

R.Co 

Brooklyn  Grand  Road  Co.  v.  Slaughter, 

Brooks  Paper  Works  v.  Willet 

BrookvilleT.  Co.  v.  McCarty 6.54, 

Broughton  v.  Manchester  Waterworks 

Co 

Brouvver  V.  Hill 

Brown  V.  Beatty 561, 

Brown  v.  Leckie 

Brown  v.  McGregor 

Brown  V.  N.  Y.  C.  R.  Co 

Brown  v.  Pac.  Mail  Steam  S.  Co...  313, 

Brown  v.  Purvience 

Brown  v.  Somerset 

Brown  v.  S.  Kennebec  Ag.  Soc 

Brown  V.  Union  Ins.  Co 

Brown  v.  Van  Dyke 204,  303, 

Brown  v.  Winnisimmet  Co 233, 

Browne  V.  Providence,  etc.,  R.  Co  — 

Browning  V.  Morris 

Brown  lee  v.  Ohio,  etc..  R.  Co..  134,  443, 
Brownlowv.  Metropolitan  Board  .... 

Bruce  v.  Lord 385, 

Bruce  V.  Smith. 

Bruff  V.Mali    341, 

Bruffett  V.  G.  W.  R.  Co..  315,  538,  649, 

Bruning  v.   New  Orleans,    etc.,  Bank 

Co 

Bryan  v .  Reynolds 

Brvand  V.  Goodman 

Bryant  v .  Rich 730,  763,  773, 

Bryon  V.  Carter 

Bu(:hanan  v.  Hamilton 

Buchanan  v.  Upshaw 

Buck  v.  Lockport 

Buckfleld  R.  Co.  v.  Irish 130, 

Buckley  V.  Derby  Fishing  Co 

Buckley  V.  Briggs 383,  401, 

BuckniHSter  v.  Consumers'  Ice  Co 

Buckmaster  v.  Gt.  E.  R.  Co 

Bucksport,  etc.,  R.  Co.  v.  Buck 

Buclvsport,  etc.,  R.  Co.  v.  Dameson  ... 
Buckwater  v.  Blackrock  Bridge  Co. . . . 
Buel  v.  Buckingham  Co. .  .348,  3.55,  366, 

Buffalo  V.  Kortright 

Buffalo,  etc.,  R.  Co.  v.  Brainard 

Buffalo,  etc.,  R.  Co.  v.  Dudley..  .63,  6.5, 

130,135,  180, 

Buffalo,  etc.,  R.  Co.  v.  Hatch  ..     ..34. 

Buffalo,  etc.,  R.  Co.  v.  Lampson..348, 

Buffalo,  Bayou,  etc.,  R.  Co.  v.  Terris.. 

Buffett  V.  G.  W.  R.  Co 

Buffett  V.  Troy  &  B.  R.  Co  ...286,  339, 
Bulkley  v.  Derby  Fishing  Co. .  339,  338, 

Bullard  V.  Bank 93,  413, 

Bullard  v    Kinney 

Bullock  V.  Curry 

Bulowe  V   Charleston 

Bundy  V.  Blrdsall 

Burliridge  v.  Morris 

Burden  V.  Stein 

Burgess  v.  Clark 

Burgessv.  Pue 374, 

Buraessv.R.  Co 752, 

Burke  v.  Broadway,  etc..  R.  Co 

Burkev.  Gt.  West.  R.  Co 

Burke  V.  Norwich,  etc.,  R.  Co 

Burkev   Smith 218, 

Burliinshaw  v.  Birmingham  &  Oxford 

Ry.  Co 

BurlingtonR.  Co.  v.  White 


Burneav.  Penne 

Burnes  v.  Pennel 

liurnes  v.  Plienix  Glass  Co 

Burnett,  Ex  parte 

Burns  v .  Cork ,  etc . ,  R .  Co 

Burr  V.  McDonald 387, 

Burr  v.  Wilcox 114,138, 

Burrill  v.  Nahant  Bank  .    217,  233,239, 

Burroughs  v.  North  Carolina  R.  Co 

Burroughs  v.  Richmond 

Burrows  v .  Erie  R.  Co 

Burrows  v.  Smith 134, 

Burt  v.  Farrar 30, 

Burton,  In  re    

Busey  V .  Hooper 33 

Bush  V   Shipman 

Bush  V.  Steinman 

Bushwick,  etc.,  Co.  v.  Ebbets 32, 

Butchers'  Ben.  Soc 

Butler  V.  Corn  well  Iron  Co 

Butler  V.  Dunham 

Butler  V.  Pres.  of   College  of   Physi- 
cians  

Butler  v.  Watkins 445, 

Butterfleld  v.  Western,  etc. ,  R.  Co  ... 

Butternuts,  etc. ,  Turnp.  Co.  v.  North. 

Butterworth  v.  O'Brien 543, 

Buttrick  V.  Holden 

Butts  V.  Wood.. .  343,  248,  353,  260,  513, 

Butz  V.  Mass 

Butz  V    Muscatine 653, 

Cabot,  etc..  Bridge  Co.  v.  Chapin..ll9, 

Cadv  V .  Potter 

Cahill  V   Kalamazoo  Mut.  Ins.  Co..  31, 
413,  425,  054,  656,  666, 

Cain  V.  Heard 

Calais  Steamboat  Co.  v.  Van  Pelt 

Calder  Nav.  Co.  v.  Pilling 

Caldwell  v.  Murphy 

Caldwell  v.  N.  J.  Steamb.  Co.  468,  471, 

Calhoun  V.  Richardson    341, 

California  Nav.  Co.  v.  Wright 

California,  etc..  R.  Co.  v.  Butte  Co  — 
California  Tel.  Co.  v.  AltaTel.  Co.   ... 

Callender  v.  Marsh 

Camblos  v.  Phila.,  etc.,  R.  Co 

Camden  &  A.  R    Co.  v.  Briggs 

Camden,  etc.,  Co.  v.  Swede  Iron  Co.. 

Came  v.  Brighara 

Carameyer  V.  German  Churches 

Camp  V    Byrne 

Campbell  V.   Poultney 

Canal  Appraisers  v .  People 

Canal  Bridge  V.  Gordon 

Canal  Co.  v.  Bonham 

Canal  Co.  v.  R.  R.  Co.. 6.50,  654,  659.  666, 

Cannon  V    McNab 371, 

Carbon  Iron  Co.  v.  Carbon  County — 

Carey  v.  Cine,  etc.,  R.  Co 443,  504, 

Carey  v.  Giles 

Carhart  v.  Auburn  Gas  L.  Co. 

Carlisle  v.  Evansville,  etc.,  R.  Co 

Carlisle  V.  Terre  Haute,  etc.,  R.  Co... 

Carlisle  F   Nat.   Bk.  v    Graham 

Carman  V.  Steubenville,  etc.,  R.Co  — 


Carneal  V.  Banks 

Carpenter  v .  Farnsworth .   

Carpenter  V.  Mercantile  Bk  — 
Carpenter  v.  N.  Y.,  etc. ,  R.  Co 

Carr  v .  Chartier's  Coal  Co 

Carr  v.  Le  Fevre 

Carr  v.  St.  Louis 308,  413,  420, 

Carrington  v.  Wycombe  Ry.  Co 

Carroll  v.  East  St.  Louis 348, 

Carroll  v.  Hinkley  — 

Carson  v.  African  Co 


155, 


448 
32 
343 
416 
741 
407 
173 
407 
154 
3.53 
756 
140 
117 
680 
96 
649 
435 
66 
89 
347 
713 

24 
44T 
788 
788 
126 
669 
175 
.533 
714 
713 

131 
163 
386 
671 
337 
175 
433 
469 
473 
303 
504 
685 
563 
S97 
47 
339 
486 
343 
333 
505 
331 
598 
233 
528 
671 
391 
695 
671 
273 
779 
136 
553 
455 
4.58 
737 
495 
296 
.505 
159 
308 
114 
423 
590 
373 
113 
5::0 


XXIV 


Table  of  Cases  Cited. 


PAGE. 

Carson  v.  Coleman  StiO 

Cartan  V.  Father  Matthew,  etc.,  Soc  ..  415 

Carter  V.  Burley '6^2 

Carter  v.  Bean  of  Ely 401 

Carter  V.  Howe  Machine  Co 453 

Cary  V.  Cleveland,  etc.,  R.  Co 375 

Cary  v.  Matthews 267 

Caryl  v.  McElrath 6;j4 

Case  V.  Citizens' Bk 194,  195 

Casev.  Dillon 711 

Case  V.  Mechanics'  Bk 730 

Casev.  North.  Cent.  R.  Co 78a 

Cass  V.  Dillon  80 

Castellan  V.  Hobson 156 

Castleman  V.  Holmes 113 

Castro  V.  Howe  Machine  Co 453 

Caswell  V.  Boston  &  W.  R.  Co  757 

Cathcart  V.  Robinson .537 

Cathorn  V.  Towle    113 

Catlin  V.  Bell 291 

Catlin  V.  Eagle  Bk 540    657 

Catskill  Bk.  V.  State 377 

Cayuga  Bridge  Co.  v.  Magee 58 

Cayuga,  etc.,  R.  Co.  v.  Kyle 34 

Cazeauxv.  Mali 207,  242,  255 

Center  T.  Co.  v.  McConahy  .......  133,  505 

Cent.  T.  Co.  Valentine 119 

Central  Bk.  of  Georgia  v.  Gibson 559 

Cent.  Bank  of  Georgia  v.  Little 79 

Cent.  Bk.v.  Empire  Stone  Dressing  Co  .383 

387 

Cent.  Bridgev.  Lowell 44,  553 

Cent   Gold  Mining  Co.  v.  Piatt 68 

Cent.,  etc.,  R.  Co.  v.  Baches 480 

Cent.,  etc.,  R.  Co.  v.  Clemens 137 

Cent  ,  etc. ,  R.  Co.  v.  Collins ,  ,514 

Cent.,  etc. ,  R.  Co.  v.  Dixon 788 

Cent.,  etc.,  R.  v.  Georgia 554,  698 

Cent.,  etc.,  R.  Co.  v.  Kisch...l33,  441,  448 

Cent  ,  etc.,  R.  Co.  V.  Ward 201 

Cent.,  etc.,  R.  Co.  v.  Weldon 480 

Cincinnati  V.  Stone 737 

Chaffee  v.  Granger 335 

Chaffin  v    Cummings 181 

Chamberlain  v.  Ashtabula,  etc.,  R.  Co.  131 

Chamberlain  v.  Chandler 763,  770,  774 

Chamberlain  V.  Compton 414,  417 

Chamberlain  V.  Dover 317 

Chamberlain  v.  Huguenot  Mfg.  Co.  .  36 
Chamberlain  V.  Painesville,    etc.,   R. 

Co 118,  124,127,313,  315 

Chamberlinv.  Huguenot  Mfg.  Cn 34 

Chambers  v.  Ohio  Life  Ins.  &  Trust 

Co 736 

Chambers  v.  St.  Louis 373 

Chambersburg  Ins.  Co.  v.  Smith. .103,  164 

178,  188 

Champion  V.  White 446 

Chandler  V.  Monmouth  303 

Chapin  v.  Vermont,  etc.,  R.  Co 351 

Chapin  V.  Sullivan  R.  Co 578 

Chaplin  v.  Canada 483 

Chapman  v.  Mad  River,  etc.,  R.  Co...  124 

375 

Charles  River  Bridge  v.  Warren  Bridge,    39 

39.  56,  61,  339,  650 

Charlotte,  etc.,  R.  Co.  v.  Blakely..ll6,  147 

Charlton  v.  Newcastle  &  Cai-lisle  Ry. 

Co 548 

Chase  V.  Blackstone  Canal  Co 677 

Chase  V.  Sycamore  &C.  R.  Co 90,    98 

Chase  V.  Vanderbilt 213,  216,  5.56 

Chautauqua  County  Bank  v.  Risley...  358 
Cheltenham,  etc.,  R.  Co.  v.  Daniel...  173 
Cheltenham,  etc.,  R.  Co.  v.  De Medina,  173 
Chenango  Bridge  Co.  v.  Bing.  Bridge 

Co 39 

Cheney  V.  Lafayette,  etc.,  R.  Co 259 

Cheraw,  etc.,  R.  Co.  v.  White 141 


Chesapeake,  etc.,  Co.  v.  Bait  ,  etc., 

R.  Co..    .. 552,  568 

Chesapeake,  etc.,  Co.  v.  Dulany 107 

Chesapeake,  etc  ,  Co.  v.  Key 28 

Chesapeake,  etc.,  Co.  v.  Knopp 270,  394 

Chester  v .  Dickerson 351 

Chester  Glass  Co.  v.  Dewey..  .34,  90,  98,  131 

181,  305,  50.5,  653 

Chestnut  Hill  Co.  v.  Rutter..  ..394,  396,  458 

Chest  V.  App.  Tax  Court 698 

Chew  V.  Bank  Baltimore 105 

Chicago  V.  Langlass      469 

Chicago  V.  Mayor  . .   480 

Chicago  Building  Soc .  v.  CroweIl....a33,  295 

376 

Chicago,  etc.,  R.  Co.  v.  Allerton 209 

Chicago,  etc.,  R.  Co.  v.  Atty.-Gen'l 47 

Chicago,  etc.,  R.  Co.   v.  Borough    of 

Fort  Howard 530,  637 

Chicago,  etc.,  R.  Co.  v.  Coleman 275 

Chic,  etc.,  R.  Co.  v.  Fears  789 

Chic.  R.  Co.  V.  Fell 458 

Chic,  etc.,  R.  Co.  V   Gregory 793 

Chic,  etc.,  R.  Co.  v.  Hazzand 756 

Chic,  etc,R.  Co.  v.  Howard  ....  344,  246 
248,  484,  501,  508,  664 

Chic,  etc.,  R.  Co.  v.  Iowa 48 

Chic,  etc.,  R.  Co.  v.  McKean 786 

Chic,  etc.,  R.  Co.  v.  Moffit  .5.54 

Chic,  etc.,  R.  Co.  v.  Patchin 583,  .587 

Chic,  etc,  R.  Co.  v.  Payne 792 

Chic,  etc.,-R.  Co.  v.  People 680 

Chic,  etc.,  R.  Co.  v.  Quaintance 784 

Chic,  etc.,  R.  Co.  v.  Randolph 756 

Chic,  etc.,  R.  Co.  v.  Shannon 480 

Chic,  etc.,  R.  Co.  v.  Stumps 739 

Chic,  etc.,  R.  Co.  v.  Svvett 480 

Chic,  etc.,  R.  Co.  v.  Triplett 787 

Chic,  etc.,  R.  Co.  v.  Whipple 458 

Chic,  etc.,  R.  Co.  v.  Williams 457 

Child  V.  Hudson  Bay  Co 91,  104,  413 

Chillicothe  Bk.  V.  Chillicothe 386 

Chouteau  Spring  Co.  v.  Harris 96,  164 

188,  429 

Christian  University  v.  Jordan 237 

Christ's  Church  V.  Barksdale 241 

Christ's  Church  v.  Phila 700 

Church  Case.    318 

Church  V.  City,  etc 423 

Church  V.  Imperial,  etc.,  R.  Co 396 

Church  V.  Slack 676 

Church  V.  Sterling 233,  239,  295 

Church  of  the  Ascensicn  v.  Buckhart.   785 

Cincinnati  V    Gwynne 425 

Cin.  Mut.,  etc.,  V.  Rosenthal 373 

Cin.,  etc.,  R.  Co.  V.  Cole 29,    47 

Cin  ,  etc.,  R.  Co.  v.  Comrs.. 711 

Cin.,  etc.,R.  Co.  v.  Knowlton 559 

Citizen's  Bk.  y.  Howell 346 

Citizen's,  etc..',  Ins.  Co.  v.  Lott 155 

City  Bk.  Columbus  v.  Bruce 217 

City  Council  v.  Ahrens 431 

City  Council  V.  Baptist  Church 431 

City  Council  v.  Moorehead 406,  410 

City  Council  V.  Plankroad  Co 356 

City  Hotel  V.  Dickinson 130,  143,  148 

Cit.  Mut.  F.  Ins.  Co.  v.  Sortwell 313 

ClaremontBk.  v.  AVood 633 

Clark  V.  Boston  Manuf.  Co 333 

Clapp  V.  County  of  Cedar ...  352 

Clark  V.  Cuckfleld  Union 341,  395,  404 

Clark  V.  Denton 417 

Clark  V.  Des  Moines 286,343,  355 

CI  ark  V .  Dickson  441 ,  447 

Clark  V.  Eight  Ave.  R.  Co 761 

Clark  V.  Farmers',  etc.,  Co 403 

Clarkv.  Fry 737 

Clark  V.  Iowa  City 351,  3.54 

Clark  V.  Janesville 363 


Table  of  Cases  Cited. 


XXV 


PAGE. 

Clark  V.  Lecren 414,417 

Clark  V.  Mayor 780 

Clark  V.  Newsain .  473 

Clay  V.  Oakley 30U 

Clark  V.  Polk  County 287,  355 

Clark  V.  Pratt 280,405 

Clark  V.  Saybrook 58 

Clark  V.  Van  Northwick 272 

Clark  V.  Van  lleinisdyk 233.  293 

Clark  V.  Washington .279,282,  337 

Clark  V.  Woolen  Man.  Co 407 

Clarke  V.  Benton  Manf.  Co  308,  410 

Clarke  V.  Imperial  Gas  Co 407 

Clarke  v.  Rochester 666,  713 

Clarke  V.  Rochester,  etc.,  R.  Co 526 

Clay  V.  Rufford 222 

Clearwater  V.  Meredith 143,  548,  550 

Clevelands  v.  Grand  T.  R.  Co..     . .  462,  782 

Cleaves  V.  Turnpike  Co 131 

Cles-'horn  v.  N.  Y.  Cent.,  etc.,  R.  Co 474 

Clemens  v.  Hannibal,  etc.,  R.  Co 7S3 

Cleveland,  etc.,  R.  Co.  v.  Erie 505,  654 

Cleveland,  etc.,  K.  Co.  v.  Robbins  ....  193 

Cleveland,  etc.,  R.  Co.  v.  Rowan 479 

Cleveland,  etc.,  R.  Co.  v.  Speer 43,  560 

Cleveland ,  etc. ,  R.  Co.  v.  Terry 783 

Clinch  V.  Financial  Corp 546 

CliiiLon,  etc.,  R.  Co.  v.  Eason 99 

Clippinger  V.  Hepbaugh 307 

Coal  Co.  V.  Blatchford 522 

Coates  V.  Clarence  R.  Co 780,  782 

Coates  V.  Nottingham,  etc.,  R.  Co 178 

Coates  V.  N.  Y 420 

Coburn  v.  Boston  Papier  Mache  Man. 

Co 567 

Coburn  V.  Wheelock 71 

Cockburn  V.  Union  Bank 177 

Cochran  v.  Arnold 505 

Cook  ran  v.  Irlam , 290 

Cochrane  v.  Miller 474 

Cockle  V.  S.  E.  Ry.  Co 757 

Coe  V.  Columbus,  etc.,  R.  Co.  ..215,  387,  522 
528,  530,  532,  631,  037 

Coe  V.  Johnaon 87 

Coev.  McBrown    388.  631,  634 

Coe  V.  Pen  nock 631 

Coey  V.  Belfast,  etc.,  R.  Co .   178 

CofBav.Rich 46,  113 

Cohen  V.  Wilkinson 517 

Coil  v.  Pittsburgh  Female  College 134 

Colchester  v.  Goodwin 417 

Coleman  V.  Colutnbia  Oil  Co .    154 

Coleman  v.  Columbia  R.  Co 154 

Coleman  v.  Eastern  Counties  R.  Co 339 

383 

Coleman  V.N.  Y.,  etc.,  R.  Co 457,  762 

Coleman  v.  Sec.  Ave.  R.  Co 248 

Coleman  v ,  Spencer 533 

Coles  V.  Bank  of  England 106 

Coles  V  Bristowe 156 

Coles  V.  Trecoothick 290 

College  of  Physicians  v.  Lablas  4S3 

CoUen  V.  Wright 299 

Collier  v.  Collier 158 

Collins  V.  Godfrey 205 

Collins  V.  Hammock 368 

Collins  V.  Hatch    ...     414 

Collough  V.  Moss 342 

Colman  v.  Easter,  etc.,  R.  Co.     .  .  516,  523 
Colonial  Assn.  of  Ireland  v.  Bentley..  103 

Colonial  Bk.  v.  Cherry 243,  245 

Colorado  &Ind.  C.  R.  Co.  v.  Farrell...  758 

Colquitt  V.  Howard 247 

Coltv.  Ives 93,  164,  191,  202,  429 

Columbia  v.  Beasly 691 

Columbia  Bk.  v.  Patterson...  233,  270,  284 
293,  335,  396,  401,  403,  408,  410 

Columbia  Ins.  Co.  v.  Cooper 289 

Columbus,  etc.,  R.  Co.  v.  Farrell...     .  754 
D 


Columbu.s,  etc.,  R.  Co    v.  Powell 

Colville  v.  Ry 

Comeau  v.  Guild  Farm  Oil  Co 

Commerce  Bk.  v.  Dalrymple 

Commerce  Bk.  v.  N.  Y 690, 

Commercial  Bk.  v.  French 

Commercial  Bk.  v.  Kortright 100, 

Commercial  Bk.  y.  Lockwood G51, 

Commercial  Bk.  v.  Newport  Man.  Co  . 

Commercial  Bk.  V.  Norton 290, 

Commercial  Bk.  v.  State 42,  44, 

Commercial  Bk.  v.  Union  Bk 

Commercial  Ins.  Co.  v.  Ives 

Comins  v.  Coe 

Commissioners  V.  Bank  of  Buffalo 

Uomrs.  V.  Baroux 

Comrs.  V.  Bright 

Comrs.  V.  Cox 287, 

Comrs.  V   Erie,  etc.,  R.  Co 

Comrs.  V.  Gas  Co 

Comrs.  V.  Holyoke  Water  P.  Co 62, 

Comrs.  V.  Keller 

Comrs.  V.  Philadelphia 

Comrs.  V.  Supervisors    

Comrs.  V.  Troy,  etc.,  R.  Co 

Comrs.  of  Cent.  Park,  Matter  of 

Commonwealth  v.   Allegheny    Bridge 

Co 612,  618,  625,  654, 

Comm.  V.  Arrison    612, 

Comm.  V.  Athern ... 

Comm.  V.  Atlantic,  etc. ,  Co 

Comm.  v.  Bk.  of  Brest 35, 

Comm.  V.  Blue  Hill  Turnpike 

Comm.  V.  Breed 573, 

Comm.  V.  Burrell 

Comm.  V.  Cambridge 

Comm .  V.  Carey  Improvement  Co 

Comm.  V.  Cluley 618, 

Comm.  V.  Commercial  Bk   ...  612,  620, 

Comm.  V.  Crane 

Comm.  V.  CuUen 42,  44,  656. 

Comm.  V.  Dennison 

Comm.  V.  Eastern  R.  Co 

Comm.  V.  Erie,  etc.,  R   Co 

Comm.  V.  Essex  Co 63, 

Comm.  V.  Farmers' Bk 618, 

Comm.  V.  Fayette  R.  Co 64, 

Comm.  V.  Fisher 

Comm.  V.  Fitchburg  R.  Co 

Comm.  V.  Fowler 

Comm .  V .  Guardians  of  the  Poor 

Comm.  V.  German  Soc 86, 

Comm.  V.  Gill  ....^. 414, 

Comm.  V.  Graham 012, 

Comm.  V.  Green 

Comm.  V.  Hamilton  Man.  Co 690, 

Comm .  V.  Hancock  Bridge 

Comm.  V.  Ipswich 

Comm.  V.  Jarrett 

Com m .  V    Liquors , 

Comm.  V.  Lowell  Gas  Co 690, 

Comm.  V.  McBride 

Comm.  V.  Mayor,  etc .. 

Comm.  V.  Med.  Soc.  Erie 

Comm.  V.  Murray 

Comm.  V.  Nashua  &  Low.  R.  Co 

Comm.  V.  New  Bedford 649, 

Comm.  V.  Penn.  Beneficial  Inst ...  85, 

Comm.  V.  Perkins 

Comm.  V.  Phila.,  etc  ,  R.  Co 

Comm.  V.  Philanthropic  Soc 

Comm.  V.  Pike  Beneficial  Soc 85, 

Comm.  V.  Pittsburgh 45,  80,  .355, 

Comm.  V.  Pittsburgh,  etc.,    R.   Co 


.554 

.558 
ti05 
191 
1.55 
708 
483 
201 
278 
654 
386 
395 
371 
657 
451 
289 
164 
232 
678 
505 
355 
339 
414 
64 
651 
355 
675 
678 
388 
574 

658 
625 
615 
554 
217 

40 
577 
619 
601 
690 
655 
650 
258 
666 
673 
651 

64 
651 
625 
696 
668 
653 
616 

85 

89 
423 
625 

12 
697 
779 
318 

30 

46 
697 
614 
419 

89 
613 
796 
796 

89 
713 
625 

89 

S9 
560 

63 
650 


XXVI 


Table  of  Cases  Cited. 


PAGE 

Comm.  V.  Power    772 

Coiiiiii.  V.  QuiolisllverMin.  Co....  493,  500 

Comm.  V.  Reed      779 

Couiin    V.  Keitrart 655 

Comm.  V.  Kobertson  414 

Comm.  V.  KomauCath.  Soc 221 

Comm.  V.  Rosseter  . 077 

Comm    V.  Roxbui-y OlW 

Uomm.  V.  St.  Mary's 510 

Comm.  V.  St.  Patrick's  Benev.  Soc  ...  85 
Comm.  V.  Smith    ...  215,  387,  615,  635,  655 

Comm.  V.  Sparlvs  615 

Comm.  V.  Stodder 417 

Coram.  V.  Tenth  Mass.  Tump 012 

Comm.  V.  Tewksbury ,508 

Coram.  V.  Turner 414 

Comm.  V.  Union  Ins.  Co 650,  0.>i 

Comm   V.  Westborougrh  — . .     001 

Coram.  V.  Westchester  R.  Co...  10,  28,  120 

Coram,  V.  Worcester 414 

Comm.  Ins.  Co.  v.  Crane Mi 

Comparet  V.  Burr i)3 

Compton  V.  Sus.  R.  Co 594 

Comstock,  In  re 348,  390 

Conant  v.  Seneca  Co.  Bk 91 

Conant  V.  Van  Schaick    112 

Concord  Bank  V.  Gregg      440 

Concord  R.  Co.  v.  Greeley. .561,  570,  577,  606 

Congregation  V.  Johnston oil 

Congregational  Soc.  v.  Perry 505 

Conklin  v.  Sec.  Nat.  Bank 416 

Connecticut  V.  Penn 293,446 

Conn.  Mut.  L.  Ins.  Co.   v.  Cleveland, 

etc.,  R.  Co. 351,3.53 

Conn.,  etc.,  R   Co.  v.  Bailey  ..134,  130,  421 

443,  6.54 
Conn.,  etc.,  R.  Co.  v.  Baxter  ....        .133 

Conn.,  etc.,  R.  Co.  v.  Holton 583,  589 

Conn.  Ins.  Co.  v.  Cleveland  282 

Connell  v.  Woodward 484 

Conner  V.  Southern  Ex.  Co 113 

Conover  V.  Ins.  Co 274 

Couro  V.  Port  Henry  Iron  Co.. 221,  233,  248 

285,  297,  418,  510 

Conservators  of  River  Tone  V.  Ash  ...     27 

Contoocook  Valley  R.  Co.  v.  Barker.l  19,  151 

Conway,  Ex  parte 388,  673 

Convbeare  V.  New  Brunswick 447 

Cook  V.  Tullis 239,  292 

Cookev.State  Bank    274,  277 

Cooley  V.  Granville 69 

Coombe  v.  Scott  294 

Cooper  V.  Curtis  6.52 

Cooper  V.  Frederick 414,  520 

Cooper  V.  Gooderich 269 

Cooper  V.  Rankin 337 

Cooper  V.  Williams 561 

Copeland  v.  Merchants'  Ins.  Co 446 

Copes  v.  Charlestown 713 

Copley  V    Grover  &  Baker  S.  Mach.  Co.  452 

Copper  Mines  v.  Fcjx 395 

Corbett  V.  Woodward 213,  214 

Corey  V .  Long 543 

Corfleld  V.  Coryell 489 

Cork  &  Yougra  Ry.  Co.  v.  Paterson...  5.57 
Corn  Ex.  Bank  v.    Cumberland  Coal 

Co         323 

Cornell  v.  Guilford 3.55 

Cornell  v.  Hay.  241 

Cormack  v.  Richards 92,  193 

Corning  V.  McCullough 112,  114 

Corning  V.  Southland 233 

Cornraan  v.  Eastern  Co.  R.  Co  ..  751,  7.53 

Cornwall  V.  Easthman 113 

Cornwall  G.  C.  M.  Co.  v.  Bennett...  1.52 

Corrigan  v.  Trenton,  etc.,  Co 400,  404 

Corrigan  v.  Union  Sugar  Refinery  Co..  732 

Corry  v.  Londonderry,  etc.,  R.  Co 178 

Corse  v.  Sanford 113 


Corser  v.  Paul 293 

Cosgro ve  v.  Ogden 725,  730,  733,  795 

Coster  v.  Tide  Water  Co .561 

Cotheal  V.  Brower 178 

(/Othier  V.  Midland  R.  Co 590 

Cottrill  V.  Myrick 570 

Coulter  V.  Robertson    668,  670 

Coulter  V.  Trustees,  etc 26 

County  Comrs.  V.  Cox 668 

County  Life  Assurance  Co.,  In  re...  256 
County  Palatine  Loan,  etc,  Co.,  lore.  171 

Courcier  v.  Ritter 295 

Courtright  V.  Deeds 183 

Couteulx  V.  Buffalo 339 

Covey  V.  Pittsburg,  etc.,  R.  Co 638 

Covington  v.  Covington  Bridge  Co. 44,  287 
Covington,  etc.,  Co.  v.  Kenton  Co...  711 
Covington  Draw  Bridge  Co.   v.  Shep- 
herd   26,  495,  529, 534,  536 

Cowell  V.Colorado  Springs  Co 21 

Cowles  V.  Cromwell 171 

Cowles  V.  Mercer  County 494 

Cox  V.  Bodfish 12 

Cox  V.   Midland  R.  Co 279 

Cox  V.  Vanderkleed 469 

Craig  V.  Ward 446 

Craig  V.  Vicksburg .3.52 

Craker  v.  Chicago  &  N.  W.  R.  Co 763 

Cram  v.   Bangor  House 266,  326 

Crane,   Ex  parte 674,  677,  683 

Crawford  v.  Pittsburg,  etc.,  R.  Co...  133 

Crawfordsville  R.  Co.  v.  Wright   458 

Crease  v.  Bahcock 63,  523,  650,  664 

Crenshaw  v.  State  Riv.  Co 573 

Crocker  v.  New  LondoD,  etc.,  R    Co.  4.57 

Crocket  v.   Young 273 

Croft  V.  Alison 719 

Crook  V.  Jewett 242 

Crosby  V.  Hanover 552,  563,  566 

Cross  V.  Guthrey        479 

Cross  V.  Phenix  Bank 430 

Cross  V.  Sackett 242,  449 

Crossman  v.  Bristol,  etc.,  R.  Co 590 

Grossman  V.  Penrose  P.  B.  Co 135 

Grossman  v.  Hilltown,  etc.,  Co.     .392,  410 

Crump  V.  U.  S.  Mining  Co... 31,  133,  135,  446 

451,  654,  671 

Cruse  V.  Paine 156 

Crystal  Lake  Ice  Co.  v.  Backus 612 

Culbertson  v.  Wabash  Nav.  Co. 107,  359,  484 
Cumberland  Coal  Co.  v.  Parish. . ..  213,  216 
Cumberland  Coal  Co.  v.  Sherman.. 248,  295 

523 

Cumberland  College  v.  Ish 557 

Cumberland,  etc.,  R.  Co.  v.  Portland..  694 

Cumraings  V.  Maxwell 46,  113 

Cummingsv,   Webster 417 

Cunningham  v.  Ala.  L.,  etc.,  Ins.  Co..  104 

430 
Cunningham    v.   Edgerfleld,   etc.,    R. 

Co 130 

Cunningham  v.  Soules 300 

Cunningham  v.  Vermont 158 

Curdy  v.  Rodgers  ...   300 

Curien  v.  Santini  660 

Curlingv.  Chalklen 279,  281 

Curranv.  State.... 79,  179,  206,  209,244,  246 
515,  651,  663,  668 

Currie  v.  White 154 

Currier  v.  Lebanon  Slate  Co 171 

Curry  V.  Farmers' Bank    155 

Currv  v.  Mt.  Sterling 569 

Curry  V.  R.  R.  Co 31 

Curry  V.Scott 65,182,209 

Curry  v.  Woodward 154 

Curtis  V.  Detroit,  etc.,  R.  Co 761 

Curtis  V.  Leavitt 339,  343,  380,  387,  543 

Curtis  v.  McCullough 486,  080 

Curtiss  V.  Murry . .  113,  483 


Table  of  Cases  Cited. 


xxvii 


PAGE. 

Curtiss  V.  Rochester,  etc.,  R.  Co 4(i8 

Cushinan  V.  Loksr 2il'i 

Cusliinan  v.  Smith 59- 

Cushraan  V.  Thayer  Mfg   Co 100,  I'M 

Custer  V.  Tittiaville  Gas,  etc  ,  Co 444 

Cutler  V.  Middlesex  Factory  Co...  131,  248 
Cuyler  V.  Rochester 287,  355 

Dabney  V.  Stevens 227,289,  431 

Dacosta  V.  Russia  Co  679 

Dalandv.  Williams 156,161 

Daley  V.  Norwich,  etc.,  R.  Co 792 

Dally  v.Wonham 139 

Dalrymple  V.  Whltingham 3.55 

Damon  V.  Granby 284,318,407 

Damotit  V.  N.  O.,  etc.,  R.  Co 7.56 

Dana  V.  Bank  of  U.  S 388,418,  510 

Dana  V.  Brown 103 

Danbury,  etc.,R.  Co.  v.  Wilson — 143,  180 

Dane  V.  Young 414 

Danelv  V.  Brown 108 

Danforth  v.  Schoharie  Turnp.  Co.. 394,  .396 

Daniels  v.  Flower  Brook  Co 315 

Darcy  v.  Tamar,  etc.,  R.  Co 266,  323 

Darlinerton  V    Mayor,  etc 41 

Darnell  v.  Dickens 406,  410 

Dart  V .  Farmers'  Bank 486 

Dartv.  Houston  619 

Dart  V.  Hunston 483 

Dartmouth  College  V.  Woodward  —  3,    10 

16,  29,  .38,  43,  60,  66,  75,  338,  356,  649,  652,  705 

Daterv.  Troy  &T.R.  Co 433 

Davenport  V.  Dower    513 

Davenport  v.  Hallowell 272 

Davenport  v.  Peoria,  etc.,  Ins.  Co. ,402,  407 

David  v.  South  W.  R.  Co 480 

Davidson  v.  Bridgeport 233,  274 

Davidson  v.  Cooper 404 

Davidson  V.  Rankin 110,  113 

Davis  v.  Bank  of  England 82,  105,  424 

Davis  V.  Bilsland 645 

Davis  v.  Chic,  etc.,   R.  Co 760 

Davis  V.  London,  etc.,  R.  Co 753 

Davis  V.  Maynard 531 

Davis  V.  Mayor 779 

Davis  V.  Mobile  Bank 285 

Davis  V.N.  Y.  C.  R.  Co 790 

Davis  V.  North  River  Ins.  Co 338 

Davis  V.  Prop,  of  Meeting  House. .  .343,  414 

Davis  V.  Tuscumbia,  etc.,  R.  Co 571 

Dawning  v.  Mt.  Washington  Co ..    357 

Dawson  V.  Manchester,  etc.,  R.  Co 750 

Day  V.  Essex  County  Bk 623 

Day  V.  Newark  India  Rubber  Co 26 

Day  V.  Owen 771 

Day  V.  Stetson 31,  598,  652 

Dayton  V.  Borst 130,  147 

Dayton  V.  Pease 4,50 

Dayton,  etc.,  R.  Co.  v.  Hatch 123,  129 

221,  224,  418 

Dean  V   La  Motte 25 

Dean  V.  Roesler 296 

Dean  V    Hall 93 

Dearborn  V.  Boston,  etc. ,  R.  Co 605 

Deaton  V.  Polk  Co    605 

Debolt  V.  Ins.  &  Trust  Co 427 

DeCamp  V.  Alward 614,  627 

Decker,  Ex  parte 675 

Decker  v.  Freeman  407 

De  Cordovan  v.  Galveston 354 

Dedham  Hk.  v.  Chickering 31,  2.s0 

Dedham  Sav.  Inst.  V.  Slack 238 

De  Forrest  V.  Wright ..  733 

De  Grave  V.  Mayor,  etc 404 

De  Graff  v.   American    Linen  Thread 

Co  279,  358,  376 

Delacev  V  NeuseRiv.  Nav.  Co  ....  82,    89 

Delamatyr  V.  Mil  ,  etc.,  R.  Co 754 

Delaware,  etc.,  R.  Co.  v.  Irick  ...  143,  483 


PAGE. 

Delaware,  etc.,R.  Co.  v.  Thorp  ..62,  &51 

Delaware  Tax  Cases 339 

Delaware,  etc..  Canal  Co.  v    Coramrs..  458 
Delaware,  etc..  Canal  Co   v.  Common- 
wealth   4.58 

Delaware,  etc.    Canal  Co.  v.  Sansom  ..  147 

Delamatyr  V.  R.  Co 7.57 

Den  V.  Vreelandt 406,  410 

Den  V.  Wright    446 

Denmead  V.  Bait.  Bk         637 

Dennis  v.  Kennedy ..      13 

Denny  V.  Hamilton 533 

Denny  V.  Manhattan  Co    303 

Densmore  Oil  Co.  v.  Densmore 139 

Denton  V.  Gt.  North.  R.  Co.   438,  776 

Denton  V.  Jackson ..     27 

Denton  V.  Livingston 184,  189,  .533 

Denton  V.  Macneil 448 


De  Pauw  v.  N.  Albany 
Deposit,  etc.,  Ass.  Co. 


691 
133 
447 
407 
388 
446 


Ayscough  . 
441 

Derby  Canal  Co.  v.  Wilmot 

De  Ruyter  v.  St.  Peter's  Church 

Despard  v.  Walbridge 

Detroit  v   Jackson 233,  239,  270,  410 

Detroit  Post  Co.  v.  McArthur 478 

Detroit,  etc.,R.  Co.  v.  Curtis 761 

Detroit,  etc.,  R.  Co.  v.  Van  Steinbuxgh,  788 

790 

De  Varaigne  v.  Fox 561,668 

De  Vass  V.  Richmond 351 

Devendorf  v.  Beardsley 54.H 

Deveiidorf  v.  Dickinson 543 

Devoyv.  N.  Y 260 

Dewv.  Judges  G76,  681 

De  Witt  V.  Brisbane 890 

De  Witt  V.  Walton 286,  298 

De  Wolf  v.  Mallett 113 

Dexter  Plank  R.  Co.  v.  Millerd 128 

Dey  V.  Jersey  City 323,  338 

Deyov.  N.  Y.  C  R.  Co 750 

Dickey  v.  Tennison .561 

Dickinson  v.  Cent. Nat.  Bank 93 

Dickinson  V.  Chamber  of  Commerce..    83 

416 

Dickinson  v.  Conway 294 

Diggle  V.  London,  etc.,  R.  Co 395 

Dill  V.  Wareham 355 

Diligent  F.  Ins    Co.  v.  Com  89 

Dillingham  v.  Snow 13,    20 

Dillon  V.  Wareham 355 

Dingley  v.  Boston 571,  668 

Dingman  V    People 46 

Dispatch  Line,  etc.,  v.  Bellamy  Man. 

Co 217,239,283,285,323,326,410 

Dobbins  V.  Walton 198 

Dobson  V.  Pearce  446 

Dobson  V.  Racey 249 

Dodge  V.  Lambert 293 

Dodge  V.  McDonnell 294 

Dodge  V.  R.  Co 788 

Dodge  V.  Woolsey.     . .  .202,  511,  513,  515,  699 

Dodwell  V.  University  of  Oxford 419 

Doe  V.  Martin 435 

Donaldson  V.  Miss.  &  Mo.  R.  Co 480 

Donell  V   Sanford 469 

Donovan  v.N.Y 286 

Doiinaher  V.  State 563 

Donnelly  v.  People 614 

Donworth  V.  Coolbaugh 113 

Dooley  V.  Cheshire  Glass  Co  35,  .505 

Dorian  v.  East  Brandywine,  etc.,  R.  Co.  605 

Dorr  V.  Munsell 446 

Dorris  V.  French 131,  138 

Dorsey,  etc  ,  R.  R.  Co.  v.  Marsh 68 

Dobbleday  V.  Muskett 299 

Doughaday  V,  Crowell 336 

Dougherty  v.  Hampston 527 

Dougherty  v.  Hunter 278 


XXVlll 


Table  of  Cases  Cited. 


Doughty  V.  Hope 574 

Doiifrlaa  V.  VirtriiiiaCity 335,  343 

Doviistoii  V.  Pay  lie 588 

Dow  V.  Clark .  427 

Downie  V.  White 121,  133 

Downing  v.  Mt.  Washington  R.  Co.. 60,  295 

338,  35(; 

Downing  V.  Totts ..  81,    98 

Downinga  V.  Ruger 317 

Doylo  V.  Continental  Ins.  Co ."Us 

Doyle  V.  Miuitz 521 

Doyle  V.  Peerless,  etc.,  Co (w;j 

Drake  V.  Hudson  R.  R.,  etc (ills 

Draper  v.  Mass.  S.  Heating  Co 290,  308 

Drawbridge  Co.  v.  Shepherd 488 

Driukwater  v.  Portland  Marine  R 113 

Driscoll  V.  West  Bradley  Man.  Co. .416,  421 

Drew  V.  Sixth  Ave.  R.  Co 795 

Drury  v.  Cross 348 

Dubois  V.  Augusta 413 

Dubois  V.  Canal  Co 284 

Dubois  V.  Hermauce 440 

Dubois  V.  Wilson 645 

Dubree  v.  Reliance  Engine  Co 80 

Ducat  V.  Chicago 37,347,489,500 

Duckworth  V.  Johnson 479 

Dudley  v.  Jamaica  Aqueduct  Pond  Co.  690 

Dudley  V.  Kentucky  High  S  311 

Dudley  V.  Price 520 

Duffy  V.  Chicago,  etc.,  R.  Co.. .        786,  790 

Duggins  V.  Watson     720,  702,  795 

Duke  V.  Cahawba  Nav.  Co.  .  91,  96,  104,  188 
507,  654,  671 

Dumper  V.  Syms 369 

Duncan  V.  Jaudon 175 

Duncan  V.  Lintley 100 

Duncan  V.  Niles.     300 

Duncan  V.  Surry  Canal  Co 458,  710 

Duncuft  V.  Albrecht 185 

Dung  V.  Parker 299,  301 

Dunham  v.  Cin.,  etc.,  R.  Co 388,  631 

Dunham  V.  Isett    631 

Dunham  v.  Rochester 414,  417 

Dunham  V.  Trustees,  etc 416 

Dunham  v.  Williams 501 

Dunkerson,  Re  .   415 

Dunn  V.  Commercial  Bank 187,  190 

Dunn  V.  St.  Andrew's  Church. 394,  403,  410 

Dunnell  Man.  Co.  V.  Pawtuck 690 

Dunning  v.   North-western  Turnpike 

Road 355 

Dunster  V.  Lord  Glengall  92 

Dunston  v.  Imperial  Gas  Co 265,  412 

Dupeev.  Boston  Water  Power  Co 68 

Durant  V.  Iowa  Co 351 

Duranty's  case 439    449 

Durf ee  v.  Old  Col.  &  F.  R.  Co .63,  517 

Durkee  V.  Stringham 184 

Dusenbury  V.  Ellis  , 300 

Duston  V.  Imp'!  Gas  Co 358 

Dutch  West  India  Co.  V.  Moses 24 

Dutchess  Cotton  Mill  Manuf.  Co.   v. 

Davis 126,146,  147,  501 

Dutton  V.  Marsh 290,  298 

Duvall  V.  Myers .'....'  5;0 

Dyer  v.  Hunt ;jOg 

Dyer  V.  Walker 654,671 

Dygert  v.  Schenck.. .  7:57 

Dynes  V.  Shaffer 133,  130 

Eadman  V.  Bowman 206 

Bagan  V.  Fitchburg  R.  Co 789,  791 

Eakright  v.  Logansport,  etc.,  R.  Co 152 

Eames  V.  Wheeler 188 

Earnest  v.  Nicholls 290 

Earp's  Appeal 157 

East  V.  Third  Ave.  R.  Co 740 

East  Anglian,  etc.,  R.  Co.  v.  Eastern, 
etc.,  R.  Co 235,  360,  384 


East  Anglian  R.  Co.  V.  Lythgoe 303 

I'lrist  Boston  Ferry  Co.  v.  Boston 675 

Eastern  Archipelago  Co,  v.  Regina  ...  052 

6.57 

Eastern  Co.  R.  Co.  v.  Brown 796 

Kastern  Co.  R.  Co.  v.  Hawkes 363 

Eastern  P.  R.  Co.  v.Vaughan.90, 117, 148,  180 
Kastern  Union  Ry.  Co.  v.  Cochrane  ...  5.57 
East  Hartford  v.  Hartford  Bridge Co.41,  427 
East  London  Water  W.  Co.  v.  Bailey. .   269 

380 

Eastman  v.  Cooper 174 

Eastman  v.  Coos  Bank 403 

East  Pen n.  R.  Co.  v.  Hottenstine 605 

East  Tenn    R.  Co.  v.  Gammon 311    318 

Eaton  V.  Boston  C.  &  M.  R.  Co .'  569 

Eaton  V.  Erie  R.  Co..   . 788 

Eaton  V.  European  &  Northern  R.  Co  .  7.37 

Eaton  &  Hamilton  R.  Co.  v.  Hunt 5.58 

Ebaugh  V.  Hendel 82 

Eclectic  Life  Ins.  Co.  v.  Fahrenkring..  289 

Edgerly  V.  Emerson 323,326 

Edgerton  V.  N.  Y.  &  H.  R.  Co. 761 

Edinburgh,  etc.,  R.  Co.  v.  Campbell  ..  .590 

Edmunds  V.  Bushnell ..  299 

Ediuundson,  In  re 684 

Edwards  v.  Grand  Junction  Canal  Co.  369 

Edwards  v.  Grand  Junction  R.  Co 305 

Edwards  V.  Hall   184 

Edwards  v.  Jager 44 

Edwards  V.  Kilkenny,  etc.,  R.  Co 233 

Edwards  v.  London  &  N.  Western  Ry. 

Co 451 

Edwards  v.  London  &  S.  West.  R-  Co..  727 

Edwards  V.  Midland  Ry.  Co 453 

Edwards  v.  Stonington  Cem.  Ass 571 

Edwards  v.  Union  Bank..  .433,  458,  559,  717 

Edwardsville  Bank  v.  Simpson 487 

Ehle  V.  Chittenango  Bank 157 

Eland  V.  Eland 173 

Eld  V.  Gorham 507 

Eldridge  v.  Long  I.  R.  Co 762 

Eldridge  V.  Smith 578,635 

Ellicottv.  Warford 543 

Elliott  V.  Merryman      175 

Ellis  V.  Coleman 302 

Ellis  V.  E.^sex  Merrimack  Bd- Co 181 

Ellis  V.  Marshall 29 

Ellis  V.  Pulsi;er 297 

Ellis  V,  Sheffield  Gas  Co 716 

Ellis  V .  Turner 435 

Ellison  V.  Ellison 532 

Ellsworth  V.  Cole 197 

Elwell  V.Dodge 275,  285,  297 

Elwes  V.  Ogle 303 

Ely  V.  Fire  Ins.  Co 487 

ElysvilleMan.  Co.  v.  OkiskoCo...  147,  395 

410 

Emblem  v.  Myers 474 

Embury  v.  Connor 569,  579 

Emerson  v.  Pro  v.  Manuf .  Co 285,  336 

Emery  v.  Mariaville 355 

EmmetvReed 239 

Empire  Assurance  Co.,  In  re 545,  548 

Enfield  Toll  Hr.  Co.  v.  Conn.,  etc.,  K. 

Co 58,  215,  357,  552,  649,  654,  659 

English  V.  Chicot  Co 713 

English  V.  New  Haven,  etc.,  R.  Co...  65 
Eng.  Joint  Stock  Bk  Co.,  Ex  parte...  439 

Enos  V.  Hamilton 730 

Eiisey  V.  Cleveland,  etc.,  R.  Co  504 

Episcopal  Soc.  v.  Episcopal  church  ...    25 

233,  295 

Eppes  V.  Miss.,  etc.,  R,  Co 32,  153 

Era  Ins.  Soc. ,  In  re 548 

Erick  V.  Johnson 295 

Erie  V.  Canal  Co 41 

Erie,  etc.,  R.  Co.  v.  Brown 120 

Erie,  etc. ,  R.  Co.  v.  Casey....  45,  649,  654 


Table  of  Cases  Cited. 


XXIX 


PAGE. 

Erie,  etc.,  R.  Co.  v.  Owen 132 

Enieley  V.  Walroud 209 

Ernest  V.  Nicholls 209,  230,  513 

Ernst  V.  Bartle    10 

Ernst  V.  H.  R.  Co  788 

Essex  Bridge  Co.  v.  Tuttle 11.5,  147 

Essex  T.  Corp.  V.  Collins 239,  379 

Kstepv.  Keokuk  Co 287,  3.55 

Eureka  Co.  V    Bailey  Co 411 

European  C.  R.  Co.,  Re    241 

European  &N.  A.  R   Co.  v.  Poor 213 

348,  2.53 

Evansv.  Bicknell 278 

Evans  v.  Haefner 583 

Evansv.  Ossrood 313 

Evansv.  Philadelphia  Club.  83,  85,  87,  89 
Evansv.  Trimountain  Trust  F.  Ins.  Co.  544 

Evansv.  Wells    248 

Evaiisville  Nat.    Bk.   v.  Metropolitan 

Nat.  Bk 416 

Evansville,  etc.,  R.  Co.  v.  Baum.  457,  473 

Evansville,  etc.,  R.  Co.  v.  Duncan 760 

Evansville,  etc.,  R.  Co.  v.  Evansville.  505 
Evansville,  etc.,  R.  Co.  v.  Sheaver  ...  124 
Evartsv.  Killingworth  Man.  Co...  656,  666 

Everett  V.  Grapes  412 

Everett  v.  Saltus 642 

Everett  v.   U.S 339,273 

Everhardt  v.  West  Chester,   etc.,  R. 

Co  118,   144,  172 

Eversfleldv.  Mid-Sussex,  etc.,  R.  Co..  590 

Everston  V.  Nat.  Bk.  Newport 3.55 

Ewbank  V    Niitting 724 

Ewing  v.  Medlock 12 

Exchange  Bk.  v.  Monteath 279 

Exeter  Bk.  v.  Rogers 333,  281 

Eyre  V.  McDonald    93 

Fairv.  Load.  &  N.  W.  R.  Co 

Fairchilds  V.  Cal.  Stage  Co 

Fairfield  Turnpike  Co.  v.  Thorp  ...  30, 

Fainnount,  etc.,  R.  Co.  v.  Statler 

Falconerv.  Campbell 13, 

Fanning  V.  Gregoire 383, 

Fanners',  etc.,  Bk.  v.  Butchers',  etc., 

Bk 376,  387, 

Farmers',  etc.,  Bk.  v.  Chester 

Farmers',  etc. ,  Bk.  v.  Downe 

Farmers',  etc.,  Bk.  v.   Empire  Stone 

D.  Co  

Farmers',  etc.,  Bk.  v.  Gettinger 

Farmers',  etc.,  Bk    v.  Haight 286, 

Farmers',  etc.,  Bk.  v.  Harrison 

Farmers',  etc.,  Bk.  v.  Iglehart —  164, 


Farmers',  etc. ,  Bk.  v.  Jenks 

Farmers',  etc.,  Bk.  v.  Sherman 

Farmers',  etc.,  Bk.  v.  Troy  Bk 

Farmers',  etc.,  Bk.  v.  Wasson...  103, 
Farmers',  etc.,  Ins.  Co.  v.  Cheshunt  . 

Farmers',  etc.,  Ins.  Co.  v.  Harrah 

Farmers' Loan  Co.  v.  Carroll 

Farmers'  Iioan  Co.  v.  Clowes 

Farmers'  Loan  &  T.  Co.  v.  Commercial 

Bk 388, 

Farmers'  Loan  &  T.  Co.  v.  Hendrick- 

son 387, 

Farmers'   Loan  &  T.  Co.  v.  St.  Joseph, 

etc.,  K.  Co    

Farmers'  Turnp.  Co.  v.  McCuUough  ... 

Farrar  v.  Perley 

Farrar  v.  Stackpole    

Farrington  v.  Tenn 

Farrow  V.  Bivlngs..  .     

Faulds  V.  Yates 98, 

Fay  V.  Lexington,  etc.,  R.  Co 

Fay  V.  Noble 226,  343,  386, 

Fay  V.  Parker 470, 

Fazakerly  v.  Wiltshire 


Feeterv.  Heath 300 

Fent  V.  Toledo,  P.  &  W.  R.  Co 46a 

Fenn  V.  Harrison 273,293 

Fero  V.  Buffalo,  etc.,  R   Co 782 

Ferrett  V.  Taylor 6.52 

Fester  v.  La  Rue    375 

Field  V.  Cooks 33 

Field  V.  Crawford 427 

Field  V.  Field 310 

Field  V.  Montmollin 161,  183 

Field  V.  Pierce ..  181 

Field  V.  Schieffelin 175 

Filer  V.  N.  Y.C.  R.  Co 469,  755 

Pllson's  Trustee  V.  Himes 308 

Finch  V.  Same .509 

Finlason  V.  Chicago,  etc.,  R.  Co 791 

Fire  Dept.  v.  Helfenstein 691 

Fire  Dept.  V.  Kipp 29 

Fireman's  Ins.  Co.,  Ex  parte IIX) 

Fireman's  Ins.  Co.  v.  Ely .390 

Fireman's  Ins.  Co.  v.  Sturges 358 

First  Rapt.  Ch.  v.  Schenec,  etc.,R.  Co.  608 

717 
First  Baptist  Ch.,  etc.,  v.  Utica  R.  R., 

etc 4.54.  608 

First  Mort.  Bondholders  v.  Maysville 

&  T.  R.  Co 634 

First  Nat.  Bank  Carlisle  v.  Graham...  4.53 

457 

First  Nat.  Bank  v.  Lanier 175, 195,  201 

First  Parish  V.  Sterns 318 

Fish  V.  Chic,  etc.,  R.  Co 516 

Fish  V.  Potter 388 

Fisher  \,  Essex  Bank  ..  96,  189,  197,  201,  429 
Fisher  v.  Evansville.  etc.,  R.  Co. . .  215,  548 

551 

Fisher  v.  Horicon  Co 573 

Fisher  v.  Price 197 

Fisher  V.  Harrisburg 414 

Fisher  v.  Willard      446 

Fisher  v.  N.  Y.C.  R.  Co 5-54 

Fishkill  V.  Joliet  Opera  House   171 

Fisk  v.  Chic,  etc.,  R.  R.  Co 48.5,  525 

Fisk  V.  Kenosha 713 

Fiske  V.  Eldridge 285 

Fishmongers'  Co.  v.  Robinson 395 

Fister  v.  La  Rue 379 

Fitch  v.  McDiarmid 673 

Fitch  v.  Pacific  R.  Co 783,784 

Fitchburg,  etc.,  R.  Co.  v.  Grand  Junc- 
tion, etc.,  R.  Co ..62,651 

Fitchburg  R.  Co.  V.  Prescott .  .  691 

Fitzherbert  v.  Mather 278 

Fitzsimmons  V.  JosIi[i 295 

Flanagan  v.  Great  W.  R.  Co 341 

Fleckner  v.  W.  S.  Bank  . .  .216,  233,  239,,  273 
277,  387,  337,  371,  394,  396,  403,  410,  418 

Fleming,  Ex  parte 678 

Fleming  V.  Chic,  etc.,  R.  Co 605 

Fletcher  v.  Dysart 294 

Fletcher  V.  Peck 649 

Flint  V.  Clinton  Co 388,  411 

Flint  V.  Pierce 415,  437 

Flint  V.  Trans.  Co 762,  764 

Flint  V.  WoodhuU 43 

Flint,  etc..  R.  Co.  v.Dervey....  351,  354,  511 

Flint,  etc,  R.  Co.  v.  WoodhuU 651 

Florida  V.  Gibbs    677 

Flower  V.  London,  etc.,  R.  Co 590 

Flynn  v.  San  Francisco,  etc,  R.  Co. 783,  784 

Fogg  V.  Griffin 443 

Folger  V.  Mitchell 293 

Foote's  Case 156 

Foote  V.  Cincinnati 716 

Force  v.  Dahlonega  Tanning,  etc. ,  Co.  113 

Ford  V.  Williams 284 

Forsyth  v.  Boston,  etc.,  R.  Co 758 

Forsyth  v.  Hooper 736 

Forrestier  v.  Bordman 373,  293 


XXX 


Table  of  Cases  Cited. 


PAGE. 

Fort  Edward,  etc.,  Co.  v.  Payne.  ...127,  130 

Fort  Wayne  v.  Jackson 2fi 

Fort  Wayne  Turnp.  Co.  V.  Deane 504 

Fosdick  V.  Sturges 35,  183 

Foss  V.  Harbottle 139 

Foster  V.  Bates 307 

Foster  V.  Cackerell 92 

Foster  V.  Essex  Bank 373,  375,  434 

Foster  V.  Shaw 406,410 

Fountaine  v.  Carmarthen  R.  Co 2;}0 

Four  Mile  Valley  R.  Co.  v.  Bailey 133 

Fowle  V.  Common  Council,  etc 434 

Fowler,  In  re 569 

Fowler  v.  Bledsoe  371 

Fowler  v.  Ludwig  113 

Fowler  V.  Robinson  113 

Fowler  V.  Scully    390 

Fox  V.  AllensvilleCo 119 

Fox  V.  Northern  Liberties 339 

Foy  V.  London,  etc.,  R.  Co , 753 

Frankfort  Bank  v  Johnson    434 

Fraiikford,  eta,  Turu.  Co.  v.  Phila., 

etc.,  R.Co 783 

Franklin  V.  Ezell 294 

Franklin  v.  S.  E.  Ry.  Co 479 

J'ranklin  Bank  v.  Cooper 664 

Franklin  Bridge  Co.  v.  Wood 13 

Franklin  Co.  v.  Lewiston  Institute  for 

Saving 368 

Franklin  Glass  Co.  V.Alexander  143 

Franklin  Ins.  Co.  V.  Jenkins 303 

Franklin  Ins.  Co.  v.  Murray 389 

Franklin  Tel.  Co.,  In  re 613,  637 

Eraser  v.  Charleston 91,  194 

Fraylor  V.  Sonora  Mining  Co 303 

Frazier  v.N.  O.  Gas,  etc 346 

Frazier  V.  Wilcox 487 

Frederick  Female  Sem.  v.  State 657 

Freehold  Gen.  Ins.  Co.  v.  Metrop.  R. 

Co 781 

Freeholders  V    Barber 417 

Freeman  V.  Harwood 93 

Freeman  v.  Machias  Water  Power  Co.  338 

346 

Freeman  v.  Winchester 146 

Free  School  v.  Flint 413,  431,  423 

Fremont  V.  Stone 248,  546 

French  V.  Braintree 572 

French  v.  Gifford 514 

French  V.  Teschemaker 109,  113 

Friedlander  V.  Slaughter  House  Co 193 

Frink  V.  Coe... 474 

Frink  V.  Potter    750,  763 

Frink  V.  Schroyer 469 

Frisby  v.  Ballance .537 

Frost  V.  Frostburg  Coal  Co 34 

Frost  V.  Grand  Trunk  R,  Co 758 

Frowd  case 448 

Frye  V.  Bk.  Ill 504 

Frye  V.  Tucker 383 

Fullam  V.  Cummings 93 

Fuller  v.Bowe 107,  108 

Fuller  V.  Dame 248,351 

Fuller  V.  Hooper 297 

Fuller  V.  Plainfleld  Academic  School. .  3.56 

Fuller  V.  Rowe 256 

Fulton  Bk.  V.  N.  Y.  Canal  Co 345 

Gage  V.  New  Market  R.  Co 359,  434 

Galena  V.  Comm 3.35 

Galena,  etc. ,  R.  Co.  v.  Dill 786 

Galena,  etc. ,  R.  Co.  V.  Loomis 46 

Gallatin  v.  Bradford 416 

GalliopolisBk.  V.Trimble 654,  671 

Gallowayv.  Mayor 591 

Galveston  R.  Co.  v.  Cowdry..  330,  349,  388 

533,  631,  639 

Galwav  V.  U.  S.  Steam   Sugar  Ref .  Co..  543 

Gandy  V.Chicago,  etc,  K.  Co 783,  783 


PAGE. 

Gansevoort  V.  Williams.     377 

Gardinerv.  Pollard 204 

Gardner  V.  Hamilton  Ins.  Co .553 

Gardner  v.  Hope  Ins.  Co 143 

Gardner  V,  Newljurgh .565 

Gardner  V.  State    095 

Garland  v.  Reynolds 483 

Garlingv.  Baechtel 133 

Garnierv.  St.  Louis 260,  303 

Garrettv.  Dillsburgh,  etc.  R.  Co 139 

Garretzen  V.  Duenkel 734,  733 

Garrison  v.  Coombs    410 

Garton  v.  Great  Western  R.  Co 693 

Garvey  V.  Colcock 395,  403 

G arris  V.  Portsmouth,  etc.,  K.  Co 793 

G  as  Co.  V.  San  Francisco 374,  425 

Gas.  &  Bk.  Co.  v.  Haynes 542 

Gasset  v.  And  over 395 

Gassies  v.  Ballou    500 

Gavett  V.  Manchester,  etc.,  B.  Co  .  ...  756 

Gayle  v.  Cahawba,  etc.,  R.  Co 115,  147 

Gaylord  v.  Fort  Wayne,  etc.,  R.  Co....  625 

Gaynor  v.  Old  Colony  R.  Co 761 

Geery  V.  Hopkins 509 

Gelpcke  v.  Dubuque 351,  353,  653,  670 

General  v.  Uiica  Ins.  Co .  618 

General  Exchange  Bk.,  In  re 197 

Genesee  Bk.  v.  Patchin  Bk 383,  387 

Georgia  R.  Co.  V.  McCurdy 756 

Gerbler  V.  Emery    272 

Germantown  R.  Co.  v.  Fitler 151 

German  Security  Bk.  V.  Jefferson..     .    197 

Getchell  v.  Allen 645 

Getty  V.  Devlin ..    251 

Geyer  V.  Western  Ins.  Co 188,  193 

Ghent  V.  Adams 286 

Gibson  v.  Colt 272 

Gibson  V.  Mason 571 

Giesey  v.  Cin.,  Wilm.  &  Z.  Ry.  Co..  577,  589 
Gifford  v.  N.  J. R. Co.  . .  46,  203,  311,  318,  514 

Gifford  V.  Thompson 154,156,  161 

Gilbert's  case     .   . 143 

Gilbert  v.  Manchester  Iron  Co.,  81, 90, 96,  187 

Gilbert  Elevator  R.  R.  Co 61 

Gilesv.Hutt 146 

Gill  V.  Continental  Gas  Co 93 

Gillard  v.  Lancashire,  etc.,  R.  Co 479 

Gillen water  v.  Madison  R.  Co 451,  592 

Gillespie  v.  Wood 678 

Gillet  V.Moody 543,  664 

Gillett  V.  Missouri,  etc.,  R.  Co 458 

Gillettv.  West.  R.Co 790 

Gills  V.  Bailey 231 

Gilman  v.  Bassett 673 

Gilmerv.  Lime  Paint 569,  571 

Gilmore  V.  Pope 270,  408 

Gilpin  V.  Howell 189,  533 

Girard  V.Philadelphia 25,41,  668 

Girard  Bk.  v.  Bank,  etc 444 

Glaize  V.  S.  C.  R.  R.  Co 26 

Glasgow  V.  Drew  436 

Glasscock  V.  Comrs.,  etc 675 

Glass  Co.  V.  Alexander 147 

Glassey  V.  R.  Co 793 

Gleanes  V.  TurnpiKeCo 117,  305 

Gloucester  Bk.  V.  Salem  Bk 447 

Glover  V.  N.  W.  1{.  Co 323 

Glynv.Baker ...  352 

Godbold  V.Mobile  Bk....  104.  241,  243,  245 

308 

Goddard's  case   393 

Goddardv.  Grand  R.  R.  Co..  468,  472,  473 
475,  720,  737,  731,  762,  767,  773 

Goddard  V .  Pratt 29 

Goddard  V.  Sraithett 614,  618 

Goff  V.  Gt.  North.  R.  Co..  451,  456,  719,  724 

732,  795 
Gonzales  v.  N.  Y.  &  H.  R.  Co.  741,  751,  788 
Gooday  v.  Colchester,  etc.,  B.  Co.  833,  305 


Table  of  Cases  Cited. 


XXXI 


PAGE. 

Goodel  V.  Baker ,  317 

Goodenow  v.  Tyler. .  .  273 

Goodin  v.  Evans 30,    33 

Goodiii  V.  Whitewater  Canal  Co 248 

Goodman  V.  Kennell 795 

Goodiiow  V.  Coinrs 343 

Goodrich  V.  Detroit —  335 

Goodrich  V.  Reynolds 34,  133 

Goodson  V.  Broolie 272 

Goodspeed  v.  East  Haddam  Bk...  434,  452 

716 

Goodwin  v.  Hardy 154,  156 

Goodwin  V.  N.  Y..  etc.,  R.  Co 203 

Goodwin  v.  Union  Screw  Co 410 

Gordon  v.  Appeal  Tax  Court 698 

Gordon  V.  Baltimore 697 

Gordon  v.  Bulkley 337 

495 
776 
407 
631 
762 


Gordon  v.  Longest . 

Gordon  v.  Manchester,  etc.,  R.  Co. 

Gordon  V.  Preston  ..  217,  237,  296,  I 


Gordon  v.  R.  Co 

Gorgier  V.  Mierville 352 

Gorman  V.  Pacific  R.  Co 46 

Gorton  v.  Erie  R.  Co 788 

Goshen  Turn.  Co.  v.  Hurtin99,  115,  128,  145 

Goshen  Turn.  Co.  V  Sears 31 

Goshoen  V.  Supervisors 560 

Goslin  V.  Agricultural  Hall  Co 735 

Goss  V    Coblens  795 

Goswill  V.  Dankley 291 

Goszler  v.  Georgetown 356,  420 

Gott  v.  Adams  Express  Co 36 

Gould  V.  Oneonta 379,  375 

Gould  v.  Thompson 500 

Gould  V.  Womack 537 

Goulding  v.  Clark 313 

Governor  V.  Gridley 4 

Governor  V.  McEwen    41 

Gowen  v.  Penobscot  R.  Co 46 

Gracie  v.  White 336 

Grady,  E.t  parte 358 

Graff  v.  Pittsburgh  R.  Co  ....  130,  136,  144 

172 

Grafton  Bk .  v.  Doe 623 

Graham  V.  Connersville  R.  Co 606 

Graham  V.  Van  Diemen'sLand  Co 313 

Grammar  School  V.  Burt 44 

Granger  v.  Bassett 156,  1.59 

Grand  Gulf  Bank  V.Archer 6.54 

Grant  V.  Courter 713 

Grant  v.  Mechanics' Bk 96,  429 

Gratz  V.  Redel 146,148,341,  255 

Gray  V.  Bridge 675 

Grayv.Coffin  114 

Gray  v.  Monongahela  Nav.  Co 141 

Gray  v.  Murray 291 

Gray  V.  N.  Y.  &  V.  S.  Co 248 

Gray  V.  Portland  Bk 203,270,408,  484 

Grays  v.  Turnpike  Co 146,  148,  504 

Great  Falls  Man.  Co.  v.  Fernald  —  572,  .574 
Great  Luxembourg  Ry.  Co.  v.  Magnay,  253 
Great  North   England  Ry.   Co.  v.  Bid- 

dulph lOo 

Great  Northern  Ry.  Co.  v.  Kennedy 146 

Great  W.  R.  Co.  v.  Fawcett ...  741 

Great  W.  R.  Co .  v.  Rushout 521 

Greeley  v.  Smith 667 

Greely  V.  Bartlett  272 

Green  v.  African  Methodist  Sec 85 

Green  V.  Bidde 649 

Green  v.  Craig 474 

Green  V.  Durham 312 

Green  v.  Hudson  Ry.  R.  Co 480 

Greeny.  London  Genl.  Omnibus  Co —  433 
451,  454,  716,  719,  731 

Green  v.  Seymour 39,  373 

Greenland  v.  Chaplin 462 

Greanleaf  v.  Ludington 163 


PAGE. 

Green  Mt.  Tump.  Co.  v.  Bulla 193 

Greenup  V.  Barbee 113 

Greenville,  etc.,  R.  Co.  V.  Partlow 606 

Greenville,  etc.,  R.  Co.  v.  Smith 147 

Greenville,  etc.,  R.  Co.  v.  Woodsides  . .  118 
Greenwich  v.  Easton,  etc.,  R.  K.Co —    68 

Greenwood's  case 209 

Greenwood  v.  Lake  Shore  R.  Co 187 

Gresham  Life  Assurance  Co.,  In  re 191 

Grew  V.  Breed 664 

Grogan  v.  San  Francisco 41 

Grose  V.  Hilt 113 

Gridley  V.  Lafayette,  etc.,  R.  Co.  257 

Griffin  v.  Kentucky  Co 62 

Griffin  v.  St.  Louis  Vine,  etc.,  Assoc...    89 

Griffith  V.  Com'rs,  etc 712 

Griffith  V.  Frederick  County  Bk 526 

Griggs  V.  Foote 286 

Grim  V.  Wissenberg 561 

Grippen  V.  N.  Y.  C.  R.  Co 787 

Grisewood  case 441 

Grissell  V.  Bristowe 156 

Griswold's  case 449 

Griswold  v.  Haven 444 

Griswold  V.  Peoria  Univ    180 

Grizebood  v.  Blane 197 

Grymes  V.  Hone 97,  163 

Guaya  Iron  Co.  v.  Dawson 487 

Gue  V.  Canal  Co 528,  531 

Guerreiro  V.  Peile 278 

Guest  V.  Poole 359 

Gunton  V.  Ingle 636 

Gutzweller  v.  People 41 

Guyer  V.  Western  Ins.  Co 197 

Haack  v.  Fearing 795 

Habersham  v.  Canal  Co 680,  688 

Habnerv.  New  Orleans,  etc.,R.  Co —  760 

Hackfordv.  N    Y.  O.  R.  Co 789 

Haden  v.  Middlesex  T.  Corp 239 

Haddesfleld  Can.  Co.  v.  Buckley 173 

Haddon  V.  Ayers 296 

Hadley  V.  Freedman's  Sav.  Bank 348 

Hagan  v.  Providence  R.  Co 471,  473 

Hagerstown  Turnpike  v.  Cruger...  20,    35 

Hague  V.  Dandeson 198.  4.30 

Hague  v.  Philadelphia 386,  380 

Hahicht  V.  Pemberton 12 

liahn  V.  Purdell 68 

Hahnemannian  L.  Ins. Co.  v.  Beebe...  503 

Haightv.  Aqueduct 566 

Haight  V.  Day 331 

Haightv.  N.  Y.  C.  R.  Co  788 

Hain  v.  N.  Y.  G.  Co 119 

Halcomb  V.  111.,  etc..  Canal  Co 485 

Haldeman  v.  Penn.  R.  Co 668 

Hale  V.  Bridge  Co 213,  344,  246 

Halev.  Houghton 335 

Halev.  Mut.  F.  Ins.  Co 375,  433 

Halford  v.  Cameron,  etc.,  R.  Co 385 

Hall  v.  Boyd 561 

Hallv.  Carey 333 

Hall  V.  Grossman 679 

Hallv.  Selma.,  etc.,  R.  R.  Co 116 

Hall  v.  Sullivan,  etc.,  R.  Co  ...215,387,  635 

Hall  V.  Supervisors 678 

Hallv.  U    S.  Ins.  Co 115,  171,  173 

Hall  V.  Vt.  &  Mass.  B.  Co 358,  306 

Hallett  V.  Dowdall 296 

Hallowell  Bk.  v.  Hamlin 273,  275 

Hallows  V.  Fernie 133,  341 

Halstead  v.  Mayor,  etc 355 

Ham  V.  Boody 393 

Hamdenv.  N.  H.  R.  Co 781 

Hamilton  v.  Annapolis,  etc.,  B.  Co       ■  566 

654,  671 

Hamilton  v .  Hobart 553 

Hamilton  V.  Keith 43,    63 

Hamilton  V.  Lycoming  Ins.  Co...  395,  403 


xxxu 


Table  of  Cases  Cited. 


Hamilton  v.  Newcastle  R.  Co 380,  395 

Hamilton  V.  Pittsburn *i81 

Hamilton  v.  K.  R.  Co ;i37 

Hamilton  v.  St.  Louis  County  Court  .  691 
Hamilton  V.  Third  Ave.  Co...  457,  474.  724 
Hamilton,  etc.,  R.  Co.  V.  Rice  ....  131,  180 

Hammattv    Wyman 531 

Hammond  v.  Shepard 26 

Ilanison  v.  Weare 113 

Hampton  v.  Coffin 601 

Hampton  V.  Spe(^kenagle 300 

Hampshire  V.  Franklin 293,  659 

Hamtramck  v.  Bk.  Edwardsville  ..  504,  653 

Hance  V    Cayuga,  etc.,  R.  Co 793 

Handrahan  v.  Cheshire,  etc 114 

Hanford  V.  M'Nair ...  337 

Haunav.  Cincinnati,  etc.,  R.  Co.  141,  .553 

558 
Hanna  v.  International  Petroleum  Co.    13 

34 

Hanover  R.  Co.  V.  Coy le 469,  786,  788 

Hanson  V.  Donkersley 108 

Hanson  v.  R.  R.  Co 473 

Hanson  V.  Vernon    41,  577,  713 

Hardcastle  V.  Md.,  etc.,  R.  Co 675 

Hardeman  V.  Ford 294 

Hardenbergh  v.  Bacon 100 

Harding  V.  Goodlett .-     573 

Harding  v.  Tovpnshend 480 

Hardy  v.  Merriweather  . .  133,  383,  386,  505 

Hardyv.  Waltham 698 

Harford  V.  M'Nair 293 

Harger  V.  McCuUough 113 

Hargreaves  v.  Parsons 185 

Harlem  Canal  Co.  v.  Selxas 119,  147 

Harness  V.  Chesapeake,  etc.,  R.  Co...  566 

Harper  v.  Charlesworth 401 

Harrington  V.  Berkshire . —  601,  603 

Harris  v.  Intendant 67 

Harris  V.  Thompson 561,  779 

Harris  V.  Roof  s  Ex'rs 307 

Harrison  v.  Goodman 417 

Harrison  V.  Lexington  R.  Co 654 

Harrison  v.  Martinsville,  etc.,  R.  Co. . .  505 

Harrison  v.  Muskingum  Man.  Co ...  504 

Harrison  v.  Timmons 23 

Harrison  v.  Vines 183 

Hartv. Albany 417 

Hartv.  West.  R.  Co 463 

Hartford  Bk.  v.  Barry 273,  275,  487 

Hartford  Bk.  v.  Hart 484 

Hartford,  etc.,  R.  Co.  v.  Boorman.   ...  144 

171,  539 

Hartford,  etc.,  R.  Co.  v.  Crosswell 143 

Hartford,  etc . ,  R .  Co.  v.  Kennedy 115 

147,  539 

Hartshorn  V.  Day 446 

Hartt  V.  Harvey 535 

Hartwell  v.  Armstrong 566,  571 

Harvard  College  v.  Aldermen 690 

Harvey  v.  Thomas 571 

Haslett  V.  Wotherspoon 115 

Hastings  v.  Amherst  &  Belchertown 

R.  Co 612 

Hatch  v.  Barr 411 

Hatch  v.  Chic,  etc.,  R.  Co 495,  497 

Hatch  V.  City  Bk 686 

Hatch  V.  Vermont  Cent.  R.  Co 607 

Hatcher  V.  Toledo,  etc.,  R.  Co  ...  215,  528 

Hann  V.  Mulberry,  etc..  R.  Co 119,  150 

Haven  V.  Adams 411 

Haven  V.  Emery 388,  631 

Haven  v.  Grand  Junction  R.  Co. ..  3.51,  400 
Haven  V.  New  Hampshire  Asylum,  308,  410 

Havens  v.  Erie  R.  Co 789 

Haverhill  Mut.  F.  Ins.  Co.  v.  Newhall.  285 
Hawkins  v.  Dutchess,  etc.,  Steamboat 

Co 717 

Hawkins  V.  Malthy 156 


PAGE. 

Hawkins  V.  Rochester 601 

Hawthorne  v.  Calef 44 

Hay  V.  Cohoes  Co 458,  572,  785 

Haxtun  V.  Bishop 388 

Hayden  v.  Middlesex Turnp.  Corp.,  403,  484 

Hayden  V.  Noyes 413,  410 

Hayes  V.  Ottanay,  etc.,  R.  Co 215 

Haygood  v.  Justices,  etc 678 

Havne  v.  Beaucharap 130 

Ilaynes  v.  Covington 66,  371,  483 

Haynes  V.  Municipality  .  41 

Haysv.  Pittsburgh  R.  Co 142,  144,  173 

Haysv.Stone 234 

Hay  ward  v.  Davidson 374 

Hay  ward  v.  Pilgrim  Soc 239,  255,  279 

Haywood,  etc.,  Plankroad  Co.  v.  Bryan, 

116,  122 

Hazard  v.  Day 446 

Hazelhurst  v.  Savannah,  etc.,  R.  Co...  179 

279,  375,  377 

Hazen  v.  Boston,  etc.,  R.  Co.. 458,  584,  589 

Hazen  V.  Essex  Co 571,573,  577 

Heacock  v.  Sherman 112 

Head  v.  Providence  Ins.  Co....  66,  338,  350 

384 

Heard  v.  Eldredge 161 

Heard  V.  Talbot 653 

Heart  v.  State  Bk 103,  189,  197,  201 

Heastonv.  Cincinnati,  etc.,  R.  Co. 180,  .504 

Heath  V.  Erie  R.  Co 248,513 

Heath  V.  Sijverthorn  Co 32 

Heathcote  v.  N.   Staffordshire,   etc., 

Ry.  Co 527 

Heaton  v.  Cincinnati,  etc.,  R.  Co 483 

Hebron  Church  v.  Smith 36 

Heffernan  v.  Benkard 737 

liegeman  v.  Johnson 300 

Hegeman  v.  Western  R.  Co 741 

Heil  v.  Glanding  .     .  474 

Heisembittle  v.  Charleston 414 

Helland  v.  Lowell  433 

Helm  v.  Swiggett 100 

Hendee  v.  Pinkerton.215,  387,  392,  400,  404 
Henderson  v.  Australian  Royal  Mail, 

etc.,  Co 395 

Henderson  v.  Hays 527 

Henderson  v.  Marzetti 395 

Henderson  v.  R.  R.  Co 134,441,   443 

Henderson  v.  Sacon 241 

Hendrickson  V.  Kingsbury 471 

Henriquez  v.  Dutch  West  India  Co.341,  485 

506 

Henry  V.  Dubuque,  etc.,  R.  Co 578,  605 

Henry  V.  G.  Northern  R.  Co 179 

Henry  V.  Rutland,  etc.,  R.  Co 259,  303 

Henry  v.  Vanderwood 561 

Henry  V.  V.  &  A.  R.  Co 541 

Henry  V.  Vt.  Cent.  R.  Co 783 

Henshaw  v.  Bellows  Falls  Bk 633 

Herals  V.  G.  Western  R.  Co.  179 

Herkimer,  etc.,  Co.  v.  Small 146 

Hern  v.  Nichols 435 

Herod  V.  Rodman ..255 

Herronv.  Vance » 664 

Hersey  v .  Veazie 303,  513,  523 

Herzo  v.  San  Francisco 417 

Heskith  V.  Braddock 417 

Hester  V.  Hooker 526 

Hester  V.  Memphis  R.  Co 134 

Hewettv.  Swift 716,  720,  731,  793 

Hewitt  V.  Price 197 

Heyman  v.  European  R.  Co. ...133,  441,  447 

Hey  ward  V.  Mayor 561,  668 

Hi  board  v.  Lambe 523 

Hibbard  v.  R.  Co 763 

Hibernia  Turnp.  Co.  v.  Henderson.  98,  115 

117 

Hichens  v.  Congreve 523 

Hickey  V.  Boston, .etc.,  R.  Co 761 


Tablk  of  Cases  Cited. 


XXXIU 


PAGE. 

Hicksv.Hlde 286 

Hitrgrins  v.  N.  Y.  &  H.  R.  Co    7(11 

llifjgins  V.  Senior ..  28:J 

HiggiDS  V.  Watervliet  Turnp.  Co  ..  720,  72" 

7oO,  VXi 

Higg'scase 5li' 

Highland  Turnp.  Co.  V.  McKean....  13,   '.t8 

115,  148 

Higlitowerv.  Thornton 148.  6Gi,  OTO 

Hildretli  v.  Lowell ..571 

Hilt  V.  Beach  ....   3.") 

Hillv.  Frazier 212 

Hill  V.  Lacrosse,  etc.,  R.  Co 530,  637 

Hill  V.  Manchester  Water- Works  Co. ..  33S 

Hill  V.  Newichawanick 154,  1G3 

Hillv.  N.  J.  R.Co 203 

Hill  V.  N.  O.,  etc.,  R.  Co 473 

Hill  V.  Pine  River  13k  100,  199 

Hillv.  Rockingham  Bk 203 

Hill  V.  Simpson 175 

Hill  V.  Western  Vt.  R.  Co  . .  .  578,  584,  590 
Hilles  V.  Parrish.  154,  247,  329,  331,  3-50,  524 

Hilliardv.  Goold  238,  296,  763 

Hilliard  V.  Richardson 732 

Hills  V.  Bannister 283 

Hindustan  Bk.,  etc.,  In  re 545 

Hoaglandv.  Bell .    114,181 

Hobbitt  V.  London ,  etc.,  Ry.  Co 734 

Hobbs  V.  Manhattan  Ins.  Co 495 

Hoblyn  V.  Rex    312 

Hodges  V.Buffalo 287,  3.55 

Hodges  V.  New  Eng.  Screw  Co  ...  241 ,  247 
303,  523,  547 

Hodges  V.  Rutland  R.  Co 259,  303 

Hodgkinson  V.  Kelly 156 

Hodsdon  v.  Copeland 650,  653,  659 

Hotfraan  Steam  Coal  Co.  v.  Cumberland 

Coal  Co 248 

Holbrook  v.  Basset 387 

Holbrook  V.  Fauquier,  etc.,  Turnp.  Co.  181 

Holbrook  V.  N.J.  Zinc  Co 183,  190 

Holcomb  V.  111.,  etc.,  Canal  Co    487 

Holder  V.  Lafayette  R.  Co 257,  259 

Holladay  v.  Elliott 119 

Holliday  V.  People 41 

Holly  Spring  Bk.  v.  Pinson 91,  103 

Holmes,  Ex  parte 99,  320 

Holmes  v.  Gilliland 482 

Holmes  v.  Holmes  Man.  Co —    ...    25 

Holmes  V.  Wakefield.  ...  718,  720,  763,  795 

Holt  V.Blake 113 

Holyoke  v.  Grand  Trunk  R.  Co. ...468,  474 

Holyoke  v.  Ry.  Co 469 

Holyoke  Bk.  v.  Burnh.am 114 

Holyoke  Bk    v.  Man.  Co 508 

Holyoke,  etc.,  Co.  v.  Lyman  ...43,  65,  651 

Home  of  Friendlessv.  Rouse 69-i 

Home  Ins.  Co.  v.  Davis    347 

Home  Ins.  Co.  v.  Morse 348 

Home  L.  Ins.  Co.  v    Pierce 289 

HomersLara  v.  Wolverhampton,  etc., 

Co 404 

Honegsberger  V.  R   Co  793 

Hood  v.  N.  Y.,  etc.,  R.  Co 339 

Hooker  V.  Eagle  Bk 380 

Hooker  v.  N.  II.  &  Northampton  Co...  597 

Hooksettv.  AmoskeagMan.  Co 785 

Hoole  v.  Great  W.  R.  Co 516 

Hooper  V.  Winston .543 

Hope,  etc.,  Ins.  Co.  v.  Beekman.  ..30,    32 

Hope,  etc.,  Ins.  Co.  v.  Koeller 3'2 

Hopkins  v.  A.  &  St.  R.  Co  474 

Hopkins  v.  Exter 82 

Hopkins  v.  Gallatin  Turup.  Co....  388,  407 

411 

Hopkins  v.  Mayor 423 

Hopkins  V.  Mehaffey 271,  284,  300 

Hopkins  V.  Whitesidea 71,  669 

Hoppin  V.  Buffum  96,98,100,319 

E 


PAGE. 

Horn  V.  Atlantic,  etc.,  R.  Co ...    793 

Horn  V.  Baltimore  Co 303 

Horn  V.  Ivy 267 

Horner  v.  Lawrence 730 

Ilornstein  V.  Atlantic,  etc.,  R.  Co 605 

Horton  V.  Baptist  Church 311,  318 

Hotchin  v.  Kent 238 

Hotel  C.>.  V    Dickinson 147 

Hough  V.  Cook  County  Fund  Co 371 

Houston,  etc.,  R.  Co.  v.  Commrs 085 

Houston,  etc.,  R.  Co.  v.  Smith 791 

Hovey  v.  Magill 285 

How  V.  Canal  Co 795 

Howbeach  Coal  Co.  v.  Teague 143 

Howard  v.  Baillie 271 

Howard  V.  Moore 527 

Howard  v.  Savannah 414 

Howev.  Duel     219,243,245,  535 

Howe  V.  Freeman 388,  631,  633 

Howe  V.  Keeler 407 

Howe  V.  Newm arch 720,724,  795 

Howe  v.  Starkweather.  ..  187,  531,  534,  037 

Howe  Machine  Co.  v.  Snow 504 

Howell  V.  Chic.  &  N.  W.  R.  Co...    156,  1.59 

524 
Hoyle  V.  Plattsburgh,  etc  ,  R.  Co.  248,  530 

ii.i$,  640 

Hoyt  V.  Bridgewater,  etc . ,  Co 239 

Hoyt  V.Sheldon  420,  657 

Hovt  V.  Thompson  217,239,316,  420 

Hubbard  v.  Chappel 505 

Hubbard  V.  Winsor 317 

Hubersty  v.  Manchester,  etc.,  Ry.  Co..  198 
Hudersfleld  Canal  Co.  V.  Buckley..         171 

Hudson  v.  Carman 30,  113 

Hudson  V.  Layton 526 

Hudson  Co.  V   State 316 

Hudspeth  V.  Wilson. 93 

Hughes  V.  Antietam  Manuf.  Co  — 171,  443 

Hughes  V.  Bank  of  Somerset 504 

Hull  &  London  L.  Assur.  Co.,  Ex  parte,  439 

HiiUman  y,.  Honcomp 615,  619 

Humbard  V    Hurabard 526 

Humble  V.  Mitchell ; 185 

Humes  V.  Knoxville 458 

Humphrey  V.  Pegues 704 

Humphreys  V.  Havens 294 

Hungerford  Nat.  Bk.  v.  Van  Nostrand,    36 

Hunt  V.  Bullock 529,  638,  641 

Hunt  V.  Hoyt 409 

Hunt  V.  Kansas,  etc..  Bridge  Co —         32 

Hunt  V.  R.  Co 7.33,  736 

Huntv.  Wolfe 543 

Hunter  V.  Glasgow,  etc..  Canal  Co —  731 

Huifhins  v.  Byrnes 411 

Huti^hins  v.  New  England,  etc  ,  Co...  114 

Hutchins  V.  State  Bk 175,  187,  189 

Hutton  V.  R.  Co 179,780 

Huvett  V.  Phila.,  etc.,  R.  Co 783 

Hyatt  V.  Allen 155 

Hyatt  V.  ISIcMahon 63 

Hyatt  V.  Whipple 649 

Hyde  V.  Franklin 355 

Hyde  v.  Lynde 542 

Hynes  V.  Jungren 730 


Ihl  V.  Forty-second  St.  R.  Co. 

lllidge  V.  Goodwin 

Illinois  Bk.  v.  People 

III  "    ~ 

111 

HI 

111 


etc.,  R.  Co.  v.  Able . 

etc.,  R.  Co.  V.  Adams 

etc-,R.  Co.  V.  Baches 

etc.,  R.  Co.  v.  Barron 

111.,  etc.,  R.  Co.  V.  Beers 

111. ,  etc. ,  C.    Co.  V.  Chic.  &  R.  I.  R.  Co. 

III.,  etc.,  R.  Co.  V.  Cook   34,  524, 

111.,  etc.,  R.  Co.  V.  County 

III., etc. ,R.   Co.  V.  Hutchinson  

111.,  etc  ,R.  Co.  V.  McClelland 


793 
463 
698 
755 
793 
788 
469 
140 
563 
551 
699 
793 
783 


XXXIV 


Table  of  Cases  Cited. 


PAGE. 

Til.,  etc.,  R.  Co.  V.  Nunn T83,  784 

111.,  etc.,  R.  C.)    V.  Reedy «» 

III.,  etc.,  I{.  Co.  V.  Station 700 

111.,  etc.,  R.  Co.  V.  Weldon 480 

Imperial  Arso.  V    Coleman 511 

Imperial  IJk.,  etc.,  v.  Hindustan  Bk..  546 

Imperial  Gas  L.  Co.  v.  IJroadbent 780 

Imperial  Gas  Co,  V.  Clarke COl 

Importins,  etc.,  of  Ga.  v.  Locke. 613,  037 
Indianapolis,  etc.,  R.  Co.  v.  Farrell...  755 
Indianapolis,  etc.,  R.  Co.  v.  Jones  ...  55() 

55K 
Indianapolis,   etc.,    K.    Co.    v.   Para- 
more 783 

Indianapolis,  etc.,  R.  Co.  v.  Petty  793 
Indianapolis,  etc  ,  R.  Co.  v.  State. 680,  688 

Inge  V.  BirmiriKham,  etc.,  R.  Co 536 

Iiifilis  V.  Great  N.  Ry.  Co 146 

Ingrahara  v .  Terry  .  653,  (167 

Inhabitants  V.  Weir 355 

Inhoff  V.  Chicago,  etc.,  R.  Co 760 

Inland   Fishery  Comm'rs    v.  Holyoke 

W.  P.  Co 43 

Instone  v.  Bridge  Co 148 

Insurance  Co  ,  In  re    325 

Ins.  Co.  V,   Coram 488,600 

Ins.  Co.  V.  C.  D.,  Jr 500 

Ins.  Co.  V.  Mayor 680 

Ins.  Co.  V.  Sanders , 316 

Ins.  Co.  V.  Tweed 463 

International  L.  &  A.  Soc,  In  re  .  .  ..  531 
International  L.  Ins.  Co.   v.  Commrs. 

of  Taxes 696 

Intendent  V.  Chandler 67 

Iowa  V.  Wapello 713 

Ireland  v.  Palestine  T.  Co 143 

Ireland  Bk.  v.  Evans 407 

Iron  Bk.  V.  Pittsburgh 695 

Iron  City  Bk.  V.  Plattsburg 698 

Iron  Mountain  Bk.  v.  Mercantile  Bk. ..  453 
Iron  R.  R.  Co.  v.  Lawrence  Furnace  Co.    47 

Irrigation  Co.  of  France,  Re 313 

Irvine  v.  McKeon 113 

Irving  Bk.  v.  Wetherald  444 

Isaacs  V.  Third  Ave.  R.  Co 729 

Isabel!  V.  St.  Joseph,  etc.,  R.  Co 791 

Isham  V.  Bennington  Iron  Co.  189,  484,  634 

Isham  V.  Buckingham 189 

Isreal  V.  Jewett 605 

Jackson  v.  Brown 387 

Jackson  V    Carnpbell 407 

Jackson  V.  Cliicago,  etc  ,  R.  Co. 783 

Jackson  V.  Cocker ...180 

Jaclison  V.  Hampden 313 

Jackson  V.  Ludeling 244,  246,  248 

Jackson  v.  Marine  Ins.  Co.,  Matter  of.  6.53 

657 
Ji-ckson  V.  Newark,  etc.,  Plank  R.  Co.  1.54 

159 

Jacksonv.  Pratt 406,  410 

Jackson  V.  R.  &  R.  Co.   .588,   793 

Jackson  v.  Sec.  Ave.  R.  Co  .    457,  730,  737 

731 

Jacksonv.  Turquand 133 

Jacob  V.  Louisville  005 

Jaraesv.  Cincinnati,  etc.,  R.  Co 183 

James  V.  Eve  546 

James  v.  Gt.  West.  R.  Co 789 

.lames V.  Pontiac  P.  R.  Co... 531 

James  V.  R.  R.  Co , 530 

James  V.  Woodruff 669 

James  Riv.,  etc.,  Co.  v.  Thompson 566 

Jameson  V.  People 1.3 

Jamison  v .  New  Orleans 691 

Janson  v.  Ostrander 4 

Jasigi  V.  Chic,  etc.,  R.  R.  Co..     100 

Jav  Bridge  Co.  v.  Woodman.  ..145,  413,  430 
Jefferson,  etc.,  Bk.  v.  Skelly 698 


Jeffersonville,  etc.,  R.  Co.  v.  Bowen.. 
Jellersonville,     etc.,     R.  Co.    v.    Hen- 
dricks     

Jeffersonville,  etc.,  R   Co.  v.  Rogers.. 

459,  474,  718,  763, 

Jeffersonville,  etc.,  II.  Co.  v.  Swift ... 

Jefts  V.  York 

Jenkins  v.  California  Stage  Co 

Jenkins  v.  Hutchinson 

Jenkins  v.  Morris .     . . 

Jennings  v.  Broughtou 

Jerome  v.  Ross 564, 

Jer.«ey,  etc  .  R.  Co.  v.  Jersey 

Jessup  v.  Bridge 631, 

Jessup  V.  Trustees 

Jewett  V.  Lawrenceburgh,  etc.,  R.  Co. 

John  V.  Erie  R.  Co 154, 

Joh !)  V .  Farmers'  Bk .   650.  0.53, 

Johns  V.  Joiins 189, 

Johnson  v,  Albany,  etc.,  R.  Co 

Johnson  V.  Atlantic  R.  Co 

Jf)hiison  V.  Bentley 654, 

Johnson  V.  Comm 

Johnson  v.  Concord  R.  Co 

Johnson  v.  County 

Johnson  v.  Crawfordsville,  etc.,  R.  Co. 

136, 

Johnson  v.  Cunningham 

Johnson  v.  Indianapolis 

Johnson  V.  Lucas 675, 

Johnson  v.  McGruder 

Johnson  v.  JSorway ,. .. 

Johnson  V.  Perry 

Johnson  V.  State  Marine  Hosp 

Johnson  v    Underbill 

Johnson  v.  Wabash,  etc.,  R.  Co  ...117, 

Johnson  v.  Westchester,  etc.,  R.  Co. .. 
Johnston  V.  Ewing  Female  Univ..  117, 

Johnston  v.  Jones 211, 

Johnston  V.  South  West  B.  Bk. ...  118, 

Joice  V .  Williams 

Joint  Discount  Co.  v.  Brown 243, 

Jolly  V.  Terre  Haute  D.  Co 

Jones  V.  Cine,  etc.,  R.  Co 

Jones  V.  Dana 34, 

Jones  V .  Glass 

Jones  V.  Mayor 

Jones  V.  Milton  T.  Co 313, 

Jones  V.  Perry. 

Jones  V.  Smith 

Jones  V.  Terre  Haute,  etc-,  R.  Co.,  1.54, 
181,  190,  219,  244, 

Jones  V.  Walker 

Jones  V.  Williams 

Jordan  v.  Woodward 

Josey  V.  R.  R.  Co 

Joslyn  V.  McAllister 

Junction,  etc.,  R.  Co.  v.  Reeve 

Junkins  v.  School  Dist 

Justices,  etc.,  v.  Turnp.  Co 

Kaiser  v.  Kellar 

Kanawha  Coal  Co.  v.  Kanawha,  etc., 

Coal  Co    

Kane  V.  Bloodgood 99, 

Kansas  City  Hotel  v.  Harris  ...123,  142, 

Kansas,  etc.,  R.  Co.  V.  Butts , 

Kansas,  etc.,  R.  Co.  v.  Fitzsimmons — 

Kansas  Pac.  R.  Co.  v.  Miller 

Kansas  Pac.  R.  Co.  v.  Pointer 

Karnes  v.  Rochester,  etc.,  R.  Co —  156, 

KatamaLand  Co.  v.  Jernegan 

Kay  V.  Johnson 296, 

Kay  V.  Penn.,  etc.,  R.  Co 

Kean  V.  Johnson 143.  223,  513,  516, 

548, 
Kearney  v,  Andrews 


\aK. 
793 

756 

4.57 
795 
756 
300 
559 
300 
385 
134 
592 
696 
636 
388 
124 
179 
654 
.533 
150 
781 
671 
698 
763 
353 
133 
443 
290 

26 
678 
336 
668 
469 
520 

97 
131 
180 
761 
131 
180 
293 
450 
277 
245 
779 
505 

36 
795 
366 
315 
479 
175 
159 
246 
560 
175 
573 
411 
469 
127 
272 
711 

543 

34 
159 
375 
783 
791 
739 
649 
158 
130 
536 
793 
534 
660 
412 


Table  of  Cases  Cited. 


XXXV 


PAGE. 

Kearney  V.  Buttes 114 

Keating  V.  N.  y.  C.  R.  Co TOO 

Keeler  V.  Fassett 9^! 

Keeler  V.  Salisbury 2'M 

Keeley  V.  Erie,  eto.,  R.  Co    750 

Keeso  v.  Chicago,  etc.,  R.  Co 784 

Kelley  V.  Mdnson 44!) 

Kellogg  V.  Chicago,  etc.,  R.  Co  ..  .  .453,  46'! 

7S3,  7»;") 

Kelly  V.  Mariposa  Min.  Co 547 

Kelly  V.  Troy  Iiis.  Co 27ii 

Kelnerv.  Baxter ...  29S 

Kelsey  V.  National  Bk 2*57,  2!) ! 

Kelsey  V.  Northern  L.  Oil  Co  .  ...  443,  447 

Kendall  V.  D.  S  67:! 

Kenicott  V.  Siinervisors 351 

Keiinayde  V.  Pac.  R.  Co 78!) 

Kennebec,  etc.,  R.  Co.  v.  Kendall,  143,  148 
413,  4;i0,  433 
Kennebec,  etc.,  R.  Co.  v.  Palmer  .  145,  305 
Kennebec,  etc.,  R.Co.  v.  Portland,  etc., 

R.  Co 215,  387 

Kennebec,  etc.,  R   Co.  v.  Waters  ..134,  443 

Kennedy  V.  Baltimore  Ins.  Co 410 

Kennedy  V.  Colton .504 

Kennedy  V.  Gibson 604 

Kennedy  v.  Panama,  etc.,  Mail  Co.,  437,  4-U 

Keuosiia  V.  Lamson ..    351,353 

Kenosha,  etc.,  R.Co.  V.  Marsh    ..     63,143 

Kenton  County  v.  Bk.  Lick  Townp.  30,    64 

Kentucky  Bk.  v.  Schuvlkill  Bk      .  231,  2.30 

287,  35S,  450 

Kernghara  V.  Williams  . 516 

Kerr,  In  re —      .  5(53 

Ketchum  v.  Buffalo 343,  3S6 

Keyes  V.  Devlin 409 

'  Keyes  v .  Westf  nrd     69 

'  Key ser  V.  School  Dist 307 

'  Keyser  V.  Stansifer 310 

Kiddermiiister  V.  Hardwick 400 

Kidwelly  Canal  Co  V.  Raby        131 

Kilpatrick  V.  Penrose  Ferry  Co 258,  303 

Kimball  v.  Cushman 732 

Kimball  V.  Marshall... 317 

Kimmel  v.  Stoner 243 

Kiii£<v.  Brooks  3-37 

King  V.  Coopers'  Co 417 

King  V.  Ginever.   430 

King  V.  Hertford 616 

King  V.  Mayor  of  Liverpool 86 

King  V.  Mayor  of  N.  Y 682 

King  V.  Merchants' Ex.  Co 387 

Ki ng  V .  Morf ord .536 

King  V.Morris 783 

King  V.  Ogden  ..  63.5 

King  V.  Patterson,  etc. ,  R.  Co 154,  159 

King  V.  St.  Catherine  Dock  Co 541 

Kingv.  Stacey       636 

King  V.  Theodorick 417 

King  V    Wilson 355 

I  Kingman  V.  Perkins ...     93 

Kingsl)ury  V.  School  Dist 

Kingston  V    Kincaid 295 

Kinney  V    Crocker 469 

Kinzie  v.  Chic 356 

Kipv.  Paterson 414 

Kirljy  V   Potter 184 

Kirbvv.  Shaw 690 

Kirkv.  Bell 143 

Kirk  V.  Nowill 417 

Kirthind  v.  Snow 166 

Kishacoquillas  T.  R.  Co.  v.  McConahy.  652 

654 
Kitchen  v.   Cape  Girardeau,  etc.,  R. 

Co  68,  270 

Klauber  v.  Am.  Ex.  Co 771 

Klein  v.  Alton,  etc.,  R.  Co 145,  147 

Kline  V.  Cent.,  etc.,  R.  Co 4,57,  733 

Knap  V.  Jewelch 269 


PACE, 

Knappv.  R.  R   Co  ..   ,533 

Kneass  V.  Schuylkill  Bk 71(5 

Kneehmd  V.  Gihnan    3^1 

Kneeland  v.  Milwaukee 691 

Knight  V.  Mnyor 34 

Knight  V.  New  O.,  etc..  R.  Co.... 703 

Ivniulit  V.  Pontcliartrain  R.  Co 760 

Kniglit  V.  Wells 25,  667 

Knowlcs  V.  Beatty 69,  141 

Knowllon  V.  Ackley    653,  6-56,  666 

Kriowlton  V.  Congress  S.  Co 143,  241 

Koehler  V.  niack  Riv.  Falls  Co 248 

Korn  V.  Mut.  III.'*.  Soc    6^ 

Kramer  v.  C.  &  P.  R.  Co 5fi9 

Krester  V.  Smith 480 

Krider  v.  Western  College 233 

Kuhn  V.  McAlli.ster ]S3 

Kynaston  v.  Mayor,  etc 417 

Lackawanna,  etc.,  R.  Co.  v.  Doak 784 

Lacl\a\vanna  Iron  Co.  V.  Luzerne.   .   ..  695 

Lafayette  Bk.  v.  Buckingham 543 

Lafayette  Bk.  v.  State  B.  of  III 27.3 

La  Fayette  Ins.  Co.  v.  Freimh 485,  488 

Lafayette  Ins.  Co.  v.  Rogers  501 

Lafayette,  etc.,  R.  Co.  v.  .-Vdams 793 

La  Grange  R.  Co.  V   Mays 127,  134 

Lrtirange,  etc.,  R.  Co.  v.  Rainey 651 

LalxC  V.  De  Lambert. ,. .  ,533 

Lake  Ontario  R.  Co.  v.  Mason,  117, 132,  1.53 

ISO,  305 

Lake  'View  v.  Rose  Hill  Cemetery 43 

Lamb  V.  Lamb    ,348 

Lambertville  V.  Clevinger. 605 

Lainpeth  v.  North  Carolina  R.  Co 760 

Lamprell  v.  Billericay  Union 404 

Land  Grant  R.  R.  Co.  v.  Coffey  County,  348 

Landreaux  v.  Bet 763,  76t 

Lane  V.  Brainerd 137,  313,  315 

Lane  V.  Cotton    - ..  435 

Lane  v.  Schomp .  .  366,  .5.3.3 

L.mg  V.  Smith 353 

Langhaff  v.  Mil.,  etc.,  R.  Co 700 

Lang.'-dale  v.  Bonton. 425,  ,508 

Langston  v.  South  Carolina,  etc.,  R.Co.,  353 

Lanier  v.  Bk 91 

Lansing  V.  Cf)unty  Tr 653.  670 

Lansing  V.  Gaine    '.  277 

Larrabue  v.  Baldwin    109 

Lathrop  v.  Bk.  of  Sciot 271 

Lath  rop  V.  Cora    Bk..  410 

Lathrop  V.  Union  Pac.  R.  Co 485,  494 

Laugher  V.  Pointer 435 

Lauman  v.  Lebanon,  etc.,  R.  Co.,  215,  .SIX 
387,  513,  .547,  550 

Laussatt  V.  Lippincott 272,  290 

Lavertv  V.  Burr 277 

Law  V.  Conn.  R    R.  Co ; . .  293 

Lawless  v.  Anglo-Egyptian  Co 453,  4.53 

Lawrence  case      448 

Lawrence  v.  Gt.  North.  R.  Co 7S3 

Lawrence  v.  Housatonic  R.  Co 469 

Lazarus  v.  Shearer 283,  300 

Lea  V.  American  Canal  Co 6.53 

Lea  V.  American,  etc.,  R.  Co 604 

Leavenworth  V.  Rankin 287,  302,  355 

Leavitt  V.  Blaichford 344 

Leavitt  V.  Fisher 170 

Leavitt  V.  Palmer 381 

Leavitt  v.  Yates 217,  316 

Leazure  V.  Hillegas 410 

Le  Blanc,  Matter  of 155,  1,59 

Ledbetter  v.  Walker 336 

Lee  V.  M.  E.  Church 296 

Lee  V.  Sandy  Hill ,..  443,  4.58 

Lee  V.  Trustees,  etc., 403 

Leev.  Wallis 421 

Leech  v.  Harris 83 

Leedom  V.  Plymouth,  etc.,  R.Co 529 


XXXVl 


Table  of  Cases  Cited. 


PAOF.. 

Leflerv.  Field 446 

Legtrett  V.  N.J.  Bk.  Co  407,  6;?1 

Le^urett  V.  N.  J.  Man.  Co 410 

Legrand  v.  Haiupdeii  Sidney  College  .    271 

403.  410 
Lehigh  Br.  Co.  v.  Lehigh  Coal  Co.  50.5,  H.50 

Lehigli  Co    v.  Northampton 6'.).') 

Lehigh,  etc.,  R.  Co.  v.  Hall 788,  790 

Lehiiutn  V.  Brooklyn 480 

Leigh  V.  Crump -.  537 

Leitoh  V.  Welles 97,  190 

Leland  V.  Hayden ..  156,  160 

Lenoh  V.  Lench...  . 449 

Lenox  V.  Roberts 388 

Lentoii  V.  McNeil 13;i 

Leonardsville  Bk.  v.  Willard    483 

Le  Roy  V.  Globe  Ins.  Co 159 

Leroy  V.  Piatt ..  638 

Le  Roy  v.  Trinity  House 616 

Lesterv.  Webb 217,  278 

Levering  v.  By.  Co 594 

Levy  V.  Home 378 

Lewey's  Island  R.  Co.  v.  Bolton —    ..  153 

Lewis  V.  Bk.  of  Kentucky 487,  506 

Lewis  V.  Jeffries 369 

Lexington  V.  Butler 353,  383,  387 

Lexington,  etc.,  R.  v.  Applegate 60S 

Lexington,  etc.,  R.  Co.  v.  Bridges.  241,  303 
Lexington,  etc.,R.  Co.  v.  Chandler,  117,  119 

147,  153 

Lexington ,  etc.,  R.  Co.  v.  Staples 1.53 

Libbey  V.  Hodgdon 486 

Libby  V   Roselvranse     543 

Lickbarrow  V.  Mason 4-14 

Life  Ins.  Co.  v.  Mechanics*  F. Ins.  Co..  434 

Life  Ins    Co.  v.  Wilson    677 

Lighte  V.  Everett  Ins.  Co 504 

Lightner  v.  Boston,  etc.,  R.  Co 555 

Limpus  v.  London  Gen'l  Omnibus  Co.,  451 
457,  716,  719,  726,  731,  738,  795 

Lincoln  v.  Prince 493 

Lincoln  V.  Richardson 29 

Lincoli!  V.  Saratoga  R.  Co 469 

Lincoln  v.  Smith 713 

Lindell  V.  Benton    653,  667 

Linder  v.  Carpenter  2.53 

Lindsey  v.  ^Marshall 371 

Lindus  v.  Melrose 296 

Linsley  v.  Bushnell 468 

Lionberger  v.  Rouse 711 

Lisconibe  V.Jersey,  etc.,  R.  Co 7.53 

Litchfield  Bk.  v.  Church ..  133,  136 

Litchfield  Bk.  v.  Peck 4« 

Litchfield  Iron  Co.  v.  Bennett  ....  233,  278 

Littell  V.  Scranton  Gas,  etc.,  Co 93 

Little  V.  O'Brien 371 

Little  Miami  R.  Co.  v.  Collett 606 

Little  Miami  R.  Co.  v.  Stevens 717 

Little  Miami  R.  Co.  v.  AVetmore.     763,  794 
Littleton  Manuf.  Co.  v.  Parker.  119,  141,  151 

Littlewort  v.  Davis 371,  391 

Liverpool  v.  Chorley  W.  Works 575 

Liverpool  Ins.  Co.  v.  Mass..  .2,  15,  23,  348 

490,  500 

Livingston  V.  Dorgenois 674,  683 

Livingston  V.  Hastie 277 

Lloyd  v.  Hannibal,  etc.,  R.  Co.   ...  755,  760 

Lloyd  v.  Mayor,  etc.,  of  N.  Y 41 

Lloyd  V.  Wheatley 526 

Loan  Asso.  v.  Stoneraetz..257,  259,  260,  303 

Loan  Asso.  V.  Topeka 35 

Locke  V.  Stearns  .. .   .     278,  435 

Lockhart  V.  Van  Alstyne 159,  179 

Lockwood  V.  Mechanics'  Nat.  Bk..  188,  416 

Lockwood  V.  Merchants'  Nat.  Bk 413 

Logan  V.  McAllister 29,    32 

Lohman  v.  N.  Y.,  etc.,  R.  Co..  181,  233,  274 

Loker  V.  Brookline 286 

London  V.  Vanacker 413 


London,  etc. 
London,  etc. 

London,  etc. 


London,  etc.,  Bk.,  Re 546 

London,  etc. ,  Coal  Co. ,  In  re 218 

London,  etc. ,  Ins.  Corp.,  In  re 548 

LoTidon  &  Provincial  Law  Ass.  v.  Lon- 
don Pro.  Joint  Stock  Life  Ins.  Co  . . .     25 

London,  etc.,  K.  Co.  V    Canal  Co 780 

R.  iJo   V.  Freeman.   173 

R.  Co.  V.  Graham...  146,  148 
173 

R.  Co.  V.  McMichael 79 

Londonderry  V.  Andover 13 

Longv.  Colburn 283,293 

Long  Island  U    Co.,  Matter  of 146,  313 

Longley  v.  Little  113 

Longmore  V.  G.  W.  Ry.  Co 7.57 

Loraine  v.  Cartwrignt 293 

Lothrop  V.  Stedmai) 45 

Loughbridge  V.  Harris   570,  .573,  .576 

Louisiana  V.  Fordick 487,  500 

Louisiana  State  Bk.  v. Orleans Nev.Co.     66 

Louisville  V.  Uni.  of  Louisville 649 

Louisville  It    Co.  v.  Faulkner    795 

Louisville,  etc.,  R.  Co.  v.  Comm 694 

Louisville,  etc.,  R.  R.  Co.  v.  Letson..     79 

488,  493,  495 

Louisville,  etc.,  R   Co.  v.  State...  &iS,  796 

Lovett  v.  Salem,  etc. ,  R.  Co 723 

Lovett  V.  Steam  Saw  Mill  Asso 407 

Low  v.  Connecticut,  etc.,  R.  Co 304 

Low  v.  London,  etc.,  R.  Co 396 

Lowberv.  Mayor 41,  666 

Lowell's  case 233 

Lowell  V.  Boston  &  Low  R.  Co 433 

Lowell  V.  Oliver 6iM3 

Lowell  Sav.  Bk.  v.  Winchester 237,  289 

419,  431 
Lowry  V.  Commercial,  etc.,  Bk...  105,  176 

Lucas  V.  Pitney    343,  383,  386 

Lucenav.  Crawford 449 

Ludlow  v    Charlton 409 

Ludlowv.Hurd  388,6.31,637 

Luling  V.  Atlantic  Mut.  Ins.  Co  190 

Lum  v.  Robertson 669 

Lumbard  v.  Stearns 571,  658 

Lunney  v.  East  Warren  Co 393 

Luttrell  V.  Hazen 795 

Lyman  V.  Bonney 533 

Lyman  v.  Bridge  Co 458,  717 

Lynch  V.  Nurdin 463 

Lyndeborough  Glass  Co.  v.  Mass.  Glass 

Co 233 

Lyon  V.  Adamson 271 

Lyonv.  Jerome 564 

Lyons  V.  Martin 730 

Lyons  V.  O.  A.  &M.  R.  Co 31,     64 

Mabey  V.  Adams 241 

Mabey  V.  Austin 303 

McAfee's  Heirs  v.  Kennedy 573 

Mc Aleer  v.  McMurray 516 

Macauly  v,  Robinson 113 

McBane  v.  People 673 

.Mc Bride  V.  Porter 310 

McCall  v.  Byram  Man.  Co 350 

.McCall  v.  N.  Y.  C.  R.  Co 788 

McClanathan  v.  R.  Co 730 

MeCleary  v.  Kent  ■ 734 

McClellan  V.  Scott 443 

McClung  v.  St.  Paul 304 

McCluerv.  Manchester,  etc.,  R.  Co 375 

McClure  V.  Bennett  .   398 

McConahy  v.  Centre  Turnp 671 

McCracken  V.  San  Francisco..  239,293,  355 

McCray  v.  Junction  R.  Co 140,  143,  551 

McCready  V.  Rumsey 200 

MeCullO(;h  V.  Maryland    14,  699,  706 

McCulloch  V.  Moss 337,  289 

McCullough  V.  Annapolis  R.  Co 423 

McCully  v.R.  R.  Co 128 


Table  of  Cases  Cited. 


xxxvii 


PAGE. 

McCurdy  v.  Myers 600 

McCutcheon  V.  Steamboat  Co 380 

McDcUiiel  V.  Etiiaiiuel 467 

McDaniels  v.  Flower  Brook  Manuf.  Co.,  312 

3.58 

McDermottv.  Board  Police 417,  423 

McDeriuott  v.  Kvening  Journal 4-53 

McDiarmid  V.  Fitch 67.5 

McDonald  V.  Chicago,  etc.,  R.  Co.,  751,  7-53 

756,  7.59 

McDowell  V.  Bk.  Wilmington 104 

McDowell  V.  N.  Y.  C.  R.  Co 793 

McDowell  V.  Wash.  Bk 430 

McElhenny's  appeal 1.39 

Mackey  V.  N.  Y    C.  R.  Co 78^: 

McGehee  V.  Mathis 691,  698 

McGoonv.  Scales 664 

Mactrregor  v.  Deal,  etc.,  R.  Co.,  302,  363,  -383 

McGresjor  v.  Erie  U.  Co .560 

Mai'gregor  v.  Dover,  etc.,  R.  Co 302 

McGrew  V.  Stone 469 

McGuire  V.  Grant ':32 

McGuirev.  Hudson  R.  Co 789,  791 

Jlclntire  V.  Preston 285 

Mclntyre  v.  N.  Y.  Cent.  R.  Co 479 

Mclntyre    Poor  Schools  v.  Zanesville 

Canal  Co.     73,  650,  659,  666 

Mackey  v.  N.  Y.  Cent.  R.  Co 787 

McKarlin  V.  Bresslin .509 

McKeen  V.  Northampton 695 

McKellarv.  Stout...    113 

McKeon  v.  (  itizens'  R.  Co 795 

McKim  V.  Mason     637 

Mclvinleyv.  Chic.  &  N.  W.  R.  Co.. 463,  478 

McKinstry  V.  Pearsall 272 

Mai'laev.  Sutherland 2-39 

McLaren  V.  Pennington ...  131,  649,  6.59 

McLaughlin  v.  Detroit,  etc.,  R.  Co. 1,58,  179 

181,  233 

McLean  v.  Russell 735 

McMahan  V.  Morrison 547,  550 

McM asters  V.  Com m 561 

McMasters  v.  Reed 3.56 

McMetity  V.  Frank 336 

McMillen  v.  Smith 679 

McMuIlin  V.  State 675 

McMiirtrie  V.  Bennett 527 

McNeil  V   Tenth  Nat.  Bk...  91,  97,  102,  190 

Macon,  etc.,  R.  Co.  v.  Davis 793 

Macon,  etc.,  R.  (^o.  v.  Johnson 761 

Macon,  etc.,  R.  Co.  v.  Parker..  ..529,  .5.34 
Macon,  etc.,  R.  R.  Co.  v.  Vason...  139,  142 

534 

Macon,  etc.,  R.  Co.  V.  Winn 793 

McPadden  V.  N.  Y.  C.  R.  Co  751 

McPherson  V.  Foster 357 

McRea  V.  Ru.'^sell 116,  118 

McVlcker  V.  Ross 5.53 

McWhorterv.  Lewis 286 

McWhorterv.  McMahan 527 

Maddox  V.  Crahara 3.52 

Madison  College  v.  Burke 483 

Madison,  etc., R   Co.  v.  Taffe 789 

Madison,  etc.,  R.  Co.  v.  Watertown, 

etc.,  P.  R.  Co 66 

Magill  V.  Kauflman 233,  287 

Mahaska,  etc.,  R.  Co.  v.  Des  Moines, 

etc.,R   Co 215 

Maher  V.  Carman 114 

Mahoney  v.  R.  Co 793 

Mahonyv.  Bk.  of  Arkansas 28 

Mahony  V.  Bast  Hoi vford 3.56 

Mahoney  v.  Spring  Valley  Water  Wks.  368 

Mahoney  Mining  Co.  v.  Bennett  313 

Macine  Stasre  Co    v.  Langley 394 

Malecek  v.  Tower  Grove  Co 270 

Malloy  V.  Mallett    114,669 

Maltby  V.  N.  Western  R.  Co  137,  505 

Manderson  v.  Commercial  Bk 514 


Manhattan  Co.  v.  Lydig 345.  450 

Mann  V.  Cfiandler 283 

Manti  v.  Cooke 147,  172,  541 

Mann  v.  Ciirrie 121,147,171,  173 

Mannv.  Prentz  ...        144,171,406,410,  .">41 

Maniiey  v.  Motz 483 

Monroe  v.  McCall 674 

Man <  V.  Worthing .338 

Manser  v.  Eastern  Counties  R.  Co 741 

Mansfield  V.  Watson  114,  436 

Mansfield  V    Fuller    675 

Mansfield,  etc.,  R.  R.  Co.  v.  Dunker...  .5.57 

.Man    Nat.  Bk.  v   Baach 492,  .500 

Man.  Co.  V.  Armstrong .505 

Manuf.  Co.  V.  Davis 25 

Mapp  V.  Phillips 294 

Marble  V.  Worcester 463 

Marblehead  Social  Ins.  Co.  v.  Quiner.  1.87 
March  v.  Eastern,  etc.,  R.  Co. .154,  I.5fi,  204 

513,  516 

Marchand  V.  Loan,  etc.,  Assoc ..      34 

M arc vv.  Clark  40,  113 

Mare  V.  Charles 286 

Marietta  V.  Fearing 41,416 

Marietta  Bk.  v.  Pindall 487 

Marietta,  etc. ,  R.  Co.  v.  Elliott 140 

Marine  Bk.  V.  Biays    1-59 

Marine,  etc.,  Ins.  Bk.  v.  Jauncey 487 

Mariners' Bk    v.  Sewall 064 

Markham  V    Brown 773 

Markle  V.Akron 425 

Marlatt  v.  Levee  Stearab.  Cotton  Co  . . .  4.51 

Marlborough  Manuf.  Co.  v.  Smith  .  96,  149 

104,  172,  198,  218,  224.   439 

Maroney  v.  R.  Co 763 

Marsh  V.  Falker 446 

Mar.'ih  V.  Fulton  Co.   286,  303,  355 

Marshall  v.  Baltimore,  etc.,  R.  Co  26 

307,  495,  .500 

Marshall  V.  Queensborough .536 

Martin  v.  Gt.  North.  R.  Co 7.53 

Martin  v.  Mayor 286,  355 

Martin  V.  Nashville  Building  Asso 413 

Martin  V.  Pensacol a  Coal  Co 134 

Martin  v   Pensacola,  etc.,  R.  Co..  124,  1.36 

Martin  V.  Zellerbach  2-33,  295 

Mary  V.  Beekraan  Iron  Co 284 

Maryland  v.  Baltimore,  etc.,  R.  Co 4*0 

Maryland  V.  Bank  of  Md    .530 

Maryland,  etc.,  v.  Scliroeder 535 

Maryland  Tris.  Co.  v.  Dalrymple 93 

Maryland  Union  Bk.  v.  Ridgely 233 

Mason  v.  Cheshire  Iron  Works 114 

Mason  v.  Elsworth 469 

Mass.  Gen.  Hosp.  v.  State  Asso.  Co 649 

Mass.  Iron  Co.  v.  Hooper 103,  197,  201 

Master,  etc..  Emanuel  College,  Case  of.  269 

Masters  v.  Warren 468 

Mathenyv.  Golden      427 

Matheny  V.  Wolffs 737 

Mathews  v.  Albert 114 

Mathews  V.  Mass.  Bk 196 

Mathews  V.  Hamilton 294 

Mattesor.  V    N.  Y.  C.  R.  Co    ..   469 

Matthews  v.  G.  Northern,  etc.,  R.  Co..  178 

Matthews  V.  Skinner 68,  338 

Matthews  V.  Trustees .534 

Matthews  v.  West  London  W.  Co 782 

Manx  Ferry  Gravel  Co. V.  Branigau.257,  2-59 

Maxwell  V.  Dulwich  College 401 

Mayer  V.  Penn.  Slate  Co Ill 

Mayhew's  case 23 

Mayorv.  Bailey 571 

Mayor  V.  Beasley 414 

Mayorv.  Charlton 380,  395 

Mayor  V.  Seaber 483 

Mayor  v.  Groshon 516,   524 

Mayor  V.  Horner 365 

Mayorv.  Lord 685,  714: 


XXXMU 


Tajjle  i)V  Cases  Cited. 


PAGE. 

Mayor  v.  Norfolk  K.  Co 303,  3ti;3,  379 

Mayor  V.  Norwich  K.  Co 651 

Mayor  V.  Ifairiwater 074 

Mayor  v.  Kay 2!).") 

JMayor  V.  Slielturi 18 

Mayor  V.  Winfleld 4U 

Alayor  V.  Vuillo  ..    ..  67,414 

Maysville 'riirnpike  Co.  V.  How 42 

Mead  v.  ICeeler 30,  37,  274,  278,  386 

Mead  v.  Sinith 107 

Mead  V.  Veeder 313 

Meads  v.  Merchants' Bk 444 

Means  V.  Swormstedt 2'.\.\ 

Mears  v.  London,  etc.,  R.  Co 458 

Mechanics'  Bk.  v.  Bk.  of  Columbia —  271 

379,  286,  338 

Mechanics'  Bk.  v.  Merchants'  Bk. .  .102,  197 

534 

Mechanics'  Bk.  v.  Mfriden  Agency  Co.  35.i 

Mechanics' Bk.  v.  N.  V   ,  etc.,  It.  Co...  102 

187,  190.  207,  227,  287,  289,  431 

Mechanics' Bank  V.  Thomas     202 

Mechanics'  Bk.  Asso.  v.    White   Lead 

Co 383,  388 

Mechanics',  etc.,  Bk.  v.  DeboIt..42,  202,  Oid 

699 

Mechanics',  etc.,  Bk.  v.  Smith 416,  419 

Mechanics'  i  uilding  Asso.  v.  Stevens..  671 

Medicallnst.  V.  Patterson 10 

Medillv.  Collier 114 

Medomak  Bk.  v.  Curtis 239 

Meech  V.  Smith 300 

Meeker  v    Meeker 526 

Meers  v.  London  &  S.  Western  Ry.  Co.  451 

Meesel  V.  Lynn,  etc.,  11.  Co 701 

Meeting  House  V.  Lowell 695 

Meikel  v.  German  Sav.,  etc.,  Soc 505 

Mellen  V.  Whipple 427 

Melvin  V.  Lumar  Ins.  Co 171 

Memphis  V.  Dean .509,510 

Memphis  v.  Lasser 451 

Memphis  Uranch  11.  R.  Co.  v.  Sullivan  139 
Memphis  Freight  Co.  v.  IMemphis.  .572,  577 

Memphis  &  O.  B.  Co.  v.  Hicks 782 

Meagher  V.  County 303 

Mendelsohn  v.  Anaheim  Lighter  Co..    408 

473 

Menier  v.  Hooper's  Tel.  Works 510 

Mentz  V.  Second  Ave.  R.  Co 788 

Mercer  V.  R.  K.  Co 509 

Mercer  Co.  V    Hackett 351 

Merchants'  Bk.  v.  Cont.  Bk..  239,  280 

Merchants'  Bk.  v.  Glendori  Co 37 

Merchants' Bk.  v.  Mc'  all 285,  297 

Merchants'  Bk.  v.  Marine 274 

Merchants'  Bk.  v.  Richards  ...    19  5 

Merchants'  Bk.  v.  State  Bk....229,  374,  277 
4.34,  444,  447 

Merchants' Bk.  V.  Stone 31 

Merriam  V.  Moody's  Exrs 66 

Merrick  v.  Brainard 338,  3.50 

Merrick  v.  Burlington,  etc.,  R.  Co.,  401,  410 

Merriclv  V.  Peru  Coal  Co     .       2.55,  484 

Merrick  v.  Reynolds  Engine  Co 35,  505 

Merrill  V.Suffolk  Bk  007 

Merrill  v.  Tariff  Mem .  Co 4.59 

Merrimac,  etc.,  Co.  v.  Bay  City 145 

Merrimac  Mining  Co.  V.  Levy 130 

Merritt  V.  Ferris 313 

Mersey  Docks' Trustees  v.  Gibbs 4.53 

Methodi-st  Chappel  Co.  v.  Herrick..  303,  410 
Methodist,  etc..  Church  v.  Pickett  ...  36 
Methodist  Episcopal  Church  v.  Wood. .  506 

Metropolis  Rk.  V.  Jones 217 

Metropolis  Bk.  V.  Orme ...   .    506 

Metropolis  Bk.  v.  Guttsclilick,  270,  283,  408 

411 
Metropolitan  Saloon  Omnibus  Co.  v. 

Hawkins 452 


Meyer  v.  Midland,  etc..  R.  Co 792 

Meyer  V.  Second  Ave.  R.  Co 7t)3 

Mey not.  Ex  parte 304 

Miami  Coal  Co.  v.  Wigton 578 

Mich.  Bk.  V.  Hasting* ...  649 

Mich.  Bk.  V.  Williams.... 504,  506 

Jlichoud  V.  Girod  . . .  2.54 

Mickles  V.  Rochester  City  Bk., 625,  653,  657 

Middle  Bridge  V.  Brooks    06 

Middlebrook  v.  Merchants  Bk 100 

Middlebury  Bk.  v.  Edgerton 217,  213 

iiddlebury  Bk.  v.  R.  ^  W.  R.  Co...  317,  4()5 

420 
Middlesex  Husbandman  V.  Davis...  24,  315 
Middlesex  R.  Co.  v.  Boston,  etc.,  R.  Co.,  215 

Middlesex  T.  Co.  V.  Locke 127,  143 

Middlesex  Turn.  Co.  v.  Swan 127 

iMiddletown  Bk.  V.  Bu.ss 113 

Middietown,  etc.,  Turnp.  Co.  v.  Watson,  149 

.Midland  G.  W.  R   Co.  v.  Gordon 180 

Midland  Great  Western  Ry.  v.  Leech...  557 

Mid.  By.  Co.  v.  Hudson 2.53 

Milhau  v.  Sharp 416 

Millard  v.  Eyre 523 

Mill  Dam  Foundry  V.  Hovey.    393,405,  411 

Miiledge  V.  Boston  Iron  Co..   394 

Miller  v.  Chance 387,  031 

.Miller  V.  Craig ...  571 

.Vlillerv.  Ewer 26,  328,  350,  411,  015 

Miller  V.  Frost 573 

Miller  V.  Hanover  Junction  &  S.  R.  R. 

Co  ..   ..r 141 

Miller  V.  Lancaster.   ..  5.54,5.56 

Miller  V.Milwaukee 3^5 

.Miller  V.  N.  Y.,  etc.,  R.  Co 506 

Millerv.  P.  &C.  R.  R.  Co  125 

Miller  v.  Rutland,  etc.,  R.  Co 2!5,  217 

351,  353,  387,  637 

Miller  V.  State 65 

Milligan  v.  Wedge 435 

Mi  Hi  ken  v.  Whitehouse 114 

Mills  V.  Camp  100 

Mills  V.Jefferson    353 

.Mills  V.  Stewart 98 

Mills  V.  Williams    ...   39,    44 

Milwaukee  &  M.  R.  Co.  v.  Finney  .  473,  774 
Milwaukee,  etc.,  R.  Co.  v.  Hvmter.  787,  790 

Minardv.  Mead 282,2.84 

Miners' Bk.  V.  Cr.  S    63,  049 

Miners'  Ditch  Co.  v.  Zellerbach    . .    66,    08 
286,  357,  360 

Minliinnah  v.  Haines 676 

.Minn.  Cent.  R.  V.  McNamara 606 

Min.  Co.  V.  St.  Paul  Co 530,  039 

Minor  V.  Mechanics' Bk...  30,  118,  130,  274 

Minotv.Paine 1.55,159,  101 

.Minter  V.  Pac.  R.  Co 725 

Minturu  V.  Larue  .. .     07 

Mintzer  V.  Montgomery 711 

Mo.  Bk.  V.  Merchants' Bk. 6.54 

Miss.  Bk.  v.  Wren n 051 

Miss  ,  etc.,  R.  Co.  V    Camden 80 

Miss.,  etc.,  R.  Co    v.  Cross...  134,  136,  443 

505 

Miss.,  etc.,  R.  Co.  v   Gaston 153 

Miss.  Soc.  V.  Musgrove 31 

Mitchell  V.  Deeds     375 

Mitchell  V.  Rockland 287,  355 

Mitchell  V.Rome  R.  Co.. 118,  ISO 

^Mitchell  V.  Sproul .   ..  336 

Mitchell  V.  Vermont  Copper  Min.  Co...  426 

Mixer's  case 439 

Mobile  V.  Yuille 51 

.Mobile,  etc.,  R.  Co.  v.  Franks 339 

Mobile,  etc.,  R.  Co.  v.  Mosely ..     43 

Mobile,  etc.,  K.  Co.  v.  State 650,  6.59 

Mobile,  etc.,  R.  Co.  v.  Talman'...  343,  388 

631 
Moers  V.  Reading 711 


Table  of  Cases  Cited. 


xxxix 


PAGE. 

Mohawk,  etc.,  R.  Co.  V.  Clute 694 

Mohawk  &  Hudson  R.  Co . ,  lie 09,  69 i 

Mohawk  Brid-ie  Co.  v.  U.  &  S.  R.  Co.  58,  3.39 

Moise  V.  Cliapman ...   'A'-) 

Moises  V.  Thornton 406,410 

Mokelumne,  etc., Co.  v.  Woodbury.  32,  113 

Alonongahela  Bridtje  Co.  v.  Kirk 785 

Monroe  Co.  Sav.  Bk.  V.  Koch Til 

Montague  v.  Church  School  Dist ,T).H 

Montoya  V.  London  Ass.  Co     .   46'.; 

Montpelierv.  East  Montpelier UiiS 

Monument  Nat.  Bk.  v.  Globe  Works...  357 

3.-3 

Moody  V.  Keener ..     93 

Moody  V.  Orijorood 468 

Moody  V.  Wright 388 

Moore  V.  Bk.  of  Commerce  161,  416 

Moore  V.  Fjichburgh  R.  Co 457,  716,  73;2 

738,  763,  764,  795 

Moore  V.  Hammond 313 

Jloore  V.  Saiiborno 733 

Moore  v .  Whitcomb 659 

Morell  V.  Codding 285 

Morford  v.  Farmers'  Bk 383 

Morgan  v.  Bauk  of  North  America.. ..  103 

430 

Morgan  V.  Donovan 367 

Morgan  v.  Louisiana  703 

Morgan  V.  Skiddy 3t3 

Morrill  V.  Noyes .388,  631 

Morris  V.  Keil .396 

Morris  Canal  Co.  v.  Lewis 351 

Morris  Canal,  etc.,  Co.  v.  Townsend  ...  566 

Morris,  etc.,  R.  Co.  V.  Miller 691 

Morris,  etc.,  R.  Co.  v.  Newark.. SSS 

Morris,  etc.,  K.  Co.  v.  Sussex  R.  Co 68 

Morrison  v.  Eaton,  etc.,  R.  Co 342 

Morse  v.  Auburn,  etc.,  R.  Co 468 

Morse  v.  Erie  R.  Co 788 

Morse  v.  b wits 343 

Mortimer  V.  McCallan 197,509 

Morton  Gravel  R.  Co.  v.  Wysong 413 

Mosler  V.  Potter    36 

Moss  V.  Averell 114,  233,  295,  386 

Moss  V.  Haspeth  Academy 336,  343 

Mosa  V.  Livingston 398 

Moss  V.  McCullough    112 

Moss  V.  Oakley 113,  114 

Mossv.  Rnssie  Lead  Co  2-33,  388 

M,)tt  v.  Hicks. 271,  283,  297,  342,  386,  394,  396 

Mottv.  Palmer 6.38 

Mott  v.  Penn.  R.  Co 437,  698 

Mott  V.  U.  S.  Trust  Co 338,371 

Mt.  Holly,  etc.,  T.  Co.  v.  Ferree.  ..188,  19ij 

19' 

Mount  Wash.  Road  Co.,  Petition 566 

Mount  Sterling  V.  Looney 379 

Mousseaux  v.  Urquhardt  99 

Mowrey  v.  Ind.  &Cin.  R.  Co....  43.  44,  l-'O 
311.  550,  553 
Muir  V.   Louisville  &  Portland  Caual 

Co 395 

Muller  V.  Dows 5.54 

Mullins  V.  North,  etc.,  R.  Co.... 139 

Mummav.  Potomac  Co  ..206,244,  246,  515 
650,  659,  664,  668 

iMunicipality  V.  Cutting 425 

Muiin  V.  Rarnum  187 

Mu  n  n  V.  Comrs.  Co 386 

Munu  V.  Illinois 49 

Munn  V.  People 52 

Munroe  V.  Thomas 538 

Munsell  V.  Temple 373 

Munt  V.  Shrewsbury,  etc.,  R.  Co-  ..516,  536 

Miirdock  v.  Gifford 638 

Murphy  V.  Bk.  of  Arkansas 28 

Murphy  V.  Caralli 731 

Murphy  V.  Farmers'  Bk 613,618,  634 

Murray  v.  Carrie 732 


Murray  v.  East  India  Co 

.\Iurray  v.  Lardiier 351, 

Murray  v.  Vanderbilt 

Muscatine  v.  11.  R.  Co 

JIuscatiue  Turn  Verein  v.  Funk...  664, 
Muskingum,  etc.,  R.  Co.  v.  Ward  .   ... 

Mussey  V.  Eagle  Bk 

Mut.  Benellt  L.  Ins.  Co.  v.  Davis 

Myers  v.  Manhattan  Bk 19, 

Naber  V.  Bright 

Nabor,  Matter  of 

Naglee  v.  Pac,  etc.,  Warf.  Co 191, 

Napa  Valley  R.  Co.  v.  Napa  Co 

Napier  v.Poe 

Narragansett  Bk.  v.  Atlantic  Silk  Co.. 
35,  37,  393, 

Nashville  Bk.  V.  Petway 65b, 

Nasliville,  etc.,  R.  Co.  v.  Messino  .   .   . 

Nathan  v.  VVIiittock 541, 

Nat.,  etc..  Assurance  Co.,  In  re 

Nat.  Bk.  v.  Colby 

Nat.  Bk.  V.  Comm 

Nat.  Bk.  V.  Lake  Shore,  etc.,  Ry.  Co.. 
Nat.  Exchange  Bank  v.  Hartford,  etc  , 

R.  Co 351, 

Nat.  Ex.  Co.  V    Drew 437,  450, 

National  Patent  Steam  Fuel  Co.,  Ex 

parte 179, 

Natoma  W.  &M.  Co.  v.  Clarkin 

Nebraska  v.  Campbell 

Neal  V.  Pittsburgh  &  Connellsville  Ry. 

Co . 

Neall  V.  Hill 204,  523, 

Neiler  v.  Kelly 

Nelson  V.  Blakey 

Nelson  v.  Eaton." 

Nelson  v.  Iowa  Eastern  R.  Co 

Nelson  V.  Justices  ....  

Nelson  v.  Luling 244, 

Nesbitt  V.  Trumbo 

Nesmith  V.  Wash    Bk 

Neuse  River  Nav.  Co.  v.  Com.  of  fiew- 

bern 133 

Neville  v    Wilkinson 378 

Nevitt  V.  Bank 664 

New  Albany  v.  Burke 669 

New  Albany,  etc.,  R.  Co.  v.  Fields 131 

New  Albany,  etc.,  R.  Co.  v.  McCormick,  1.53 
New  Albany,  etc.,  R.  Co.  v.  McNamara,  79.3 
New  Albany,  etc.,R.  Co.  v.  Smith  ...  353 
New  Bedford,  etc.,  Co.  v.  Adams. ..      145 

Newberry  v.  Detroit,  etc 199,  203 

Newberry  v .  Garland ...   243 

New  Boston  V.  Dumbarton 13,    28 

New  Bruuswick,  etc.,  Ry.  Co.  v.  Cony- 

beare  437,  439, 

Newby  v.  Oregon,  etc  ,  R.  Co 

Newcastle  R.  Co.  v.  Peru,  etc..  R.  Co.. 
New  Cent.  Coal  Co.  v.  George's  Creek 

Coal,  etc. ,Cu 

Newcomb  v.  Smith 

Newell  v.  Smith 288, 

New  England  Car  Spring  Co.  v.  Union 

India-rubber  Co 

New  Eng.  Ins.  Co.  v.  De  Wolf  ....     283, 
New  Hampshire,  etc.,  R.  Co.  v.  John- 
son  

New  Haven  Co.  v.  Hayden  . .  

New  Haven  R.  Co.  v.  Chapman 

New  Hope  &D.  B.  Co.  v.  PhoeuixBk.. 


269 
353 
255 
670 
669 
153 
274 
485 
654 


674 
200 
685 
116 
31 
308 
666 
750 
664 
556 
657 
711 
193 

a53 
453 

43T 
374 
469. 

604 
535 
93 
137 
387 
643 
677 
246 
561 
439 


New  Hope,  etc.,  Co.  v.  Pough.  Silk  Co., 

N.  J.  M.  R.  Co.  V.  Strait 

New  .Jersey  Nav.  Co.  v.  Merchants'  Bk. 

New  Jersey  V.  Wilson 

Newling  V.  Francis — 

.Vewman,  Ex  parte 

New  Orleans  v.  Philippi 


453 
35 
553 

571 
573 
573 

68 
288 

119 

379 
35 
237 
239 
487 
554 
.53 
699 
413 
674 
414 


xl 


Table  of  Cases  Cited. 


New  Orleans  Gas-light  Co.  v.  Bennett..  542 

N.  O.  U.  R.  Co.  V.  Biiiley 4.52 

Kew  Orleans,  etc.,  K  Co.  v.  Harris,  42,  21.5 
New  Orleans,  etc.,  K.  Co.  v.  Hurst.  . .  474 
New  Orleans,  etc.,  R.  Co.  v.  Statham..  474 

75!) 
New  Orleans,  etc.,  R.  Co.  v.  Willianis,  135 

Newry,  etc.,  Ily.  Co.  v.  Edmonds    J0:> 

Newsou  V.  N.  Y.  C.  R.  Co 7«9 

Ncwsoii  V.  Thornton  272 

Newton  &  Bridf;eport  Turnp.   Co.  v. 

Northrop ..   Ifi7 

Newton,  etc.,  Co.  v.  White &59 

N.  Y.  Bli.  v.Bk.  Ohio 297 

N.  Y.  Bk.  V.  Farmers'  Bk '^97 

N.  Y.,  etc..  Canal  Co.  V.  Fulton 548 

N.  Y .  Dry  Docks  v.  Hicks 485 

N.  Y.  Exch.  Co.  V.  DeWolf 123,  134 

N.  Y.  Floating  Derrick  Co.  v.  N.  J.  Oil 

Co : 3.28,  350 

N.  Y.  F.  Ins.  Co.  v.  Ely ti9,  485 

N.  Y.  L.  Ins.  &  Trust  Co.  v.  Beebe  ....  390 
N.  Y.,  etc.,  R.  Co.  v.  Ketchum,  257,  259,  2«1 

303 

N.  Y.,  etc.,  R.  Co.  v.  Kip 339,  .570 

N.  Y.,etc.,  R.  Co.  v.  N.  Y 410 

N.  Y.,  etc.,  R.  Co.  v.  Sal>in 695 

N.  Y.,  etc.,  R.  Co.  v.  Schuyler,  91,  102,  171 
186.  188,  195,  207,  209,  431,  444.  532,  716 

N.  Y.  &E.  R.  Co.  V.  Young 7S5 

N.  Y.  Trust  &  Loan  Co.  v.  Helmer..70,  389 

New  Zealand  Bk.  Co.,  Re 232 

New  Zealand  Caulking  Co.  v.  Blakely 

Ordinance  Co 350 

Ney  V.  Richards 676 

Niagara  Bk.  V.  Johnson 653 

Nichol  V.Nashville 711 

Nicholas  V.  Oliver 270,  285 

Nicliols  V.  Burlington,  etc.,  Plank  R. 

Co  128 

Nichols  V.  Frothingham 28.5,  296 

Nichols  v.  Oliver 296 

Nichols  V.  Somerset,  etc.,  R.  Co 561 

Nicholson  v.  Bradford  .     404 

Nicholson  v.  Erie  R.  Co 789 

Nicholson  v.  Lan.  &  York  R.  Co 7-52 

Nicholson  Pavement  Co.  v.  Painter  ...    66 

Nickerson  v.  Wheeler .   .  241 

Nicol's  case 437 

Nicoll  V.  N.  Y.  &  Erie  R.  Co. . .       .     588,  652 

Nietov.  Clark  762,  765,  771,  774 

N;nimons  V  Tappan 6.57 

Niven  v.  Spikerman 12 

Nixton  V.  Hyserott 272 

Norris  V.  Irish  Land  Co 679,  680,  687 

Norris  v.  Trustees 41,    44 

Norris  v.  Staps 421 

Norris  V.  State 412 

North  V.  Forest 93 

Northampton  Bk.  V.  Pepoon 217,  233 

280,  286 

Northampton  Bk   v.  Smith 216 

North  E.  &S.  W.  R.  Co.,  Ex  parte 46 

Northern  Cent.  R.  Co.  v.  Basiian     280,  410 

North    Liberties  V.  Cresson 371 

Northern  R.  Co.  v.  C.  R.  Co 563 

Northern  R.  Co.  v.  Miller.. 62,  130,  145,  147 

Northern,  etc.,  Tea  Co,,  In  re 198 

North  Hempstead  v.  Hempstead 10 

North  Penn.  R.  Co.  v.  Adams .353 

North  Penn.  R.  Co.  V.  Heilman  786 

North  Penn .  R.  Co.  v.  Robinson  ...  479 
North  Riv.  Bk.  v.  Aymar.227,  278,289,445,  730 

Northrop  v.  Curtis 164,  429 

Northrop  v.  Newton,  etc.,  Turnp.  Co  ..    96 

164,  197,  429 

North  Shore  Ferry  Co.,  Matter  of      ...  106 

North  Stafford  Steel  Co.  v.  Warth 132 

North  Staffordshire  R.  Co.  v.  Dale 781 


PAGE. 

North  Western  Distillery  Co.  v.  Brant.    26 
North  Wliitehali  v.  South  Whitehall  ..  394 

North  Yarmouth  V.  Sklllings 41 

Norwich,  etc.,  Co.  v.  Tlieobald 119 

Noves  v.  Loring 300 

Noyes  V.  Hut    &  Burl.  R.  Co 4;« 

Noyes  V.  Spaulding 100,  187,  197 

Nugent  V.  Cin.,  etc.,  R.  Co 443 

Nugent  V.  Supervisors 351,  548,550 

Oakesv.  Hill 6 

Oakes  v.  Turquand 440,  446 

Oakland  R.  Co.  v.  Keenan .531 

Oakley  v.  Paterson  Bk 535 

O'Brien  v.  Chic,  etc.,  R.  Co...   525 

O'C'onnell  V.  Strong 795 

Odd  Fellows' Hall  Co.  V.  Glazier 141 

Odiorne  v.  Maxcy  293,  44S 

O'Donald  v.  Evansville  R.  Co 129 

O'DoiinelAi  Alleghany  R.  Co '761 

ODonnell  V.  Bailey 699 

Ogden  v.  Murray 248,  253 

Ogdea  V.  Raymond 300 

Ogdenv.  Roilo 114, 

Ogdensburgh,  etc.,  R.  Co.  v.  Frost,  79,  146  : 

148 
Ogdensburgh,  etc,  R.  Co.  v.  Vermont, 

etc.,R.  Co 390 

Ogdensburgh,  etc.,  R.  Co.  v.  Wolley,  116,  133 

Ogilvie  V.  Knoxins.  Co 136,443    541 

O'Harav    Lexington,  etc.,  R.  Co 501 

Ohio  v.  Cleveland,  etc.,  R.  Co 159 

Ohio  L.  Ins.  Co.  v.  Merchants'  Ins.  Co.,  3.59 

OhioL.  &T.  Co.  V.  Debolt . 699 

Ohio  Life  Ins.  &  T.  Co.  v.  Merchants' 

Ins.  &  T.  Co 115 

Ohio,  etc.,  R.  Co,  v.  Davis.       538.  646 

Ohio,  etc  ,  R.  Co.  v.  McPherson,  266,  329,  350 

Ohio,  etc.,  R.  Co.  v    Wheeler 495 

Olcott  V.  Supervisors 571 

Olcottv.  Tioga  Ry.  Co....    233,  285,  295,  297 

386 

Old  Colony  R.  R.  Co.  v.  Evans 335 

Old  Dominion  Bk.  v.  McVeigh 44 

Oldtown,  etc..  R.  Co.  v.  Veazie,  63,  119,  149 

Oler  V.  Baltimore,  etc.,  R.  Co .  139 

Oliverv.  Liverpool  Ins.  Co 690 

Oliver  v-  Northern  Turnp.  Co 730 

Oliver  v.  AV ash.  Mills  690 

Oliver  Lee  &  Co. 'sBk 64 

Olmsiead  V.  Camp     569,  571 

OMara  v.  Hudson  R.  Co    786 

Oregon  Cascade  Co.  V.  Bailey    578 

Oregon,  etc.,  R.  Co.  v.  Scoggin 443 

Ormsby  v.  Vermont  Copper  Mining  Co.  328 

350,  6.53 

Orono  V.  Wedgewood 506 

Orrv.  Bigelow 187 

Orrv.U.  S.  Bk      717 

Osbornv.  Bk    U.  S   14,   410,  708 

Osgood  V.  King ..   171 

Osgood  V.  Laytin  543 

Osgood  V.  Ogden 131,  248 

Ossipee  Manuf .  Co.  v.  Canney 35,  123 

143,  375 

Oswego  Bk.  V.  Babcock 346 

Ottawa  V.  People 673 

Ould  V.  Richmond 698 

Overseers  v.  Mayor 286 

Overseers  v .  Overseers . .   403 

Overseers  of  Poor  v.  Sears 5 

Owenv.  Smith 668 

Owen  V.  Van  Ulster 243,  245 

Owings  v.  Hall 294 

Owingsv.  Speed 13,  308,  410 

Owsley  V.  Montgomery,  etc.,  R.  Co...  453 

796 

Oxford  V.  Bunnell 429 

Oxford  Iron  Co.  v.  Spradley 386,  502 


Table  of  Cases  Cited. 


xli 


Oxford  Turnp.  Co.  v.  Bunnel KiS 

Pacific  Bank  V.  De  Roe 25 

Pac.  R.  Co.  V.  Cass  Co 637 

Pao.  R.  Co.  V.  Chrystal COli 

Pac.  K.  Co.  V.  Hufrlies C3,  140 

Pac.  R.  Co.  V.  Lincoln  Co 14 

Pac.  R.  Co.  V.  Maeruire  —  6!is 

Pao.  R.  Oo.  V.  beely 60,252 

Pagre  v.  Board  of  Trade 84 

Paire  V.  Defries T95 

Page  V.  Hardin 67f) 

Pafie  V.  MItchel 4ii9 

Paicev.  Wallver  ...  29ti 

Paine,  Ex  parte ..  678 

Paine  v    Guardians',  etc.,  Union 404 

Paine  v    Lalce  Erie,  etc.,  R.  Co. 248,  554,  558 

Paine  v.  Leicester 683 

Paine  V.  Strand  Union 380,  395 

Paine  v.   Wright  &    Ind.  &  Bellefon- 

taine  R.  Co 

Painter  V.  Pittsburg 732, 

Palfrey  v.  Paulding 

Palmer  v.  Forbes 529,  635,  638, 

Palmer  V.  Lawrence 131, 

Palmer  V.  Medina  Ins.  Co 395, 

Palmer  v.  Merrill    

Palmer  V.  Ridge  Mining  Co 141, 

Palmerton  v.  Huxford 

Palmyra  v.  Morton 

Panton  v.  Holland 

Parish  v.  Wheeler 279,  375,  387, 

Park  Bk.  v.  Nichols 

Parker  v.  Anderson 

Parker  V.  Fdote 

Parker  V.  Metropolitan,  etc.,  R.  Co... 

Parker  v.  Thomas 

Parker  v.  Scogin 

Parkham  v.  Decatur  County 

Parks  V.  Evansville,  etc..  R.  Co 

Parmly  V    Tenth  Ward  Bk 

Parrot  V.  Byers 

Parsons  V.  Goshen 287, 

Partridge  V.  Badger 278,343, 

Paschall  V.  Whitsett 650,657, 

Passenger  R.  Co.  v.  Donahue 

Passenger  K   Co    v.  Young 762, 

Paterson  V.  Baumer    .. 

Patten  V.  Rea      

Patten  V.  C'hicago,  etc.,  R.  Co 7.53 

Patten  v.  North  Cent.  R.  Co 605 

Patterson  v.  Baker  242 

Patterson  v.  Keystone,  etc.,  Co  ..   330 

Paterson  v.  Mayor £39 

Patterson  v.  Miss.,  etc..  Boom  Co 574 

Patterson  V.  Soc,  etc  . —   41 

Patterson  V.  Wyomissing,  etc.,  Co.     ..  114 

Paul  V.  Virginia        23,  347,  488,  490 

Paulk  V.  S.  W.  R.  Co ..     700 

Paulmier  V.  ErieR.  Co 480 

Pawle's  case 441 

Pawletv  Clark 4,  12,  20,  C49 

Payne  V.  Baldwin 649 

Paynev.  Elliott .      93 

Payson  V.  Strever 206,  237,  295 

Peabody  V.  Flint 203,  248 

Peari'e  V.  Olney 654,  671 

Pearcev.  R.  R.  Co 225,  286,  383,  .548 

Pearson  V.  Morgan 278 

Pease  V.  Peck    507 

Peck  V.  Gurney 241.  303,  441,  446,  449 

Peck  V.  Harriott ,. 271 

Peckv.  R.  Co 416,  727,  731,  737 

Pedrick  V.  Bailey 414 

Peele  V.  Phillips 114 

Peik  V.  Chicago,  etc.,  R.  Co 47 

Peirce  v.  Somersworth 566,  671 

Peudergastv.  Stockton  Bk 416,  424 

Pendergast  V.  Turtou 146 

F 


PAOE. 

Pendleton  V.  Army 713 

Pendletf>n  V.  Bk 275 

Peninsular  Ry.  Co.  V.  Thorp 5.57 

Penniman  V.  Briggs.   .       659 

Pennock  v.  Coe  .  339,  387,  631.  6.34,  638,  641 

Penn.  v.  Wheeling  Bridge  Co 79 

Penu.  Bk.  V.  Commonwealth 28,  217 

237,  239,  274 

Penn.  Canal  Co.  V.  Graham 469 

Penn.  R.  C"i>.  v.  Barnett  ..     786 

Penn.  U.  Co.  v.  Canal  Co.  13,  39,  6",  339,  344 
Penn.  R.  Co.  v.  Dandridge  ...  838,  296,  3.59 

Penn.  R.  Co.  V.  Henderson 479 

I'enii.  R.  Co.  V.  Keller ....  480 

Penn.  R.  Co.  V.  Kerr 461 

Penn.  R.  Co.  v.  Kilgore 760 

Peun.R.Co.v.  Mct'loskey 479 

Penn.  R.  Co.  v.  Philadelphia 712 

Penn.  R.  Co.  v.  Vandever 457,  479 

Pen n .  R.  Co .  v .  Weber 790 

Penn.  R.  Co.  V    Zebe 479 

Penn.  Steam  Nav.  f'o.  v.  Hungerford  .  435 

Peuobscott Broom  Co.  v.  Lamson..31,    41 

66,  .505,  6.50,  652,  659,  666 

Penobscot  R.  Co.  v.  15artlett 142 

Penobscot  R.  Co.  v.  Dummer..ll7,  121,  142 

180,  305 
Penobscot  R.  Co.  v.  Dunn  ...  121.  142,  218 
Penobscot  A..  Co.  v.  White  ....  119,  121,  127 

Pentz  V.  Fire  Ins.  Co 415 

Pentz  V.  Stanton 282,  284 

People  V.  American  Institute 88 

People  V.  Albany,  etc.,  R.  R.  Co..  100,  211 

660 

Peoiplev.  Ballou 243 

People V.  Bk.  Hudson 6-59 

People  V.  Bk.  Niagara 6.50 

People  V.  Batchelor 312.316,  628 

People  V.  Beigler 36 

People  V.  Board  of  Met.  Police....  673,  676 

People  V.  Bd.  Supervisors 711 

People  V.  Board  of  Trade 89 

People  V.  Bogart        620 

People  V.  Bristol,  etc.,  Turnp.  Co.. 620,  653 

657 

People  V .  Brooklyn 677,  690,  693 

People  V.  College  of  California  73,  660.  664 

People  V.  Cliica.  Co 675 

People  V.  Chic,  etc.,  R.  Co  ..   ..  688 

People  V.  Clark 616 

People  V.  Comrs 158 

People  V.  County 355 

People  V.  Crockett 413 

People  V.  Detroit 678 

Peoplev    Devin .96,201 

People  V.  Dispensatory,  etc.,  Soc.  ._.  650 

People  V.  Easton 675,  677 

People  V.  Elmore 191.  200 

People  V.  Fairbury  . . 667 

Peoplev.  Fishkill  P.  R   Co 653 

People  V .  Geneva  College , .  613 

People  V.  Grand,  etc..  Plank  B.  Co 65 

People  V.Gray 3.55 

People  V.  Green 677 

People  V.  Hatch 673 

Peoplev    Hayden 598,605 

Peoplev.  Haad 677 

People  v.  Hi  I  Hard 677 

Peoplev.  Hills 614 

Peoplev.  Hillsdale  &  Chat.  Turnp.  Co.  613 

619,  653 

People  v.  Hoffman 711 

People  V.  Hudson  Bk..611,  627,  650,  655,  659 

People  V.  Jackson  P.  R.  Co 44,  649 

People  V.  Jackson  T.  Co , 658 

People  V.  Jameson 675 

People  V.  Judges,  etc 674,  677,  679 

People  V.  Kingston,  etc.,  Turnp.  Co...  616 
620,  650,  654,  658 


xlu 


Table  of  Cases  Cited. 


PAGE. 

People  V.  Law 779 

People  V.  LoiKiks (>~1 

People  V.  Manhattan  Co 44,  650.  G5:) 

People  V.  Marshall 613,  fi49 

People  V.  Mariiii 317 

Pen[)le  V    Mayiiard 13 

People  V.  Mayor,  etc.,  N.  Y...  561,  56.5,  678 

681,  711 
People  V.  Med.  Soc.  of  Erie  ....  86,  88,  417 

fi7t! 

People  V.  Minor C78 

People  V.  Mitchell 713 

People  V.  Morris 40 

Peoplev    Mott 680 

People  V    Nearing 571 

People  V.  N.Y.  Board  of  Underwriters.    86 

87 

People  V.  N.  Y.  Commercial  Asso 87 

People  V.  N.  Y. Cotton  Exchange  ..   ..      86 

People  V.  N.  Y.  Gas  L.  Co    770 

People  V.  N    Y.  Loan  Commercial..   .      84 

People  V.  Niagara  Bk 613,  627,  655 

People  V.  Olmstead 676 

Peoplev.  Pac.  Mail  Steamship —  177,  686 

690 

People  V.  Pearson 677 

Peoplev.   Pe(^k 315 

People  V.  Peirce 693 

People  V.  Phoenix  Bk 654 

Peoplev.  Piatt     770 

People  V.  Sailors'  Snug  Harbor..  85,  89,  413 

Peoplev    Salem  570,  713 

People  V.  Salomen 678 

People  V.  St.  Fransiscus  Benev.  Soc  ...    83 

88 
People  v.  Sar.  &  Rens.  R.  R.  Co  . . .  616,  638 

People  v.  Smith 569,  .577 

Peoplev    Society,  etc 652 

People  V.  Steele 680 

Peoplev.  Supervisors 67-3,  677 

People  V.  Sweeting    615,  6.55 

Peoplev.  Thompson 62R.  658,  673,  677 

Peoplev.  Throop...  216,  412,  414,  509,  6s0 

68f),  688 
People  V.  Tibbets  . . .  413,  421,  433,  630,  635 
People  V.  Troy,  etc..  R.  Co....  676,  678,  680 

People  V.  Turn.  &  Bridge  Co .506 

People  V.  Uticalns.  Co....  69,  338,  356,  613 
616,  618,  630,  632 

People  V.  Vein  Coal  Co 100 

People  V.  Waite ■     655 

Peoplev.  Walker 6.53,  6S6 

People  V.  Washington  Bk 050,  653,  655 

Peoplev.  Whitcomb 619 

People  V.  White 566 

People  V.  Williams ■•-    676 

People  V.  Wren  . .   ..   41 

People  V.  Young  Men's,  etc.,  Soc  ..  88,  320 

Peoples'  Bk.  v.  Gridley 93 

Peojiles' Ferry  Co.  v.  Balch 117,  180 

Peoples' Ins.  Co    v.  Westcott 313,  3!6 

Peoria  V.  Calhoun 417,  421 

Peoria  Bk.  Ass.  V  Loomis —     .     468 

Peoria,  etc.,  R.  Co.  v.  Etting 119,  147 

Peppin  V    Cooper ..  379 

Percy  v.  Millandon  ..  317,  331,  243,  345,  247 

Perkins  V,  Church 114 

Perkins  v.  Mijssouri 474 

Perkins  V.  N.  Y.,  etc.,  R.  Co 442 

Perkins  V.  Wash    Ins.  Co  ....  233,  371,  300 

Perkins  V.  White .527 

Perleyv.  Eastern  R.  Co 462.  466 

Perrine  v.  Chesapeake,  etc..  Canal  Co.  58 
66,  69,  339,  384 

Perry  V.  Wilson 561 

Peruvian  R.  Co.  v.  Thames,  etc.,  Co  ..    70 

385 

Petersburgh  V.  Matzker 356 

Peterson  v.  Mayor 232,  380,  394 


Petriev.  Wright 173,  395,  401,  403 

Petroleum  Co.  v.  Weare 347 

Phenix  Bk.  V.  Curtis .505 

Phenix  Bk.  v.  Donnell 504 

Philadelphia  V.  Field 41 

Phila.  V.  Flanigen 286 

Phlla.v.  Given 260,  .303 

Phila.  V.  Lewis,  etc.,  R.  Co 355 

Phlla.  V.  Head.  R.  Co 730 

Phila.,  etc.,  R.  Co.  V.  Bayless 696 

Phila.,  etc.,  R.  Co.  V.  Cornell    1.59 

Phila.,  etc.,  R.  Co.  v.  Derby  .  43.3,  4.57,  738 

763,  773,  778 

Phila.,  etc.,R.  Co.  v.  Hickman..  122,  124 

Phila.,  etc.,  R.  Co.  v.  Quigley  ...  434,  4,53 

458 

Phila.,  etc.,  R.  Co.  v.  State 696 

Phila.,  etc.,  K.  Co.  v.  Steam  Tow-Boat 

Co 730 

Phila.,  etc.,  R.  Co,  v.  Wilt. 4.5T 

Phila  ,  etc.,  R.  Co.  v.  Woelpper..  388,  631 

Phila.  Sav.  Bank  case. 413 

Phillips  V.  Allen 417 

Phillips  V.  Berger 101 

Phillips  V.  R.  &S.R    Co 761 

Phillips  V.  Wickham 107,  413,  421,  656 

666,  671 
Phillips  Limerick  Academy  V.  Davis...  315 

Phosphate  of  Lime  Co.  v.  Green 233 

Pickens  V.  Diecker  79.5 

Pickering  V.  Pickering 526 

Pickerin;^  V.  Templeton 1.39 

Picket  V.  Crook 474 

Pickett  V.    Pearson  295 

Pickett  V.  School  Dist.  No.  1.,  etc 249 

Pickett  V.  White 678 

Pierce  v.  Emery..  215,  387,  530,  631,  634,  637 

Pierce  V.  Gibson    93 

Pierce  v.  Milwaukee,  etc.,  R.  Co...  388,  631 

Pierce  V.  Partridge .5.30 

Pierce  v.  St.  Paul,  etc..  R.  Co 388 

Pierce  v.  Somersworth 6.54 

Pierce  v.  Thompson    259 

Pierson  v.  Washington  Bk 201 

Piggv.  Corder 526 

Piggot  V    Eastern,  etc.,  R  Co 462 

Pinkerton  v.  Man.  &L    R.  Co 201 

Piqua  Bk.  V.  Knoop 44,699 

Piscataqua  Bridge  v.  N.  H.  Bridge, 553,  563 
Piscataqua  Ferry  Co.  v.  Jones,  116,  134,  136 

147,  443 

Pitcher  V.  Hennessy 303 

Pitts  V.  Shubert      295 

Pittsburgh  V.  Scott .598 

Pittsburgh,  etc.,  R.  Co  v,  Alle.  Co  . .  179 
Pittsburgh,  etc.,  R.  Co.  v.  Biggar.    124,  130 

Pitts  .  etc.,  Co.  v.  Clark. 173,  201 

Pitts.,  etc.,  R.  Co.  V    Dunn 787,  790 

Pitts.,  etc.,  R.  Co    V.  Gazzam     294 

Pitts.,  etc  ,  R.  Co.  V.  Gilleland. .. .  739,  781 
P'tts.,  etc.,R,  Co.  V.  Graham...  .  133,  144 
Pitts.,  etc.R.  Co.  V.  Hinds.... 764,  773,  774 

Pitts.,  etc  ,  R.  Co.  V.  Methoen 793 

Pitts  ,  etc  ,  R.  Co.  V.  Pearson    793 

Pitts  ,  etc.,R.  Co.  V.  Plummer 144 

Pitts.,  etc.,  R.  Co.  V    Stewart 133 

Pitts,  etc.,  R    Co.  V.  Thompson 480 

Plankroad  Co.  v.  Arndt 128 

Plankroad  Ci.  v.  Husted 427 

Plankroad  V.  Payne  147 

Planters'  Bk    v.  Alexandria  Bk  ...  654,  671 

Planters'  Bk.  v.  Leavens    184,  189 

Planters'   Bk.   v.    Rivingsville    Cotton 

Man.  Co 115 

Planters' Bk.  V.  Sharp 44,  239 

Plate  Man    Co.  V.  Meredith 565 

Piatt  V.  Archer 6.57 

Piatt  Receiver,  etc.,  In  re 664 

Player  v .  Jones HI 


Table  of  Cases  Ciied. 


Xllll 


Player  V.  Vere 417 

Pleasant  Bk.,  In  re 61t 

Plitt  V  Cox    ms 

Plymouth  V.  Jackson 41 

Prymouth  Bk.  v.  Bk    Norfolk 430 

Plymouth  Chrisiiati  Soc.  v.  Macomber,  3s 
Plymouth  R.  Co.  v.  Colwell  529 

Polar  Star  Lodge  v.  Polar  S.  Lodge,  248,  6U0 

Police  Jury  V    Britton 3ol,  386 

Pohue  Jury  V.  Shreveport 41 

Pollard's  Lessees  V.  Hagan ritjl 

Pollock  V.  Nat.  Bk 101,  105 

Poineroy  V.  Bank 664 

Poiiieroy  V.  N.  Y.,  etc  ,   R.  Co 495 

Pouchartraia  R.  Co.  v.  Paulding..  241,   243 

245 

Pond  V.  Negus 426 

Pondville  Co.  V.  Clark 657 

Poor  V.  European,  etc.,  R.  Co 248 

Ptior  V.  Sears 27 

Pore  Gibson  v.  Moore 669 

Port  of  Lond  Assurance  Co.  case  ...  316 
Porter  V.  Androscoggin,  etc.,  R.  Co...  392 

405 

Porter  v.  Harris 677 

Porter  V.  McOoUura 352 

Porter  V    Necerrvis 483 

Port  V.  Russell 248 

Portland  Bk.  v.  Apthorp 690 

P(ii-tlaud  R.  Co.  V.  Graham     142 

Portsmouth  Livery  Co.  v.  Watson. .485,  487 

Potter  V    Bk.  Ithaca..     ....   381 

Potter  V.  Seymour 732 

Pottstowii  Gas  Co.  v.  Murphy 605,  785 

Poughkeepsie  P.  R.  Co.   v.  Griffin  .117,  13:i 

Poultiieyv.  Wells 394 

Poulton  V.  London,  etc.,  R.  Co.451,  737,  7vi5 

Powell  V.  Deveny 462 

Powell  V.  Hannibal,  etc.,  R.  Co 793 

Powell  V.  Newbursrh 410 


Powell  V.  North  Mo.  R.  Co. 


.547,  558 


Powell  V    Salisbury 46' 

Powers  V.  Skinner    306 

Praeger  v.  Bristol  &  E.  Ry.  Co 7-57,  T58 

Prater  V.  Miller 5^7 

Pratt  V    Bacon 114 

Pratt  V.  Jewett 660 

Pratt  V.  Meriden  Cutlery  Co OS.; 

Pratt  V.  Pratt .517 

Pratt  V.  Putnam    446 


156 


Pratt  V.  Tilt 

Presbyterian  Cong.  v.  John's 

President,    etc.,    Jacksonville    v.   Mc 

Connel 

Preston  v.  Dubuque,  etc.,  R.  Co... 583,  605 

Preston  V    Grand  Coll.  Dock  Co 14:! 

Preston  V.  Liverpool,  etc.,  R.  Co. .304,  3.59 

424 

Prettyman  V.  Supervisors 80 

Priest  V.  Essex  H at  Mfg.  Co 35 

Priester  V.  Angley t —  795 

Prouty  V    Lake  Shore,  etc.,  R.  Co 5.58 

Proutvv.  Blichigan  S.,  etc.,  R.  Co.     ..  179 
Providence  Bk.  v.  Bellines  ...    39,  339,  705 

Prov.,  etc.,  R.  Co    v.  Wright 694 

Provident  Inst.  v.  Mass 711 

Pulford  v.  Fire  Dept.  Detroit 424 

Pullan  V.  Cincinnati  R.  Co. 215, 387,  635,  639 

Pulliain  V.  Owen .527 

Pullman  v.  Cincinnati  R.  Co 387 

Pumpellyv    Phelps 296 

Purchase  V.N.  Y.  Exchange  Bk 100 

Purtonv.  N    O  ,  etc.,  R.  Co 1.50 

Putnam  v.  New  Albany 124,  171 

Putnam  F.  Scliool  v.  Fisher 505 

Pynev.  Great  N.  R   Co 480 

Quarman  V.  Burnett    435 

Quimby  V.  Vt.  Cent.  R.  Co 793 


Quln  V.  Moore 479 

(iulM  v.  111.  Cent.  R.  Co 761 

Quincy  Canal  v.  Newcomb 6.53 

Quiner  v.  Marblehead  Ins.  Co.  103,  161,  429 

Racine,  etc.,  R.  Co.  v.  Farmers'  Loan 

Co .560 

Ry.  Co.  V.  Allerton 216,  224 

li.  Co.  V.  Anthony 762 

K.  Co.  V.  Archer 780 

R.  Co.  v.  Aspell     756,  762 

R.  Co.  V.  Berks  Co 695 

R.  Co.  V.  Blocher 472,  763 

R.  Co    v.  Canal  Co 781 

R.  R  Co.  v.  Chenoa 13 

R    Co    V.  Clinton  Co 677 

R.  R.  Co.  V    Davis .588 

R.  Co.  v.  Derby 764 

R.  Co.  V.  Douglass 28 

R.  Co.  v.  Finney 762,  764 

R.  Co.  V.  Goodwin 5.5? 

R.  Co    V.Harris .559 

R.  Co.  V.  Hinds 7(i3 

R.  Co.  V.  Howard 375,  515 

R    Co.  V.  Hurst 472 

R.  Co.  V.  James 639 

R.  Co.  V    Kenney 563 

R.  Co.  V.  Kip  569 

R.  Co.  V.  Plumas  Co 13 

R.  Co.  V.  Rodrigues 146,  444 

R    Co.  V.  Seeley...   .   339 

R.  Co.  V.  Soutter 388,  631 

R.  Co.  V.  Stout 792 

R.  Co.  V.  Vandiver 702,  764 

R.  Co.  v.  Whitton 493,  5.59 

R.  Co.  v.  Wyandot  Co 678 

Railsback  v.  Liberty,  etc  ,  Turnp.  Co..  505 

Raleigh,  etc.,  R.  Co.  v.  Reid 700 

Ramsden  v.  Boston,  etc.,  R.  Co  ..  457,   717 
720,  724,  727,  731,  762,  794 

Rand  v.  Hui)ble 157,  161 

Randall  V.  Elwell 530 

Randall  v.  Van  Vechten  .  233,  270,  284,  410 

Raiidleson  V.  Murray 435 

Ranger  v.  Great  Western  R.  Co 433 

Hanson  v.  N.  Y.,  etc.,  R.  Co 468 

Kapson  V.  Cubitt 435,  735 

Rawson  v.  N.  Y.  &  Erie  R.  Co  469 

Raymond  v.  Caton  148 

Read  v.  Frankfort  Bk ...  650,  664 

Keadhead  V.  Midland 741 

Reading  V.  Comrs    673 

Reapers'  Bk.  v.  Willard 46 

Red d al  1  V.  Bryan    571 

Redge  Turnpike  Co.  v.  Staener 356 

Redmond  V.  Dickerson 248 

Red  Riv.  Bridge  Co.  v.  Clarksville 566 

Red  River  Turn.  Co.  v.  State 796 

Reed  v.  Bradley 410 

Keed  V.  Jones. ..  333 

Reed  V.  N    Y.  C.  R.  Co 741,751 

Reedie  v.  London,  etc.,  R.  Co 734,  795 

Reese  v.  Bk.  Montgomery  ( ,'o 182 

Reese  Riv.  S.  M.  Co.,  In  re 441 

Reese  Riv.  Min.  Co.  v.  Smith 448 

Reformed,  etc.,  Church  v.  Brown  .   ...  180 

RegeiiK,  etc.,  v.  Detroit 271,  283,  392 

Regents,  etc.,  v.  Williams 41,  649,  6.55 

Rotritri  v.  Archdall 626 

Reg   V.  Baines  681 

Reg.  V.  Birmingham,  etc.R.  Com.  433,  453 

688,  796 

Reg.  V   Boucher 11 

Reg.  V.Cumberland 270 

Reg.  V.  Deptford  Pier  Co 687 

Reg.  V.  Derbyshire,  etc.,  R.  Co...  683,  687 
Reg.  V.  Eastern  Counties  R.  Co.,  591,604,  687 

Reg.  V.  Gen.  Cem.  Co 680,  684 

Reg.  V.  G.  N.  of  E.  R.  Co 453,  796 


xli' 


Table  of  Cases  Cited. 


PAGE. 

Re«.  V.  Governora 423 

lif-ii.  V.  Hereford  (i72 

Keg.  V.  Kendall 680 

Heg.  V.  London,  etc.,R.  Co  680,  684 

Ketc.  V.  Londonderry,  etc.,Ry.  Co    ..    103 

Reji.  V.  Longton  Gas  Co   45:! 

Res.  V .  Mayor 453 

Ret;.  V.  Midland,  etc.,  R.  Co 680 

Reg.  V.  Pepper 62(5 

Resr.  V.  Powell 6T2 

Repr.  V.  Quale        C2ti 

Beg.  V.  Queen,  etc.,  Co 530 

Reg.  V.  Registrar,  etc 24 

Reg.  V.  St.  Paul,  etc 404 

Reg.  V.  Saddlers' Co 423,679 

Reg.  V.  Scott 796 

Reg.  V.  Sheffield  Gas  Co 796 

Reg.  V.  Slatter 026 

Reg.  V.  Stephens 453,  798 

Reg.  V.  Train 781 

Reg.  V.  Trustees,  etc    687 

Reg.  V.  United  Kingdon  Electric  TeL 
qq  ■ 453 

Reg .'  V. '  Victoria  Park  Co. '. '. '. '. '. '.  530,'  541',  684 

Reg.  V.  White 378 

Reg.  V.  Wing .103,680,  684 

Reg.  V.  York  North  Midland  R.  Co 604 

Reid  V.  Hibbard 293 

Reid  V.Jones 525 

Keiff  V.  Connor 426 

Reitenbaugh  V.  Chester  Valley  R.  Co..  592 

Rensselaer,  etc.,  P.  R.  Co.  v.  Bartow..  117 

131,  147,  ISO 

Rensselaer,  etc.,  R.  Co.  v.  Davis. . .  339,  .569 

577,  .590 

Rensselaer,  etc.,  R.  Co.  v.  Wetsel 119 

Reprocity  Bk.,  Matter  of 649 

Republic  Bk    v.  Hamilton  County.. 46,  704 

Renter  v.  Electric  Tel.  Co 239,  396 

Revere  V.  Boston  Copper  Co 308,  6G0 

Rex  V.  Amery 31,  654,  6.59 

Rex  V.  Anderson  ...     .     615 

Rex  V.  Archbishop  Canterbury 682 

Rexv.Ashwell 30,426 

Rex  V.  Atwood 312,  423 

Rex  V    Barber  Surgeons 421 

Rex  V    Barker 672,  681,  683 

Rex  V.  Bedford  Level  Corp 681 

Rex  V    Bibb 401 

Rex  V.  Bigg 269,  365 

Rex  V.  Bird :..... 312,  423 

Rex  V.  Bishop  of  Chester 682 

Rex  V.  Bishop  of  Ely 509 

Rex  V.  Carmarthen 654 

Rex  V.  Chancellor,  etc. ,  of  Cambridge  681 

Rex  V.  Chetwynd 312 

Rex  V.  Conirs.  of  Excise 682 

Rex  V.  Cooper,  etc.,  Co 414,  423 

Res  V.  Corp.  Bedford 683 

Rexv.  Cudlipp 615 

Rex  V.  Curghey 672 

Rex  V.  East  &  W.  I.  Docks  R.  Co 780 

Rexv    Field C81 

Rexv.  Francis 611 

Rex  V.  Gardner 492 

Rexv.  Gi never 423 

Rexv.  Grant 015 

Rex  v.  Gray 659 

Rexv.  Grosvenor 652 

Rex  V.  Gutch 435 

Rex  V.  Haythorne 421 

Rexv.  Hill 313 

Rex  V.  Hots  man  of  Newcastle 680 

Rex  V.  Justice  of  Buckingham 537 

Kejc  V.  Justices  of  Yorksliire 684 

Rex  V.  Langhorn 312 

Rexv.  Latham 615 

Rex  v.  Liverpool 86 

Rex  V.  London     454,  616,  681 


PAfiE. 

Rex  V.  London  Assurance  Co 100 

Hex  V .  Marcli 679 

lle.x  V .  M  ay 326 

Rex  V.  Mayor 083 

Rexv.  Medley ..716,790 

Rex  v.  Merchant  Tailors  Co  .     .509,  680,  686 

Rexv.  Miller    421 

Rex  V.  Monday 325 

Rex  V.  AI  orris    666,  779 

Rex  V.  Norwich,  etc 672 

Rex  V.  O.xford 315 

Rexv.  Pasmore 652,  654,  667,  671 

Rex  V.  Piiyne 615 

Rexv.  Pease    779 

Rexv.  St    Katharine  Dock  Co 684 

Rex  V.  Saunders 6.52 

Rex  V    Slaverton 6.54 

Rexv    .Spencer    413,  420 

Rex  V.  Stacey 612,  615 

Rex  V.  Surgeons  Co 681 

Rex  V .  Swem,  etc. ,  R.  Co 687 

Rex  V.  Trevener       -■ 615 

Rex  V.  Water- Works  Co 677,  687 

Rexv.  Westwood       .  30,  312,  412,  423,  426 

Rexv.  Wilts  Canal  Co 686 

Rex  v.  Worcester  Canal  Co 684,  687 

Rexv.  York 681 

Rexford  V.  Knight 605,668 

Reynolds  V.  Glasgow  Academy 405 

Rheerav.  Naugatuck  Wlieel  Co 506 

Rhode  V.  Loutham 336 

Rhodes  V.  <31eveland 717 

Rhodes  V.  Salem,  etc.,  R.  Co ..  694 

Rice  V.  Comm.  Bk 618 

Rice  V.  Courtis 92,  201 

Ricev.Gove 283 

Ricev.  R.  R.  Co ..    339 

Richard  V.  Warren 380 

Richards  v.  Merrimack  R.  Co  .   ...  387,  631 
Richards  v.  New  Hampshire  Ins.  Co. . .  242 

248 

Richardson  V.  Burl.,  etc. ,  R.  Co 502 

Richardson  V.  N.Y.  Cent.  R.  Co..  786,  789 

Richardson  v.  St.  Jolins  Ins.  Co 410 

Richardson  v.  St.  Joseph's  Iron  Co 504 

Richardson  V.  Scott,  etc. ,  R.  Co 284 

Richardson  v.  Sibley 215,  387 

Richardson  v.  Vt.  Cent.  R.  Co.  560,  780,  783 

Richardson  V.  Williamson 241,  303 

Richie  V.  Ashbury  Co 390 

Richland  County  v.  Lawrence  County.     41 

Richmond  &  Painter's  cases. 143 

Richmond  V.  Russell 735 

Richmond  Man.  Co.  v.  Starks  .     .       ...  293 
Richmond,  etc.,  R.  Co.  v.  Louisiana  R. 

Co 39,339,552,563 

Richmond,  etc.,  R.  Co.  v.  Snead 386 

Rickett  V.  Metrop.  Rv 781 

Riddell  v.  Harmony  F.  Ins.  Co 88 

Riddiclcv.  Anielin ...       18 

Riddle  V.  Locks,  etc.,  Co 31,  6.59 

Ridgwayv.  Farmers. .  .216,  221,  273,  387,  418 

Rigby  V.  Hewitt 462 

Riggs  V.  Johnson  County 685 

Ring  v.  Johnson  Co 407 

Ripon  V.  Bittel 469 

Risley  v.  Ind.,  etc.,  R.  Co.. 237,  2.34,  3.38,  248 
289,  419,  431 

Ritterband  V.  Baggett 415 

Rivere  V.  Boston  Copper  Co  659 

Rives  V.  Montgomery,  etc.,  R.  Co 443 

Rives  V.  R.  R.  Co 134 

Roach  V.  Coe 294 

Road  cases .  426 

Road  V.  Myers 407 

Roberts  V.  Button 243,245 

Roberts  V.  Ohio,  etc.,  R.  Co 142 

Robertson  V.  Conrey 113 

Robertson  V.  Ryckford 554 


Table  of  Cases  Cited. 


xlv 


PAGE. 

Robinson  v.  Bealle 274 

Robinson  v.  Chartered  Bk.   188,  3t)6 

Robinson  v.  Lane - ..  609 

Kobinson  V.  Nesbitt 92 

Robinson  v.  N.  Y.  &  E.  R.  Co 783 

Robinson  v.  Pitts.,  etc.,  R.  Co 121,  133 

Robinson  V.  Sniitli 217,  5:i3 

Kobson  V.  N.  E.  R.  Co 755 

Rochester  l$k.  v.  Gray 40-1 

RockRiv.  Bk,  v.  Sherwood 370 

Rookville  &  Wash.  Turup.  v.  Maxwell,    35 

148 

Rockwell  V.  Elkhorn  Bk 386 

Roehler  v.  Mechanics'  Aid  Son 82,  676 

Rogers  V.  Hastintrs,  etc.,  R.  Co 359 

Rogers  V.  Huntington  Bk 429,  5.33 

Rogersv.  Kneelaiid 271,  293,  449 

Rogers  v .  Saunders 526 

Rollins  V.  Cl.iy 567 

Rollins  V.  Columbia  Ins.  Co 423 

Ronan  V.  Fry 113 

Rome  V.Cabot 335 

Rome  Bk.  v.  Rome 351 

Rome  R.  Co.  v.  Rome 696 

Rood  V.  N.  Y.  C.  11.  Co .782 

Root  V.  Wallace 424 

Rorke  V.  Thomas 547 

Rose  V.  Truax  ...        307 

Rose  V    Turup.  Co. 656,  666 

Rosenback  v.  Salt  Spring  Nat.  Bk 416 

Rosenthal  v.  Madison,  etc.,  R.  Co 25 

Ross  V.  Crockett 323 

Ross  V.  Estates  Investment  Co 133,  448 

Ross  V.  Lafayette,  etc.,  R.  Co 142 

Ror^s  V.  Lane" 678 

Ross  V.  Madison 337,401 

Ross  V.  Ross 532 

Ross  V.  South-western  R.  Co 91,    97 

Rossmore  V.  Mowatt  558 

Rothe  V.  Mil.  R.  Co 788 

Rounds  V.  Del.  &  Lack.  R.  Co.,  720,  723,  727 

Rounds  V.  Smith 444 

Roundtree  V.  McLain 526 

Rouse  V   Mcore 4 

Routh  V.  Thompson 449 

Rowlev  V.  Empire  [ns.  Co 288 

Royal  Bk.  of  India's  case 230 

Royal  Bk.  Liverpool  v.  Gr.  June.  R  400,  405 

Royal  British  Bk.,  In  re 433,439 

Royal  Uritish  Bk.  v.  Turquand 379 

Royalton  v.  Turnp.  Co 247 

Royston  v.  Royston 561 

Roxbury  V    Huston 506 

Rubotton  V.  McClure  598 

Ruby  V.  Abyssinian  Soc 484 

Ruby  V.  Portland 71 

Ruck  V.  Williams 452 

Rudolph  V.  Covell 526 

Ruggles  V.  Washington  County 293 

Ruhn  V.  McAllister 93 

Rundle  V.  Del.  «&  Raritan  Canal  Co 6 

Runkle  v.  Wineraeler 680 

Runj'on  V.  Lessee,  etc 26 

Russell  V.  Elliott 677 

Russell  «r.  McLellan 30,  656,  666 

Rust  V .  Low .588 

Rutland,  etc.,  Co.  V.  Proctor 384 

Rutland,  etc.,  R.  Co.  v.  Thrall  .   ..  124,  153 

Rutter  V.  Chapman 11 

Ryan  V.  Dunlap 273 

Ryan  V.  H.  R.  R.  Co 738 

Ryan  V.  N.  Y.  Cent.  R.  Co 461 

Ryder  V.  Alton,  etc.,  R.  Co....  1.3,  147,  172 

190,  606 

Sabin  V.  Vt.  Cent.  R.  Co 781 

Sabin  v.  Woodstock 201 

Sacketts  Harbor  Bk.  v.  Lewis  Co.  Bk. .  381 
Sadler  V.  Langhatn 570,  573,  576 


Safford  V.  Wyckoff 338.  S^S,  .3«7 

Sagory  V.  Diiboi-e 131,144,   116,  14S 

St.  Andrew's  Bay  Land  Co. v.  Mitchell.  271 

410 
St.  Charles  Nat.  Bk.  v.  De  Bernales....  485 

St.  James'  Church  v.  C.  Redeemer 248 

St.  Jo.  &D.  C.  R.  Co.  V.  Chase 463 

St.  .lohn  V.  Benedict ...527 

St.  Johns  V  Erie  R.  Co 1.56 

St.  Joseph  V.  Rogers 351 

St    Louisv.  Alexander 712 

St.  Louisv.  Buffinger 423 

St.  Louis  V.  Ferry  Co 705 

St.  Louisv.  Kean  .  ..     675 

St.  Louis  V.  Manufac.  Sav.  Bk 43 

St    Louis  v.  Wel)er 68,  366,  414 

St.  Louis,  etc.,  Ins.  Co.  v.  Cohen 486 

St.  Louis,  etc.,  Ins.  Co. v.  Goodfellow.  104 

199,  4.30 

St.  Louis,  etc.,  R.  Co.  v.  Dalby 716 

St.  Louis,  etc.,  R.  Co.  v.  Manly 7b8 

St.  Louis,  etc.,  R.  Co.  v.  Montgomery.  783 

St.  Luke's  Church  v.  Matthews 3U8,  414 

St.  Luke's  Church  V.  Slack 6s5 

St.  Mary's  Bk.  v.  St.  John 242 

St.  Mary's  Church,  Re 311,  318 

St.  Mary's  Church  v.  Cagger 394 

St.  Paul  V.  Coulter 417,  4'21 

St.  Paul  R.  Co.  V.  Parcher 389 

Said  V.  New  Orleans 43 

Salem  v.  Richardson 303 

Salem  Bk.  V.  Caldwell  609 

Salem  Bk.  v.  Gloucester.  221,  226,  2-37,  239 
287.  289,  295,  412,  418,  420,  425,  434,  4,50 

Salem  &  H.  T.  pike  Co.  v.  Lyme 58 

Salem  Iron  Fac.  v.  Danvers    697 

Salem  Mill  Dam  Corp.  v.  Ropes 99,  118 

121,  136,  142,  305 

Salem  R.  Co.  v.  Tipton 654 

Salisbury  Mills  V.  Townsend 190 

Salmon  V.  Richardson 241 

Salomons  V    Laing 22.5,  339,  516 

Salt  Co.  V.  East  Saginaw 704 

Saltmarsh  V.  Planters' Bk 667 

Sampson  v.  Bowdoinham  Steam  Mill 

Corp 313,  317 

Samuel  V.  Halladay 315,  822,  417,419 

431,  485,  501,  511,  515 

Samuels  V.  Cent.,  etc.,  Exp.  Co 415 

San  Antonio  V    Lane 353 

San   Buenaventura,   etc.,  Man.  Co.  v. 

Vas.sault 211 

Sanders  v.   Guardians  of     St.  Neat's 

Union 404 

Sandford  v.  Eighth  Ave.  R.  Co....  7-2.3,  763 

780,  795 
San  Diego  v.  San  Diego,  etc.,  R.  Co....  248 

Sandilands,  In  re 400 

Sandusky  Bk.  v.  Wilbor 698 

Sanford  v.  Worn 566 

San  Francisco  v.  Spring  Valley  Water 

Works 15 

San  Francisco  R.  Co.  v    Bee'. ..  248 

San  Francisco,   etc.,    R.   Co.   v.  Cald- 
well     .571,  605 

Sangamon   &  Morg.  R.  Co.  v.  County 

of  Jlorgan 693 

Santa  Cruz  R.  Co.  v.  Schwartz 119 

Sargent  v.  Essex  JIarineRy.92,  1(4,187.  419 

Sargent  V.  Franklin  Ins.  Co  .81,  96,100,  103 

161,  164,  187,  197,  201,  429 

Sargent  V.  Webster.  ...217,255.  312,315,  325 

Sater  v.  Burlington,  etc.,  R.  Co 605 

Savagev.  Ball 183 

Savage  v.  Medbury 543 

Savage  v.  Rice 283 

Savage  V.  Walshe 659 

Savage  Man.  Co   v.  Armstrong 487 

Savings  Bk.  v.  Davis 271,  313,  317,  394 


xlvi 


Table  of  Cases  Cited. 


PAGE. 

SarinfTS  Fund  Soc.  V.  Phil 41 

Siiwver  V.  lloiiir 669 

Sawyer  V.  Methodist  B.  Churcli 325 

Sitxloii  V.  Uncoil 467 

S.  &  B.  K.  Co.  V.  L   &  N.  W.  11.  Co.  .  .  634 

Scaith  V.  ChiidwicU 5:il 

Sohiu-kelford  v.  New  Orleans  R.  Co.259,  30.i 
SL-liaeffer  V.  Missouri,  etc.,  Ins.  Co. .95,  115 

171 
Schenectady,  etc.,  R.  Co.  v.  Thatcher,    615 

119 

Schmidt  V.  Mil.,  etc.,  R.  Co 792 

SclKiif  V.  Bloomfield 316 

Scholev  V.  Cent.,  etc.,  R   Co 441,447 

SchulUeld  V.  Union  I5k 9(1 

School  Coinrs.  v.  Dean 27 

Scliool  Dist.  V.  Blaisdell 50li 

School  Dist.  V.  Thompson 355 

School  Di.st.  V.  Wood 390 

Scliool  Inspectors  v.  People 673 

Schular  V.  Hudson  R.  Co 732 

Schumni  v.  Seymour  323 

Soliuylliin  Nav .  Co.  v.  Thoburn 605 

Scott  V,  Cent.,  etc.,  R.  Co 157 

Scott  V.  De  Peyster 241,  248,  252 

Scott  V.  Eagle  Ins.  Co loij,  520 

Scott  V.  Lord  Hastings 92 

Scott  V.  Johnson 2S5 

Scott  V.  Scott 278 

Scott  V.  Shepherd 402 

Scotland  County  v.  Missouri  &  N.  R. 

Co  43 

Scripture  v.  Francestown  Soap-stone 

Co , 97 

Scudder  V.Trenton,  etc..  Falls  Co...  .  509 

Searl  V.  Lack.,  etc.,  R.  Co 605 

Sears  v.  Eastern  R.  Co 775 

Sears  v.  IlotchUiss 243,  245,  514,  524 

Searsburgh  Turn.  P.  Co.  v.  Cutler.  ...  504 

Seaver  v.  Coburn   290 

Secombe  v .  R   R.  Co 574 

Secoii;]  Nat.  Bk.  v.  Lavell 348,  4S5 

Sedgwick  v.  Stanton  ..     307 

Setrerv.  Barkhamstead 468 

Seibrecht  V.  New  Orleans 286,335 

Selbyv.  Levee  Corns    691 

Selma  V.  Tenn.  R.  Co 1.32 

Selnia,  etc.,  R.  Co.  v.  Harbin .5.56,  558 

Selma,  etc.,  R.  Co.  v.  Tipton..  117,  130,  145 

147,  i')04 
Seneca  County  Bk.  v.  Lamb..   215,  398,  413 

417,  419 
Serrell  v.  Derbyshire,  etc.,  R.  Co... 243,  245 

Sessions  V.  Crunkiltou 574 

Seton  V.  Slade 279 

Sewall  V.  Boston  Water  Power  Co 105 

Sewall  V.  Brainerd 353 

Sewall  V.  Chamberlain 182 

Sewal  I  V.  Lancaster  Bk 429,  5.33 

Sewall's  Falls  Br.  v.  Fisk  ...   671 

Seymour  V.  Canada,  etc.,  R.  Co  ...388,  631 

Sevmour  V.  Chiiago,  etc.,  R.  Co 753 

Seymour  V.  Milford,  etc.,  T.  Co 529 

Seymour  v.  Delancy 101,  526 

Seymour  V.  Ely 675,  679 

Seymour  v.  Greenwood.451, 457, 724,  726,  738 
702,  764,  795 

Seymour  V.  Hartford. 699 

Seymour  V.  Tump.  Co 79,  528 

Seymour  V.  Wyckoff 294 

.Shackleford  v.  Coffey 573 

Shaler,  etc.,  Co.  V.  Bliss 114 

Sharp  V.  Mayor 436,  440,  4.57 

Sharpe  V.  Bellis 285,290 

Sharpless  v.  Philadelphia 711 

Sharrod  V.  London  R.  Co 451 

Shaughnessy  V.  Rens.  In.s.  Co .5-12 

Shaver  V   Bear  River,  etc  ,  Co 238 

Shaver  V.  Ocean  Mining  Co 285 


P.VOE. 

Shaw  V.  Boylan 71 

.~<liavv  V.  Dennis 711 

Shaw  V.  Norfolk,  etc.,  R.  Co, .388,  622,  554 

556 

Shawv.  Nudd 'Si^ 

Shaw  V.  Spencer 101,  175 

Shawmut  Bk.  v.  Plattsburgh,  etc.,  R. 

Co a39 

Shay  V.  Tuolumne  Co.  Water  Co 107 

Shea  V.  Sixth  Ave    R.  Co 724,  730 

Sheffield,  etc.,  K.  Co.  v.  Woodcock....  172 

Shelbyville,  etc.,T.  Co.  v.  Barnes .551 

Sheldon  v.  Fairfax 395,  403 

Sheldon  Hat,  etc.,  Co.  v.  Eickmeyer 

Hat,  etc.,  Co 368 

Shelling  V.  Farmer 509 

Shelton  V.  Darling 283 

Shepard  V.  Buffalo,  etc.,  R.  Co ..  793 

Shepherd  V.  Gillespie 156 

Shepley  V.  A    &St.  L.  R.  Co 215,  387 

Shepficrd  V.  Midland  Ry.  Co 757, 

Sheridan  v.  Brooklyn,  etc.,  R.  Co 761 

Kherley  V.  Billings 720,  762,  773,  795 

Sherlock  v.  Winnetka 371 

Sherman  v.  Fitch 233,  411 

Sherman  v.  N.  Y .  Cent.  R.  Co 296 

Sherman  V.  Smith 113,  649 

Sherman  V.  West  Stage  Co 480 

Shervvin  V.  Bugbee 13 

Sherwood  v.  American  Bible  Soc 66 

Shewalterv.  Pirner 256 

Shield  V.  JJdin.  &  Glasgow  R.  Co 735 

Shieldsv.  Ohio 554 

Shipley  V.  Kymer 290 

Sliipman  V.  JEtna  Ins.  Co 166 

Shitz  V.  Berks  Co 690 

Shoe  &  Leather  Bk.  v.  Brown 504 

Shorter  V    Smith 503 

Shortz  V.  Unangst 31 

Shotwell  V.  Mali 207,  255 

Shrewsbury  V.  Brown 482 

Shrewsl)ury  v.  N  Staffordshire  R.  Co. .  359 
Shrewsbury,   etc.,  R.   Co.  v.   London, 

etc.,  R.  Co 225,  3;)9,  360,  .527 

Shropshire,  etc.,  R.  Co.  v.  Anderson  ..  143 

Shuetze  v    Bailey '336 

Shurtz  V.  Schoolcraft,  etc.,  R.  Co  ....  119 
Sibley  V.  Carteret  Club  of  Elizabeth...     89 

Sicilies  V.  Wilcox 4.53 

Sikesv    Hatfield 260.  303 

Silver  Lake  Bk.  v.  North.  381,  487,  023,  6.54 
Silverthorne  v.  Warren  R.  Co.  ...  675,  678 
Simmons  v.  New  Bedford,  V.  &  U.  S. 

Co 774 

Simonson  V.  Spencer 112 

Simpson  V.  Denison 516 

Simpson  V.  Westminster,  etc.,  R.  Co.    513 

Simrali  V.  Mut.  Ins    Co 30 

Siner  V.  Gt.  West.  R.  Co... 758 

Skellyv.  Jefferson  Branch  Bk 098 

Skinner  V.  Maxwell 543 

Skowegan  Bk.  v.  Cutler 191,  201 

Slack  V.  Marysville,  etc.,  R.  R.  Co..  80,  711 

Slaterv.  Rink 469 

Slaughterv.  Comm 691 

Slaw.son  V.  Loring 296,  298 

.■^laymaker  V.  Gettysburgh  Bk.  18.5,  187,  189 
Slee  V.  Bloom  ...  114,  414,  530,  6.53,  6.59,  671 

Sleeper  V.  Franklin  Lyceum : 90 

Sleevant  v.  Anglo  California  Gold  Min- 
ing Co 145 

Slim  V.  Croucher 299 

Sloan  V.  Pacific  R.  R.  R.  Co 47 

Sloan  V.  State .     40 

Small  V.  Herkimer  Manuf.  Co..  141,  146,  148 

Small  V.  Owiiigs 336 

Smart  v.  West  Ham  Union 396 

Smead  v.  Indianapolis,  etc.,  Co.287,  355,  387 
Smith,  In  re 133,191 


Table  of  Cases  Cited. 


XlVll 


PAGE. 

Smith  V.  Alvord 323,  347,  300 

Suiith  V.  American  Coal  Co 102 

JSinitli  V.  Appletou 652,  670 

Smith  V.  Bansrs 524 

Smith  V.  Uanlv  of  Scotland 233 

Smith  V.  Birmiusham  C.  Co 458 

Nmith  V.  Birmingham  Gas  Co 43-t 

S^mith  V    Hromley 373 

Smith  V.  Burlev 697 

Smith  V.  Cartwright 269 

tjinith  V.  Cheshire 355 

Smith  V.  Clark    352 

Smith  V.  Comm 260,  31)4 

Smith  V.  Congregatio'l  Meeting  House,  395 

Smith  V.  Connelly 5i3 

Smith  V.  Crescent  City  Co 91 

Smith  V.  Eureka  Flour  Mills 66,  356 

Smith  V.  Exeter 6V)4 

Smith  V.  Helmer 598 

Smith  V.  Holcomb 469 

Smith  V.  Hull  Glass  Co 290 

Smithv.Hurd 303,513 

Smith  V.  Indiana,  etc.,  R.  Co 153 

Smithy.  Lansing 255 

Smith  V.  Law 316,343 

Smith  V.  London  &  S.  W.  R.  Co 462 

Smith  V.  Miss    R.  Co 654 

Smith  V.  Morse 356 

Smith  V.  Natchez  Co 666 

Smith  V.  Northampton  Bk 273 

Smith  V.  Overby 469 

Smith  V.  Perry 337 

Smith  V.  Plankroad  Co. 24, 116, 134,  136,  152 

654 

Smithv.Poor 204,  303 

Smith  V.  Prattvllle  Manuf .  Co.240,  243,  245 

Smith  V.  Reese  Riv.  Co.   133,  441 

Smithy   Sac.  Co 351 

Smith  V.  State 628 

Smith  V.  Tracy 234 

Smoot  y.  Rea 526 

Smout  y.  Ilberv 299,  .301 

Sinvth  y.  Darley 317,  3-.'2 

Snowy    Webber      194 

Society,  etc.,  y.  Coite  711 

Society,  etc.,  v.  New  London 351 

Soc.  Visitation  of  Sick  y.  Com.  83,  87,    69 

Somerby  V.  Buntin  . 93 

Somerville.  etc.,  R.  Co.  v.  Doughty —  606 

South  Baptist  Soc.  v.  Clapp 392 

South  Bay,  etc.,  Co.  v.  Gray..   ..     149,  482 

Southampton  Dock  Co.  y.  Richards 142 

Southampton  &  ItchinB.  Co.  y.  South- 
ampton   452 

South  Eastern  R.  Co.  y.  Hebblewhite  .  143 
Southern  Life  Ins.  Co.  y.  Lanier..  279,  375 

381 
Southern  Penn.  Iron  Co.  v.  Steyens...  140 
Southern  Plankroad  Co.  y.  Hixoa.  83,     89 

133,  139 

Southern  R.  Co.  y.  Jackson    700 

Southern  R.  Co.  y.  Kendrick 468,  760 

Souih.uayd  y.  Riiss    .    —    ...   ..     Ill,  113 

Sout.i,  etc.,  K.  Co.,  Ex  parte 675 

South  Western  R.  Co.  y.  Georgia 554 

South  Western  R   Co.  v.  Paulk....  693,  762 
South  Western,  etc.,R.  Co.y.Thomason  154 

South  wick  V.  Estes 795 

South  Yorkshire  R.  Co.  y.  Great  N.  R. 

Co  225 

Soutterv.  Madison 653,  670 

Sower  V.  Philadelphia 425 

Spangler  y.  Indiana,  etc.,  R.  Co  .  150,  504 

Sparenburgh  V.  Bannatyne 493 

Sparhawk  V.  Union,  etc.,  R.  Co 525 

Sparks  y.  Proprietors,  etc ]46 

Sparrow  y.  Evansville,  etc.,  R.  Co 553 

Sparta  V.  Lebanon,  etc. ,  Turnp.  Co 145 

Spauldingv.  Chicago,  etc.,  R.  Co.  783,  783 


PAQE. 

Spauldingv.  Lowell 69,  287,  355 

Spearv.  Blairsville 5^0 

Si.ear  V.  Crawford...  113,  114,  131,  146,  118 
Spear  v.  lirant... .  206,  244,  246,  515,  520,  538 

Spear  y.  Hart 1,55 

Spearv.  Ludd 216,  233 

Speer  V.  Atlantic,  etc.,  R.  Co 559 

Spencer  V.  E'eld 282 

Spencer  v.  111.  Cent.  R.  Co....  786,  783,  790 

Spering's  appeal 240 

Spooiier  V.  Holmes 3.j3 

Sprague  V.  Cacheco  Manuf.  Co 1G2 

Spvague  V.  Gillette        271 

Sprague  v.  Hartford,  etc.,  R.  Co £60 

Sprague  v.  111.  Kiver  R.  Co 33,  143,  318 

Spring  V.  Russell oiil 

Springfield  v.  Conn.  R.  Co....  553,  563,  565 

Spriiiirfleld  V.  County  Com'rs 681 

Stacey  v.  Vermont  Cent.  R.  Co    .  578,  590 

594,  600 

Stackpolev.  Arnold 282,298,  3;i6 

Stainton  v.  Woolrych 780 

Stamford  Bk.  v.  Benedict 271,  273,  410 

Stamford  Bk.  V.  Ferris 531,  534 

Stanley  v.  Chester  &  Birkenhead  R. 

Co 305 

Stanley  v.  Stanley 113 

Stanton  V.  Wilson 180 

Starv.  Camden  R.  Co .566 

Starin  V.  Genoa ..  713 

Stark  V.Burke 113 

Stark  Bk.  v    U.  S.  Pottery  Co 251,  387 

Starkweather  y.  Bible  Soc 373 

State  V.  Accommodation  Bk  44,    65 

State  V.  Adams. 88,234 

State  V.  Ancker 417 

State  V.  Armstrong 18 

State  V.  Ashley 611,616,619,  655 

State  V.  Bailey 215,  505,  551,  664,  669 

State  V.  Baltimore,  etc.,  R.  Co. 155,  159,  190 

State  V.  Bk.  Louisiana 221,  510 

State  V.  Bk.  of  Maryland 388 

State  v.  Binder 318 

State  V.  Bonnell    212 

State  v.  Bradford 650,  6r>2 

Slate  V.  Bridgman 675 

State  V.  Brown 655 

State  v.  Buchanan 613 

State  V.  Burbank 655,  673,  675 

State  V.  Burnett 6.55 

State  V.  Canterbury 563 

State  y.  Carney 678 

State  y.  Centerville  Br.  Co 6.54 

State  V.  Cincinnati 653 

State  v.  Clark 414 

State  V.  ClarksvilleR.  &  T.  Co 779 

State  v    Claypool 543 

State  V.  Coll.  &  H.  P.  R.  Co 657 

State  v.  Commercial  Bk. . .  326,  273,  289,  419 
431,  622,  649 

Statev.  Com'rs 63 

State  v.  Common  Council 80,  676 

Statev.  Conklin 413,415,  520 

State  V.  Conlin 713 

Statev.  County  Judge 678 

State  v.  Curran 63,  420,  650 

State  v.  Davenport  .  714 

State  V.  Dawson ...      30 

Statev.  Delafleld 351 

State  V.  Douglas 42 

State  V.  Dubuclet 678 

State  V.  Duflfv 676 

State  V.  Favell 653 

State  v.  Ferguson 313,  414,  417 

State  V.  Ferris. .. : 95 

State  V.  Fisher 655 

State  v.  Fourth  N.  H.  Turnp.  Co..  6-53,  670 

State  V.  Franklin  Bk 158,  189 

State  v.  Freeman 414 


xlviii 


Table  of  Cases  Cited. 


PAGE. 

State  V.  Georpria  Med.  Soc 84,    87 

Wtate  V.  Gleasoii 611,  CI9 

State  V.  GoU 508,  fit?5 

State  V.  Grand  Trunk  R.  Co 7")9 

State  V.  Hartford,  etc.,  K.  Co (587 

State  V.  Haskell 'M2 

State  V.  Hood CDS 

State  V.  Hull f)77 

State  V.  111.  Cent.  K.  Co 093 

Slate  V.  J  ersey  City 425,  574 

State  V.  Johnson Oil,  (519 

Stale  V.  Justinian  Soc 82 

State  V.  Kirkley 303 

State  V.  Krebs 89,    70 

State  V.  Lehre...   615,  fi-'C 

State  V.  La  Granse  11.  Co 5;i0 

State  V.  Latliroji C91 

State  V.  Ck.  Louisiana 418 

Slate  V.  Lynah C75 

State  V.  McOrillus C73 

Stale  V.  Mclver 191 

State  V.  Maine  Cent.  11.  Co 554 

^la;e  v.  Manchester,  etc.,  R.  Co 792 

State  V.  Mansfield 695 

State  V.  Marlow  . 615,619 

Stale  V.  ^I  ayor  of  Mobile 356 

State  V.  Mayor  of  Newark 41,    43 

Stale  V.  Merchants'  lus.  Co 653,  657 

State  V.  Merry 611,  619 

State  V.  Metz 560 

State  V.  Miller 42 

State  V.  Minion 696 

Stale  V.  Miss.,  etc.,  R.  Co.. 65b 

State  V.  Morris,  etc.,  R.  Co....  395,  450,  796 

State  V.  Morristown 414 

State  V.  Morristown  F.  Ins.  Asso IBO 

State  V.  New  Orleans  Gas  L.  Co. ..  6.52,  654 

State  V.  Northern,  etc.,  li.  Co 3«8,  486 

560,  631,  680 

State  V.  N.  Eastern  R.  Co ...676,  688 

Stale  V.  Nnyes 28,44,46,  566 

Slate  V.  Ogden 691 

Stale  V.  Parker 713 

State  V.  Parrott 779 

btale  V.  Paterson,  etc.,  T.  Co..  618,  625,  653 

State  V.  Pawtucket  T.  Co 650 

State  V.  Perrine 675,  678 

Slate  V.  Person 42,    64 

State  V.  Pindal 37 

State  V.  Pinto  City  Clerk,  etc 426 

State  V.  Police  Jury 678 

State  V.  Powers  .   698 

State  V.  Real  Estate  Bk 611,  619,  637 

Stale  V.  Rives      530,634,658 

State  V.  St.  Louis  County  Court 41 

Stale  V.  St.  Louis  Ins.  Co Oil,  619 

State  V.  Saxton 676 

State  V.  Schnierle 655 

State  V.  Scott 779 

State  V.  Sh ields 613 

State  y.  Sibley 32 

State  V.  Smith 191,261! 

Slate  V.  Southern  Minn.  R.  Co 42,  680 

State  V.  Stebbina  3.56 

State  V.  Stone 611,  619 

Slate  V.  Taylor 615,619 

State  V.  Tolan .   .  655 

State  V.  Tombeckbee  Bk 44 

State  V.  Trustees,  etc 668 

State  V.  Tudor 82, 107,  616 

Stale  V.  Tunis C96 

Stale  V.  Union  Merchants' Exchange..  416 

State  V.  U  rbana  Ins .  Co 653,  6.57 

Stale  V.  Vt.  fent.  R.  Co 716,  796 

State  V.  "Wadkins 615,  619 

State  V.  Warmoth 675 

State  V.  Warren  County 691 

State  V.  Warren,  etc.,  Co 687 

State  V.  Warren  Foundrj',  etc.,  Co 191 


State  V.  Washincton  Library. . 
Stale  V.  Wost  Wis.  R.  Co. . .". 
State  V.  Willianistown  T.  Co.. 
Stale  V.  Wilinint^ton  lir.  Co... 

Stale  V.  Wilson 

State  V.  Zanesville,  etc.,  Co. 


PAGE. 

.  69,  649 
611,  619 


649 

..    ..     678 

Slate  Bk.  y.  Cape  Fear  Bk 44,  336 

State  Bk.  y.  Clark 80 

State  Bk.  y.  Comc3;ys 23:^ 

State  Bk.  y.  Giblis 80 

State  Bk.  V.  Knoop 40,  696 

State  i'.k.  V.  Kav.  Co ,     41 

State  Bk.  V.  Orleans  N.iy.  Co ,3.56 

State  Bk.  y.  State    611,610,628 

State  Bk.  y.  Tutt 531 

State  Board  Agriculture  y.  Cit.  Street 

R.  Co 357,381 

State  F.  Ins.  Co.,  In  re 521 

State  Ins.  Co.  V.  Sax 191 

State  Nat.  Bk.  y.  Robadoux 657 

Stale  Nicholson  Payem't  Co.  y.  Mayor,  677 

State  Sav.  Bk.  V.  Kellogg 108 

Steam  Nay.  Co.  v.  Weed 381 

Steamship  Dock  Co.  v.  Heron..  91,  104,  200 

429 

Stearns  y.  Midland  Ry.  Co 4.54 

Stearns  V.  Old  Col.,  etc.,  R.  Co 793 

Stebbins  y.  Jennings 28 

Stebbins  V.  Merritt 313,  315 

Stebbins  y.  Phoenix  F.  Ins.  Co  ... .  104 ,  187 

198,  429 

Steel  V.  S.  Eastern  R'y  Co 735 

Steele  y.  Oswego 403 

Stein  V.  Mobile 711 

Stelner's  Appeal 635 

Stephen  y.  Smith 7(53 

Stephenson  V.  N.  Y    R.  Co 279 

Stetson  V.  City  Bk 664 

Stetson  V.  Kempston 69,  287,  355 

Statson  y.  Patten 300 

Stevens  V.  Buffalo,  etc.,  R.  Co 388,  434 

450,  530,  631,  716 

Stevens  V.  Davison 247,  525 

Stevens  y.  Eden  Meeting-House  Asso.,  313 

Stevens  y.  Middlesex  Canal 569 

Stevens  y.  Midland  Ry.  Co 456,  459 

Stevens  y.  Norris 306 

Stevens  y.  Rutland,  etc.,  R.  Co 143.  204 

Stevens  v.  South,  etc.,  R.  Co 516,  525 

SLeven.s  v.  Watson.. 388 

Stevenson  y.  Buxton 527 

Steward  y.  Huntingdon  Bk ...  279 

Stewart  v.  Austin 241 

Stewart  y.  Jones 538,  533 

Stewart  v.  Say 108 

Stiles  v.  Cardiff  Steam  Nav.  Co 4.53 

Stimson  v.  N.  Y.  C.  B.  Co 763 

Stockton  y    Frye 469 

Stockton  Iron  Co.,  In  re 197 

Stockton,  etc.,  R.  Co.  v.  Stockton 574 

Stoddard  y.  Gilman    426 

Stoddard  V.  Shetucket 159 

Stokes  y.  Eastern  Counties  H.  Co 741 

Stokes  y.  Lebanon,  etc.,  R.  Co     ..  115,  148 

Stokes  V.  Scott  County 713 

Stone  V.  Berkshire  Congregat'l  Soc.,..  395 

Stone  V.  Hockett 188 

Stone  V.  Wetmore 655 

Stoneham  Branch  R.  Co.  v.  Gould 119 

Stoney  v.  American  L.  Ins,  Co 

Stoops  V.  Greensburgh  P.  R.  Co...  504,  671 

Storey  y.  Ash  ton 734 

Story  V.  Livingston  , 508 

Stowv.  Wyso 313,317,  417 

Stout  V.  Sioux  City,  etc.,  R.  Co 791 

Stogstown,  etc.,  T.  Co.  y.  Craver 333 

Stratton  v.  Allen 255,  343 

Strauss  y.  Eagle  Ins.  Co...  60,  335,  342,  3.")6 
Strauss  y.  Pontiac 416 


Table  of  Cases  Cited. 


xlix 


PAGE. 

StrawbridKe  V.  Turner 467 

Strickland  V.  Frichard C")9 

Sirong's  case —  G76 

Stroll},' V.  Smith 99 

StroiiK  V.  Wheaton I'iS 

Stuart  V.  Loudon  R.  Co 2;i9 

Slurges  V.  Bk.  Circleville »71 

Sturstes  v.  Board  of  Trade 79 

Sturffesv-  Knapp 53:^ 

Sturges  V.  Stetson ...     35,  183,  ~'1T 

Sturtevaiit  V.  Alton  335,  403 

Sturtevant  v.  Jacques —  174 

Sturtevaiit  V.  Liberty 355 

Stuyvesant  V.  JIayor 420 

Sudl)ury  V.  Stearns —  676 

Sullivan  v.  La  Cro=se,  etc..  Packet  Co..  486 

Sullivan  V.  Union  P.  11.  Co 479 

Sum  V.  Robertson  ....    ...  664 

Sumner  V.  Marcy 353,  387 

Supervisors  v.  Durant GS5 

Supervisors  V.  Mississippi  R.  Co.. .  141 

Sui)orvisors  v.  U.  S 714 

Sus.  Bridge  Co.  V.  Geii'l  Ins.  Co..  387,  631 

Sus.  CanalCo.  v.  Wright 387,529,  598 

Sutton  V.  Cole 293 

Sutton's  Hospital  Case 4,27,392,  412 

Suydam  v.  Morris  Canal,  etc 381 

Siiydam  v.  Moore 649 

Suydam  V.  Receivers 544 

Suydam  v.  Williamson 635 

Swan  V.  Grav 675 

Swan  V.  North  British,  etc.,  Co...    103,  6V0 

Swan  V.  Williams 569,  571 

Swansea  Dock  (.'o.  v.  Levien 142 

Swartwoiit  V.  Mich.,  etc.,  R.  Co 35 

Swil't  V.  Winterbothara 441 

Switzerland  lik.  v  Turkey  Bk 658 

Sweeney  V.  Old  Col.  R.  Co 788,  789 

Sweetzer  V.  Mead 383 

Sword  V.  Cameron 731 

S.  Y.  R.  Co.  V.  Great  N.  R.  Co 264 

Sj'ke'sCase 341 

Symonds  V.  Carter ..    476 

Taber  V.  Cincinnati,  etc.,  R   Co 387 

Tabor  v.  Mo.  Vail.  H.  Co 789 

Taft  V.  Hartford,  etc.,  R.  Co 178 

Tuft  V.  Pittsford  302,  355 

THK£;artv.  West  Maryland  R.  Co.. .  46,   180 
Tailors  of  Ipswich  V.  Sherring.   ...  414,653 

Taintor  v.  Pendergrast 283 

Talbot  V.Dent      711 

Talbot  V.  Hudson 570,  577 

Talladega  Ins.  Co.  v.  Landers..  29,  33,    68 

Talladegalns.  Co.  v.  McCuIlough 502 

Tallmaa  v.  Svracuse,  etc.,  R.  Co 793 

Talmadge  V.  tishkill  Iron  Co 243 

Taliiiau-ev.  Pell 542 

Tarbell  V.  Page 113 

Tar  Kiv.  Nav.  Co.  V.  Neal 140,  504 

Tarver  v.  Comrs.  Court 677 

Tattan  V.  G.  Western  R.  Co 451,  458 

Taunton  Turnpike  Co.  v.  Whiting 143 

Taylor  V.  Ashton  437 

Taylor  V.  Boston  W.  P.  Co 716,  793 

Taylor  v.  Burlington  C.  R.  R.  &  M.  Co.  646 

Taylor  V.  Carondelet 423 

Taylorv.  Chichester,  etc.,  R.  Co 3.59 

Taylor  V.  Fletcher 122 

Tavlor  v.  Franklin  Ins.  Co 657 

Taylor  V.  Grand  Trunk  R.  Co 781 

Taylorv.  Griswold  ...30,  107,  313,  413,  421 

Taylor  V.  .TenUins  531 

Taylor  V.  Miami  Export.  Co 217 

Taylor  V.  Midland  Uy.  Co 105 

Taylor  V.  Newberne 30,  37,  712 

Taylor  V.  Porter 449,561,  577 

Taylor  V.  Ry.  Co 474 

Taylorv.  Robinson 239,  293 


PAGE. 

Taylorv.  Shelton 300 

Teaton  V.  Lynn 505 

Teller  v.  Northern  R.  Co 480 

Ten  Eyck  v.  Del.,  etc..  Canal  Co..0,  41,  566 

Term.  Bk.  V.  Dibrell    79 

Tenney  v.  East.  Warren  Lumber  Co.   .  266 

405,  411 
Terro  Haute  Gas  Co    v.  Teel. . .  .4.58,  716,  796 

Terre  Haute,  etc.,  R.  Co.  v.  Karp 141 

Terre  llauto,  etc. ,  R  Co.  v.  McKinlcy.  781 
Terre  Haute,  etc.,  R.  Co.  v.  Vaii.ntta  ..  763 

Terrett  V.  Taylor 20,649,  654 

Terrilv.  Flower 293 

Thatcher  V.  Bank 26,  27.5,  434,  450,  7!7 

Thayer  v.  Boston 434,  716 

Thayer  V.  Daniels 92 

Thiiyerv.  Middlesex  Ins.  Co  ..  37,  308.  410 

Thigpi-n  V.  Miss.,  etc.,  R.  Co 443 

Thomas  V.  Armstrong 538 

Thomas  V.  Dickenson SiiO 

Thomas  v.  Richmond 286,  302,  3'<5 

Thompson  V.  Abbott 555 

Thompson  v.  Bell 434,  4.50 

Thompson  v.  Candor 33,  a5,  2~i(i,  559 

Thompson  v,  Davenport 2'I6 

Thompson  V.  Erie,  etc.,  R.  Co 156,  179 

Thompson  v.  Grand  Gulf  R.  Co.... 598,  605 

Thompson  V.  Guion 140 

Thomitson  v.  Lambert 357 

Thompson  v.  New  Orleans  &  Carrolton 

Co 717 

Thompson  V.  N.  W.  R.  Co 4.59 

Thompson  v.  N.  Y.  R.  Co 654 

Thompson  v.  Tioga  R.  Co 285,  297 

Thompson  v.  Waters 348,  485 

Thompson  V.  Young 233,  281 

Thomson  v.  Lee  Co. . .  .80,  351,  353,  652,  713 

Thomson  V.  Pac.  11.  Co 14 

Thornburgh  v.  Newcastle,  etc.,  R.  Co.  133 

136 
Thornton  v.  Marginal  Freight  Rwy  ...    43 

Thorpe  V.  Hughes 133 

Thorpe  v.  Rutland,  etc.,  R.  Co 690.  71:2 

Thrasher  V.  Pike,  etc.,  R.  Co 98 

Thurston  V.  Hancock... 609 

Tibbets  V.  Knox  &  Lincoln  R.  Co 734 

Ticonic  Water  Power  Co.  v.  Lang 131 

Tide  Water  Canal  Co.  v.  Coster 553,  570 

Tidrickv.  Rice 294 

Tilden  v.Metcalf 483 

Tilley  v..H\idsonR.  R.  Co 480 

Tilliterv.  Phippard 734 

Tilson  V.  Warwick  Gas  Co 303 

Timms  V.  Williams 433 

Tiuu'leyv.  Providence 605 

Tinkhamv.  Borst      664,  689 

Tinsman  V.  Belvidere,  etc.,  R.  Co  —  6,    41 

Tii)petsv.  Walker 141,  181,  134,  533 

Tisdale  V.  Harris 93 

Titcomb  V.  Union  Ins.  Co 531,  533 

Titus  v.  Ginheimer .  .  638 

Titus  V.  Kyle 298 

Titus  V.  iMabee  529,  638 

Tobey  V.  County  of  Bristol 536 

Tobin  V.Portland,  etc.,  R.  Co 752,  753 

Toddv.  Austin 571 

Todhunter  V.  Walters 113 

Toledo,  etc.,  R.  Co.  v.  Opperson...741,  751 
Toledo,  etc.,  R.  (  o.  v.  Baddeley...  469,  757 
Toledo,  etc.,  R.  Co.  v.  Goddard....7S6,  788 

Toledo,  etc.,  R.  Co    v.  Riley 791 

Tombigbee,  etc.,  R.  Co.  v.  Kneeland.     487 

Tomlinson  V.  Branch 65,554 

Tomlinson  V.  Jessup     65 

Toiiica,  etc  ,  R.  Co.  v.  McNeely 131,  305 

Toomey  V.  London,  etc.,  R.  Co 753 

Topping  V.  Bickford 36,410 

Towar  V.  Hale  671 

Town  V.  Bk.  of  Riv.  Raisin ...  659 


Table  ok  Casks  Cited. 


Townv.  Cheshire,  etc.,  R.  Co 793 

Ti)«er  V.  Provideiioe,  etc.,  K.  Co 703 

Towle  V    Sleveiisoi) 20,1 

Towii.seiid  V.  Urown. 33!) 

'I'ownsend  V    N.  Y.  Cent.  R.  Co 474 

Tracv  V.  N.  Y.  C.  R.  Co 793 

Tricyv.  Tahnajre 379,  375,  381 

Tracv  V.  Yato.s 118 

Traders' r5k.  V.  Tlioraas 009 

Tra.sU  V    Ma^ruire     698 

Treadwell  v.  Salisbury  Man.  Co.  .  315,  (iOO 

Troti  V.  Warren i.'33 

Troivv.  Vt.  Cent.  R.  Co 793 

TV-v  V.  Milt.  Ulv. 690 

Troy, etc.,  R.  Co.  v.  Kerr,  145, 147,  215,  311 

387,  634 
Trov,  etc.,  R.  Co.  v.  Newton  ....  117,  119 
Trov,  etc.,  R.  Co,  v.Tibbits..  137,  133,  147 
Troy  T.  &  R.  Co.  v.  McChesney,  146,  153,  333 

374 

Trumbull  v.  Mut.  F.  lus.  Co 115 

Tru.stees  V.  Cherry      386 

Trustees,  et(!.,  v.  Flint 71,  437 

Trustees  V.  Indiana 44 

Trustees  V.  Parks 37 

Trustee.s  V.  Peaslee 35,  69,  338 

Trustees  v.  lieneau 36 

Trustees  V.  State 673 

Truiidy  v.  Farrar 410 

Tuberville  v.  Stamp 734 

Tucl<er  V.  Rex 313 

Tuckerv.  Woulsey...   ..  730 

Tucker  Manuf.  Co.  v.  Fairbanlss..  396,  398 

Turnery.  Ciav 537 

Turnery.  G.  W.  R.  Co 776 

Turner  V.  North  Beach  R.  Co    473 

Turquand  V.  INIarshall 343,  345 

Turnpike  Co.  v.  I m lay  145 

Turnpike  Co.  y.  McKean 116 

Turnpike  Co.  V.  Phillips   1.33 

Turnp.  Co.  v.  State 653 

Tuttle  y.  Walton 104 

Tyler  V.  Beacher 570,  576 

Tyrrell  y.  Bk.  London 139 

Tyrrell  y.  Washburn    _. 114 

Tyson  V.  Watts  ..   ..   537 

Underbill  V.  Trustees 354 

Underbill  y.  Newport  Lyceum 458,  717 

Union  Bk.  y.  .Jacobs 386,  39'i 

Union  Bk.  y.  Knapp .345,  509 

Union  Bk.  v.  Laird 91.  96,  104,  198,  439 

Union  Bk.  y.  McDonough 443,  450 

Union  Bk.  y.  State 104,  189,  695 

Union  Branch  R.  Co.  v.  East  Town  R. 

Co 505 

Union  Bridge  Co.  v.  Troy,  etc.,  R.  Co.,  578 

Union  Co.  y.  Bordelon 691 

Uniim  Hotel  Co.  V.  llersee     ...     ..   .      138 

Union  Improvement  Co.  v.  Comm 64 

Unionlns.  Co.  v.  Keys 338 

Union  Loclcs  &  Canals  v.  Towne..  115,  140 

143 
Union  Mining  Co.  y.  Rocky  Mt.  Nat. 

Bk 336,  843 

Union  Mut.  Ins.  Co.  y.  Ossood 504 

Union  Mut.  Ins.  Co.  y.  Wilkinson 389 

Union  Pac.  R.  Co.,  Re    253 

Union  Pac,  etc.,  R.  Co.    y.    Lincoln 

County 3t)6,  533 

Union,  etc.,R.  Co.  y.  East  Tenn.   R. 

Co 500 

Union  Springs  Co.  y.  Jenkins 337 

United  Soc.  v.  Underwood....  243,  345,  347 

U.  S.  V.  Amedy 10,  340 

U.  S.  V.  Bank  of  Columbus 377 

U.  S.  y.  Brown  304 

U.  S    y.  Columbian  Ins.  Co 99 

U.  S.  y.  County  Co 676 


U.  S.  V.  Devaux 493 

U.  S.  y.  Hart  413,  431 

U .  a.  V.  Haskins, ..     ,504 

U.  S    V.  Kirkpatrick 230 

U.  S.  V.  Keokuk 675,  685 

U.  S.  y.  New  Orleans,  etc.,  R.  Co.  388,  6,39 

U .  S .  y .  O wen     373 

U    S.  V.  Van  Zandt 330 

U    S.  V.  Vaughn 103,  187 

U.  S.  Bank  v.  Dallam 113 

U.  S.  Bank  V.  Dandridge 39,  219,  233 

370,274,  401,  403,40:,  410 

U.  S.  Bank  y.  Dunn        274,277 

U.  S.  Bank  V.  btearns 5i!6 

U.  S.  Trust  Co.  v.  Brady    13,15,371 

University  of  Md.  y.  Williams.  6.52,  654,  6.59 
Univ    of  Vermont,  etc.,  V.  Baxter.   ...  .555 

Updegrafif  y.   Evans    ...     61.5,619 

Upton  V.  Hansbrough  443,  447 

Upton  y.  Trebilcock 137 

Ulicay.  Churchill 1.58 

Utica  Bk.  V.  Hillard 509 

Utica  Bk.  y.  Magher 386 

Utica  Bk.  y.  Smalley 96,  154,  429,  504 

Utica  Bk.  y.  Smedes 69 

Utica  Ins.  Co.  V.  Bloodgood 2.57,  308 

Utica  Ins.  Co.  V.  Scott 69 

Van  Allen  v.  Vanderpool 273 

Vancey.  Erie  R.  R.  Co 452,  458 

Vance  V.  Farmers"  Bk 18 

Vandall  y.  South  San  Francisco  Dock 

Co 68,  358 

Vandenburgh  y.  Truax 463 

Vanderbilt  v.  Garrison 204 

Vander[)Ool  y.  Husson  ..  737 

Van  Doren  y    Robinson 523 

Van  Hook  y.  Somerville  Man.  Co 2.55 

Van  Hook  y.  Whitlock  114 

Van  Sandan  y.  Moore     7,    23 

Vansandsv    Middle.sex  Co.  Bk.  91.  96,  104 

Van  Schaick  y .  Hudson  R.  Co 789 

Van  Wickle  y .  Cam .  &  Amboy  R.  Co . . .  574 

V  rickv.Smith  ...  561,  577 

Varnell  v.  Thompson 96 

Vawterv.  Ohio,  etc.,  R.  Co....  133,  136,  443 

Vermont  y.  Boston,  etc.,  R.  Co 634 

Vermont  Cent.  R.  Co.  y.  Clayes. ..  117.  305 
Vermont,  etc.,  R.  Co.  y.  Vermont  C.  R. 

Co 654 

Vernon  Soc.  V.  Hills 2.56,654 

Verplanck  y.  Mercantile  Ins.  Co..  253,  653 

Vicksburgh  Co.  y.  Ouchita 508 

Vicksburgh  K.  R.  y.  McKean,  116,  118,  135 

443,  474 
Vincennes  University  V.  Indiana  ..  19,  668 

Vincent  v.  Nantucket 287,  355 

Virginia  City  v.  Mining  Co 13 

Virginia,  etc.,  S.  Nav.  Co.  v.  U.  S 26 

Vogle  V   New  Granada  Canal,  etc.,  Co 

of  N.  Y 486 

Von  Hoffman  y.  Quincy ..  670,  714 

Von  Schmidt y.  Huntington 93,  660 

Vosey.  Grant 206,  244,  246,  520,  538 

Wade  v.  American  Colonization  Soc.   .  371 

Wade  V.  Leroy 468 

Wadleigh  v.  Gilman    414 

Wadsworth  y.  Manning 526 

Wait  y.  Ferguson 114 

Waitev.  Mining  Co 366,  374,  378 

Wakeman  V.  Dalley 341 

Waldo  v.  Chic,  etc,  R.  Co    1.05,  413 

Wales  y.  Stetson 44,  649 

VValkery.  Bk.  N.  Y 285,300 

Walker  y.  Cincinnati 713 

Walker  y.  Devereaux 118,  130,  3:JI,  515 

Walker  y.  Fleming  256 

Walker  v.  Kentucky  Bk 303,  403 


Table  of  Cases  Cited. 


li 


PAGE. 

Walker  v.  London  &  Blackiiall  Ry.  Co.  683 
Walker  v.  Mobile,  etc  ,  K.  Co.,  134,  13(5,  ay3 

Walker  V.  Sherman 640 

WalKer  V.  South-east.  Ky.  Co Ti'-i 

Walker  V.  Taylor 175 

Walker  V.  Warren 471 

Walkley  v   M  u-oatine 675 

Wallace  V.  Mayor 474 

AValla<-e  V.  San  Jose  30:i 

WalliniTford  Manf.  Co.  v.  Fox  305 

Walsh  V.  Sexton    ...176 

AValter  V.  Belding 676 

Walthani  Bk    v.  Walthara 184,  18!) 

Walworth  v.  Brackett 35 

AValvvorth  Co.  Bk.  v.  Farmers'  L.  &  T. 

Co ^39 

Wanstall  v.  Pooley  793 

Ward  V.  Arredondo 495 

Ward  V.  Griswoldville  M.  Co 147,  538 

Ward  V.  Sea  Ins.  Co     653,  657 

Ward  V   Soc.  of  Attorneys 536,  63S 

Warden  v.  Eichbaiim 39 1 

Warden,  etc.,  V.  Hart 20 

Ware  V.  Barataria  Canal  Co 443,  450 

AVare  V.  Grand,  etc.,  R.  Co  -535 

Ware  v.  Regents  Canal  Co 781 

Waring  V.  Catawba 303 

Warner  V.  Daniels 34 

Warner  V.  Mower.       .313,  316,  388,  393,  417 

Warner  V.  N    Y.  C.  R.  Co 786,  783,  793 

AVarner  Academy  V.  Starrett 483 

Warren  V.  Lynch     39,' 

Warren  v.  O-ean  Ins  Co 233,  274,  410 

Warren  Bk    v.  Snfifolk  Bk 346 

Warren  Man.  Co    v,  Etna  Ins.  Co 488 

Washington  Bk.  V.  Lewis 279 

Washington,  etc.,  Soc.  V   Bacher 86,    88 

Washington  College  V.  Dnke 505 

AVashington  Co   Bk.  v.  Lee 37 

Washington  F.  Ins    Co.  v.  Davidson..  289 

Wash.  Univ.  v.  Rouse 699 

Wash.  &  B  T.  R.  v.  Maryland 6.53 

Wash.,  etc  ,  R.  V.  State 650 

Waterbury  V.  Clark ...484 

\Vaterl)nry  V.  Express  Co B'^ 

Waterbury  v.  ^Merchants''  Union  Ex.Bk.  .535 
Warerford,  etc..  Turn.  Co.  v.  People.  796 

AVat"rhouse  V.  Jamieson     1:33 

Waterman  v.  Conn.  &  Pass.  R.  R.  Co...  783 

Waterman  V.  Troy,  etc.,  R.  Co 158 

Waters  V.  Leech 414 

Waters  V.  Howard 536 

Watervliet  Bk.  V.  White 285 

Water  W.  Co.  v.  Burkhart 570 

Watkins  V.  Cheek 173 

Watkinsv    E.iraes 180 

Watkinsv.  G.  Northern  Ry 607 

Watkins  V.  Ilolman 507 

Waikins  V.Walker  Co 564 

Watson  V.  Bennett 395,  458 

Watson  V.  Harlem  Nav.  Co .534 

Watson  V.  Pittsburgh,  etc.,  R.  Co 605 

Wausaw  Broom  Co.  v.  Plumer 484 

Way  man  v.  Southard 685 

AVeaverv.  Barden 161,  189 

AVebb  v    Browning 336 

AVebb  V.  Graniteville  Manuf .  Co 194 

AVebb  v.  Manchester,  etc.,  R.  Co 590 

AVebb  v.  Moler 654 

AVebb  v.  Kidgelv 100,331 

Webb  V.  Rome,  W.,  etc..  R.  Co.. 783 

AVeher  v .  Lee  County 685 

AVebsrerv.  Upton 191 

AVeckler  v.  First  Nat.  Bk 68,  344,  3-58 

Weed  V.  Chase 446 

Weed  V.  Panama  R  Co. 719,  763,  764,773,  776 

795 

AVeeden  V.  Town  Council .  671 

AVeeks  V.  Propert 241,303 


PAGE. 

Weir  V.  St    Paul  R.  Co 571 

Weisenberg  V.  Appletiin 469 

AVelch  V.  Durand 474 

Welch  V.  Hoover  3:36 

Welch  V.  St».  Genevieve 669 

WellandR.  Co.  V.  Blake 143 

AA'ells  V.  Canton  Co 637,  6+5 

Wells  V.  Gates    10,  13,  2.56 

Wells  V.  Somerset,  etc.,  R.  Co.   564 

Wells  V.  Stackhouse        .         675 

Wertv    Crawlordsville,  etc  ,R.  Co.133,  1.35 

West  V.  Blake 569 

West  V.  Forrest 467 

West  V.  Madison  Co   Ag.  Board 68,358 

West  V.  N.  J.,  etc.,  R.  Co 787 

West  Branch  Bk.  v.  Armstrong .534 

Westbrook  V.  North 601 

Western  Bk.  Scot.  v.  Addie..  440,  447,  4.58 
Western  Bk.  Scotland  v    Bairds  ..  243,  245 

AA'estern,  etc.,  R.  Co.  v.  Avery 144 

Western,  etc.,  R.  Co.  v.  Babcock .536 

Western,  etc.,  R.  Co.  v  Johnston. .538,  533 
Western,  etc.,  R.  Co.  v.  Nolan..    513,  533 

Western  Sav.  Bk    v.  Phila 670 

Western,  etc.,  Soc.  v.  Phila 283,  337 

AA''estern  Union  Tel.  Co.  v.  Mayer 347 

A\"est  India  Docks,  etc.,  v.  Gattke  .   .      607 

Westoby  V.    Day 93 

WestoQ  V.  Bear  River,  etc.,  Mining  Co.  200 

201 

AVeston  V.  Charleston 699,  708 

Weston  V.  Hunt   5 

Weston  Bk.  v    Gilstrap..   233 

West  Phila.  Canal  Co.  v.  Tones.     .  171,   i;3 
West  Riv.  Bridge  V.  Dix..  553,  563,  566,  569 

690 
West  Vir.  Transp.  Co.  v.  Volcanic  Oil, 

etc.,  Co     574 

AVest  Wisconsin  R.  Co.  v.  Sup.,  etc 63 

AVetumpka,  etc.,  R.  Co.  v.  Bingham...     33 

AVeyant  V.  N.  Y    &  Harlem  R.  Co 733 

AVeyinire  v.  Wolf 791 

Weymouth  V.  Wash.  R.  Co 347 

Whatman  V.  Pearson 733 

AVheatonv.  N.  Beach  R.  Co 469 

AVheeler,  In  re 2;3 

Wheeler  V    Nevins 336 

Wheeless  V.  Sec.  Nat.  Bk 4.53 

AVheelock  v.  '  oston,  etc.,  R.  Co 788 

Wheelock  v.  M.mlton 189,  484,  6o4 

Wheelock  V.  Young 564 

Whelpleyv    Erie  R    Co 525 

AA'hitaker  v.  Hertford,  etc. ,  R.  Co 353 

Whitcomb  V.  Vt..  etc.,  R.  Co 607 

White  V.  Campbell 667 

White  V    Derby  Fishing  Co 239,  365 

Whitw.  Franklin  Bk 279,  375 

Whitev.  Ilaight 543 

AVhite  V.  Lester 68 

White  V.  Madison 299 

Whitev.  Mayor,  etc 414 

White  V.  New  Orleans 338 

White  V.  Schuyler 101 

White  v.  Skinner 300 

White  V.  Syracuse,  etc.,  R.  Co 63,  713 

AVhite  V. 'I  allman 417 

White  y.  A^ermont,  etc.,  R.  Co 351 

AVhite  V.  Westport  Cotton  Man.  Co....  239 

4a3 

White's  Bk.  v.  Toledo  Ins.  Co 66,  356 

AVhiiehead  V.  Tuckett 278 

Whitenian  V.  R.  Co 433,  458,  717 

White  Mountain  R.  Co.  v.  Cooke 131 

AVhite  Mountain  R.  Co.  v.  Eastman 133 

147,  218 

Whitesell  v.  Northampton  Co 695 

White  Riv.  Turnp.  Co  v.  Vermont  Cent. 

R.  Co 5.53,566,569 

Whitewater  &C.  Co.  v.  Valette 388 


lii 


Table  of  Cases  Cited. 


PAGE. 

Whitewell  Hnnd  &Co.  v.  Warner. .418,  430 
AVhitfield  v.  S.  E.  R.  Co... 434,  453,  455,  458 

71G,  7!t(i 

Wliitford  V.  Panama  R.  Co 4T9 

Wliitiiitfv.  Shehoyefan  R.  Co 713 

Wliitinan  Mining  Co.  v.  Baker.. 66,  35fi,  3T3 

Whitney  Anns  Co.  v.  Barlow 357,  391 

Whittakerv.  Man.  &  S.  K.  Co 758 

Wliittington  V.  Farmers' Bk 50fi 

Whitvvell  V.  AVarner 217,831,  339,  255 

Wi(;klo  V.  Rv    Co 504 

Wicklerv.  First  Nat- Bk 335 

Wierv,   Bush COO 

Witrgins  v.  Preerville  Baptist  Church..  313 
Wight  V.  Shelby,  etc.,  R.  Co..  ..107,11(5,  lis 

134,  443 

Wilbur  V    Glen  Iron  Works 144 

Wilcox,  Ex  parte 335,  413 

AVllcox  V.  Rome,  etc.,  R.  Co 7.SS 

Wild  V.  Bk.  Passamaquoddy..  227,  233,  273 

28i),  431 

Wiidman  V.  Wildman 1H4 

Wild.sv.  N.  Y.  C,  etc.,R.  Co.  ...  788,  790 
Willamette  Freighting  Co.  v.  Stamus. .  142 

375 

Willard  V.  Nevvburyport 69,  272 

Willcocks,  Ex  parte 96,319 

William's  case 545 

Williams  V.  Ausrusta    413 

Williams  V.   Babcock.   543 

Williams  v.  Bk.  of  111 613,  671 

AVilliams  V.  Bk.  of  Michigan 12 

Williams  V.  Bpaumont 483 

Williams  V.  Cheney 30,  278 

Williams  v.  Chester  K.  Co 281 

Williams  V.  Christian  Female  College..  310 

Williams  v.  Colleee,  etc.,  R.  Co 177 

AVilliams  V.  Creswell 348 

Williams  v.  Detroit 691 

Williams  V.  Great  W.  R.  Co. 421 

Williams  V.  Gregg 241 

Williams  V.  Luneiiburgh 318 

Williams  V.  Mechanics'  Bk 191 

Williams  V.  Planters' Ins.  Co 413 

AVilliams  v.  St.  George's  Harbor  Co 233 

AVilliams  V.  School  Dist 571 

Williams  V.  Walbridge 277 

Williamsburgh  Ins.  Co.   v.  Frothing- 

ham 30 

Williamson  v.  New  Albany,  etc.,  R.  Co.  388 

631 
Williamson  v.  N.  J.,  etc.,  R.  Co.... 388,  522 

Williamson  v.  Smoot 487,  532 

Williamson  V.  Wadsworth 114 

Willing  V.  Morris  Canal  Co 631 

Williiiks  V.  HoUingsworth 293 

AViliisv.  LongI   R.  Co 701 

AVillisv.  Murray 312 

AVilliston  v.  M  .  S.  &  N.  J.  R.  Co 178 

Wilmington,  etc.,  R  Co.  v.  Reid  ....  700 
AVilmlngton,  etc.,  R  Co.  v.  Saunders..  37 
AVilmington,  etc.,  R.  Co.  v.  Stauffer  ..  605 

AVilmot  V.  Mayor,  etc.,  Coventry 267 

AVilson  V.  Blackbird  Creek  Marsh  Co..  570 

AVilsoii  V.  Cent.  Br.  Co 660 

AVilson  V.  Marsh  Co 569 

Wilson  V.  Meiers    214,299 

Wilson  V.  Beverly .  795 

Wilson  V.  Poulter 449 

AVilson  V.  Prop,  of  Cent.  Bridge  ...  98,  600 

AVilson  V.  Tesson 651 

AVilson  V.  Tnmman 293 

AVilson  V.  AAMIliams 277 

AVilsoti  V.  Wills  Valley  R..  Co 152 

Wiltbank's  Appeal 1.54,  157,  IGO 

Winch    V.    Birkenhead    Lancashire  & 

Cheshire  June.  R.  R.  Co 634 

Winchester  T.  Co.  v  Vlmont..215,  387,  638 
Winfield  v.  Hudson 251 


Winn  V.  Macon 713 

Wtnotia,  etc.,  R.  Co.  v.  Waldron 6(t5 

Winsmore  V.  Greenbank 483 

Winsor.  Ex  parte ...  131,  149,  248,  423 

Winter  V.  Baker 205,243 

AVinier  V.  ISelmont  Mining  Co 91 

\Vii:ierv.  Muscogee  R.  Co 66,  143,  350 

Winterbottom  V.  Wright..     4;J5 

AVinters  v    Hannibal,  etc  ,  R.  Co 408 

W'iswall  V.  Greenville,  etc.,  Plankroad.  356 

Witherhead  V    Allen 

Withers  v.  No.  Kent.  R.  Co 739 

Withington  V.  Herring 271 

Wolcott  VA'^ddlen  Man.  Co.  v.  Upham..  .573 

AVolf  V.  Goddard ....410 

AVood  V.  Belford,  etc.,  R.  Co    215 

Wood  V.  Coosa,  etc.,  R.  Co 116 

Wood  V.  Draper.  ..  13 

\\'ood  V.  Dummer..206,  244,515,  520,  5138,  064 

Woodv.  McCann 239,  292,  307 

AVood  V.  Pearce 521 

Wood  V.Tate 401 

Wood  V.  Turnp.  Co ....  .528 

Wood  Hydraulic,  etc.,  Co.  v.  King.  26,  328 

346.  350 

Woodbury  v.  Larned    294 

AA'oodhouse  v.  Commonvrealth  Ins.  Co.  140 
Woodman  v.  York,  etc.,  R.  Co...     400,  405 

Woodruff  A.  Attor  -Gen 28 

AVoodrutf  V.  Trapnail 670 

Woodstock  V.  Gallup 578,083 

Woods  V.  People's  Nat.  Bk 390 

Wookeyv.  Hole 353 

Wooleyv.  Idle     417 

Woolsey  V.  D'dge     .  ..    696 

Worcester  v.  N.  &  W.  R.  K.  Co 43 

Worcester  Medical  Inst.  v.  Harding...     36 

Worcester,  etc  ,  R.  Co.  v.  Hinds 119 

AVorcester  T.  Co    v.  Willard 141,  270 

Wormley  V.  Wormley 495 

AVorrell  V.  Judson 114 

Worrell  v.  Munn 374 

Worsterv    Fortv-second  St.  R.  Co    ...  782 

Worth,  Ex  parte 437 

AVreford  v.  People 416 

Wright  V.Boyd 285 

AVrightv.  Bunday S31,  350 

Wriirlitv.  Carter      339,356 

Wri^rht  V.  OrovilleM    Co 514 

Wright  v.  Shelby  R.  R.  Co... 37 

AVyman  V.  Hallwell  Bk 226,419 

Yarborough  v.  Bank  of  England..  401,  433 

454,  458 

Yarmouth  v,  N.Yarmouth 27,  41,  049 

Yates  V.  Squires  .        795 

A'eatman  V.  Crandall . 691 

Veaton  v.  Bk.  Old  Dominion 62,     64 

Vellow  Jacket  M.  Co.  v.  Stevenson,  238,  323 

York,  etc.,  R.  Co.,  In  re 388 

York,  etc.,  R.  Co    v.  Hudson 253 

Vork,  etc.,  R.  Co.  V.  Pratt 153 

York,  etc.,  R.  Co.  v.  Pegina 29,  004 

A^ork,  etc.,  R.  Co.  v.  Ritchie  .  142,  148,  153 

York,  etc.,  R.  Co.  v.  \Vinan3 315,  387' 

A'oung  V.  Bk.  Alexandria 507 

Young  V.  Daniels .526 

Young  V.  Harrison 42,  566,  649,  654,  671 

Young  v.  N.  Y.,  etc.,  Steairi  S.  Co    ....   114 
Youngman  v.  Alexandria  R.  Co 528 

Zabriskie  v.  Cleveland,  etc  ,  R.  Co.    30,  203 

235,  383,  375,  381,  516 

Zabriskie  V.  Hackensack,  etc.,  R    Co..  43 

63,  143,  233,  516,  5r,3,  660 

Zemp  V.  Wilmington,  etc.,  R.  Co.     ...  TOl 

Ziniiner  V.  State  .         ..                    ,5.'4 

Zion  Church  v.  St.  Peter's  Church  .   ..  504 

Z<jltman  V.  San  Francisco 3S0 


PRIVATE  CORPORATIONS. 


CHAPTEK  I. 

WHAT  ARE ORIGIN  AISTD    HISTORY   OF. 

Sec.  1.  What  are  corporations,  and  kinds  of. 

Sec.  2,  Various  kinds  of  corporations. 

Sec.  3.  Distinction  between  public  and  private  corporations. 

Sec.  4.  Quasi  corporations . 

Sec.  5.  Origin  and  early  history  of  private  corporations. 

Section    1.    What  are  corporations,  and  kinds  of.  —  A  corporation   is 

an  artificial  person,  created  hy,  and  deriving  all  its  powers  from, ; 
the  law,  and,  within  the  scope  of  the  express  or  implied  authority 
conferred  npon  it  by  the  law  creating  it,  possesses  all  the  powers 
and  functions  of  a  natural  person.  It  is  composed  of  one  or  more 
persons  constituting,  under  a  particular  name,  one  artificial  person, 
without  a  soul,  but  enjoying  the  capacity  of  a  continuous  succes- 
sion, and  of  perpetual  existence  and  identity,  unless  its  duration 
is  limited  by  the  law  creating  it,  or  its  powers  are  taken  aw'ay  by 
statute  or  the  judgment' of  a  competent  tribunal,  upon  proper  pro- 
ceedings to  that  end. 

Like  a  natural  person  it  may,  unless  restrained  by  law,  in  its 
corporate  name,  purchase,  take,  hold  and  convey  real  or  personal 
property,  make  contracts,  employ  agents,  and  prosecute  the  busi- 
ness for  the  prosecution  of  which  it  was  organized,  and  sue  or  be 
sued,  either  in  courts  of  law  or  equity.  It  may  be  said  to  be  a 
collection  of  persons,  united  by  law  into  one  hody,  and  endowed 


2  Pkivate  Corporations. 

with  the  capacity  of  a  single  person  within  the  scope  of  the  ex- 
press or  implied  powers  with  which  it  is  endowed. 

It  is  a  political  or  civil  institution,  composed  of  one  or  more 
persons,  legally  organized  with  a  particular  name,  and  constituting, 
in  law,  but  a  single  person,  and  having  an  identity,  and  a  legal 
existence  and  liability  entirely  separate  and  distinct  from  that  of 
the  members  of  which  it  is  composed.  Indeed,  the  principal  ob- 
ject and  purpose  of  private  corporations  is  to  enable  many  persons 
to  concentrate  their  capital  in  the  prosecution  of  a  particular  busi- 
ness, without  incurring  the  personal  risks  or  liabilities  incident  to 
the  prosecution  of  business  by  an  individual  in  his  own  name,  or 
of  an  afferreffation  of  individuals  under  a  firm  name ;  and  to  ac- 
complish  this  result  a  corporation  has  a  legal  identity  and  liability, 
entirely  distinct  from  and  independent  of  the  persons  or  other 
corporations  of  which  it  is  composed. 

An  American  author  of  fair  reputation  accurately  describes 
a  corporation  as  being  "a  legal  institution  devised  to  confer 
upon  individuals  of  which  it  is  composed,  powers,  privileges 
and  immunities  which  they  would  not  otherwise  possess ;  the 
most  important  of  which  are  continuous  legal  identity  and  perpet- 
ual or  indefinite  succession  under  the  corporate  name,  notwith- 
standing successive  changes,  by  death  or  otherwise,  in  the  corpo- 
rators or  members  of  the  corporation."  ' 

Mr,  Kyd  defines  a  corporation  as  being  a  collection  of  many  in- 
dividuals united  in  one  body,  under  a  special  denomination  ;  hav- 
ing perpetual  succession  under  an  artificial  form,  and  vested  by 
the  policy  of  the  law  with  a  capacity  of  acting  in  several  respects 
as  an  individual ;  particularly,  of  taking  and  granting  property, 
contracting  obligations,  and  of  suing  and  being  sued  ;  of  enjoying 
privileges  and  immunities  in  common,  and  of  exercising  a  variety 
of  political  rights  more  or  less  extensive  according  to  the  design 
of  its  institution  or  the  powers  conferred  upon  it,  either  at  the 
time  of  its  creation  or  at  any  subsequent  period  of  its  existence."  * 

•1    Dill,    on   Mun.    Corp.,    §   8;    1  organized  in  England,  under  an  act  of 

Brown's  Civ.  L.   141;  2  Kent's  Com.  parliament,    with    the    incidents  of  a 

267.  corporation,  may    in    this   country  be 

^  1  Kyd  on    Corp.  13.     In  a   recent  treated  as  such,  though  it  is  expressly 

case,  the  supreme  court  of  the  United  provided  by'  the  act,  that  such  compa- 

States  has  intimated,  that  the  earlier  nies    should    not    be    so    consiaered. 

definitions  of  a  corporation  were  not  Liverpool   Ins.   Co.  v.  Massachusetts, 

satisfactory;     and    that    a    company  10  Wall.  (U.  S.)  566. 


Origin  and  History  of.  3 

Chief-Justice  Marshall,  in  a  leading  case  upon  this  branch 
of  the  law/  says  : — 

"  A  corporation  is  an  artificial  being,  invisible,  intangible,  and 
existing  only  in  contemplation  of  law.  Being  a  mere  creature 
of  the  law,  it  possesses  only  those  properties  which  the  charter  of 
its  creation  confers  upon  it,  either  expressly,  or  as  incidental  to 
its  very  existence.  These  are  such  as  are  supposed,  best  calculated 
to  effect  the  object  for  which  it  is  created.  Among  the  most  im- 
portant are  immortality,  and,  if  the  expression  may  be  allowed, 
individuality ;  properties  by  which  a  perpetual  succession  of 
many  persons  are  considered  as  the  same,  and  may  act  as  a  single 
individual.  They  enable  a  corporation  to  manage  its  own  affairs, 
and  to  hold  property,  without  the  perplexing  intricacies  —  the 
hazardous  and  endless  necessity  of  perpetual  conveyances,  for  the 
purposes  of  transmitting  it  from  hand  to  hand.'  It  is  chiefly  for 
the  purpose  of  clothing  bodies  of  men  in  succession  with  these 
qualities  and  capacities,  that  corporations  were  invented,  and  are 
in  use.  By  these  means  a  perpetual  succession  of  individuals  is 
capable  of  acting  for  the  promotion  of  the  particular  object,  like 
one  immortal  being," 

Sec.  2.  Various  kinds  of  corporations,—  The  definitions  and  descrip- 
tions we  have  given  apply  to  cor}X)rations  generally ;  but  there 
are  various  kinds  of  corporations  created  for  different  and  specific 
purposes,  the  francliises  and  powers  of  which  are  limited  to  the 
specific  purposes  for  which  they  were  created.  Thus  they  are 
divided  into  sole  and  aggregate.  A  sole  corporation  consists  of 
a  single  individual,  as  a  member  or  representative  of  it .  Of  this 
class  in  the  institution  of  the  English  church  are  the  ecclesiastics, 
known  as  bishops,  deans,  parsons  and  vicars,  who  possess  certain 
temporal  rights  and  franchises,  and  whose  successors  continue  to 

'  Dartmouth  College  v.  Woodworth,  not  impracticable,  it  has  been  found 

4  Wheat.  (U.  S. )  636.  necessary,  when  it  is  for  the  advantage 

Blackstone   observes   that,    "  as  all  of  the  public,  to  have  any  particular 

personal  rights  die  with  the  person,  rights  kept  on  foot  and  continued,  to 

and   as    the   necessary   forms   of    in-  constitute  artificial  persons,  who  may 

vesting   a  series   of   individuals,   one  maintain  a  perpetual  succession,  and 

after  another,  with  the  same  identical  enjoy   a   kind   of   legal  immortality." 

rights,  would  be  very  inconvenient,  if  1  Bl,  Com.  467. 


4  Private  Corporations. 

enjoy  the  same  rights  as  a  sole  corporation.'  In  New  York  a 
supervisor  of  a  town  is  held  to  be  siib  modo  a  sole  corporation,' 
so  an  overseer  of  tlie  poor/  and  as  to  the  latter  class  of  officers, 
the  same  doctrine  has  been  held  in  Mississippi.* 

The  king  is  regarded  as  a  sole  corporation,  and  his  successors 
enjoy  the  same  franchises  by  virtue  of  this  sole  corporation  which 
he  constitutes."     It  is  in  this  sense  that  the  king  never  dies. 

It  is  claimed  that  sole  corporations  are  an  invention  of  tlie 
English  law,  as  they  are  unknown  as  original  institutions  to  the 
civil  law,  from  which  most  of  the  law  relating  to  corporations  is 
derived.  The  familiar  maxim  of  the  Roman  law  was  tresfaciunt 
collegium.  But  it  was  a  doctrine  of  the  civil  law  that  if  a  cor- 
poration, originally  consisting  of  three  persons,  was  reduced  to 
one,  "6'<e  univemitus  ad  unam  redit^''  it  might  still  exist  as  a  cor- 
poration, '■''  et  stat  nomen  universitatus.''^ '  Tliere  are  few  princi- 
ples of  the  general  law  of  corporations  applicable  to  sole  corpora- 
tions.'' But  we  shall  hereafter  notice  statutes  of  various  states 
providing  for  the  incorporation  of  a  single  person  for  pecuniary 
gain  under  general  laws  of  incorporation,  and  call  attention  to 
the  fact,  that  an  individual  may  become  entitled  to  the  rights 
and  franchises  of  a  corporation  aggregate,  by  purchase  of  the 
same  on  a  sale  thereof  on  execution  against  the  corporation,  or  on 

'  1  Bl.  Com.  469  ;  Bac.  Abr.,  tit.  Corp.  lished  was  not  divested  by  tlie  change 

If  it  consists  of  one  member  only,  it  is  of  government.    Tlie  Town  of  Pawlet 

denominated  a  sole  corporation;  if  of  v.  Clark,  9  Crancb  (U.  S.),  293.  In  Eng- 

more  than  one,  an  aggregate  corpora-  land  the  freehold  of  the  churchyard, 

tion.     The  members  of  an   aggregate  parsonage-house,   the  glebe   and    the 

corporation  may  not  only  consist   of  tithes  of  the  parish  were  vested  in  the 

natural  persons,  but  of  other  corpora-  parson   as   a   sole   corporation.     1  Bl. 

tions  and  of  partnerships;  and  it  does  Com.  469.     The  king,  as  well  as  par- 

not    lose    its    legal    identity   by    any  liament,  is  a   sole    corporation.     The 

change  of  its  members  during  its  legal  case  of  Sutton's  Hospital,  10  Coke,  29, 

existence.     If  a  parson  holds  his  pos-  b;  1  Shepard's  Abr.  431. 

session  singly  he  is  a  corporation  sole;  ^  Janson  v.  Ostrander,  1  Cow.  (N.  Y.) 

but  if  with  others,  he  makes  a  chapter,  670. 

and  is  a  member  of  a  corporation  ag-  *  Rouse  v.  Moore,    18  Johns.  (N.  Y.) 

gregate.      Id.;    Wats.  Comp.  Incumb.  407. 

373.      In   those   states   of  the   Union  *Govenor  v.  Gridley,    1  Miss.  328. 

where  the  religious  establishment  of  '1   Bl.   Com.   470;    Bac.  Abr.,   tit. 

the  Church  of  England    was  adopted  Corp.     The  king  is  made  a  sole    cor- 

when   they    were    colonies,    together  poration  in  order  to  prevent  an  inter- 

with  the  common  law  on  that  subject,  regnum    or    vacancy   of    the    throne, 

the  minister  of  the  parish  was  seized  1  Bl.  Com.  470. 

of  the  freehold  as  persona  ecclesim,  in  *1  Bl.  Com.  469. 

the  same  manner  as  in  England;  the  '1  Woodeson's  Lect.  471;  2  Kent's 

right  of  his  successor  being  thus  estab-  Com .  307 . 


,  Origin  and  History  of.  5 

a  sale  made  under  a  power  contained  in  a  deed  of  trust,  executed 
by  the  corporation.'  We  have  said  that  aggregate  corporations 
consist  of  two  or  more  persons,  although  the  civil  law  required  at 
least  three.  Of  the  class  denominated  aggregate  corporations  are 
the  mayor  and  commonalty  of  a  city,  the  head  and  fellows  of  a 
college,  the  dean  and  chapter  of  a  cathedral  church,  and  most  of 
the  corporations,  both  public  and  private,  in  this  country.  Another 
division  of  corporations  is  into  ecclesiastical  and  lay.  In  the 
former  the  persons  comprising  them  and  the  objects  for  which 
they  are  constituted  are  spiritual  or  religious,  and  they  embrace  all 
such  corporations  as  are  organized  under  general  statutes  of  the 
various  states,  providing  for  the  incorporation  of  religious  socie- 
ties. Again,  lay  corporations  are  divided  into  two  kinds,  elee- 
mosynary and  civil.  Eleemosynary  corporations  embrace  all  such 
as  are  constituted  for  the  perpetual  distribution  of  the  arms  and 
bounty  of  the  founder,  such  as  hospitals,  colleges,  and  academies." 
Again,  civil  corporations  are  divided  into  public  and  private. 
Public  corporations  are  such  as  are  created  for  political  purposes, 
and  embrace  all  such  as  come  under  the  denomination  of  munici- 
pal corporations,  as  counties,  cities,  towns,  and  villages.'  Private 
corporations  are  such  as  are  created  for  a  variety  of  temporal  pur- 
poses, and  for  pecuniary  gain  to  the  members  composing  it,  and 
embrace  such  as  are  created  for  banking,  insurance,  railroad,  canal, 
bridge,  turnpike,  manufacturing,  building,  and  for  other  com- 
mercial and  business  purposes,  for  the  personal  gain  and  emolu- 
ment of  its  members. 


'  It  is  sometimes  provided  by  statute  lands,  to  liold  to  him  and  his  succes- 
that  the  franchise  of  a  corporation  sors  in  the  same  office  iu  right  of  his 
may  be  levied  upon  and  sold  under  an  parish."  But  ministers  were  made 
eifecutiou,  the  purchaser  becoming  sole  corporations  by  statute  in  1785, 
vested  with  all  the  powers  of  the  cor-  chap.  51,  which  is  the  same  as  28  Geo. 
poration.  Iowa  Code  (1873),  i^  1086  ;  2,  for  the  express  purpose  of  holding 
see  also,  as  to  the  authority  of  a  single  such  parsonage  lands,  and  under  this 
individual  to  entitle  himself  to  the  ad-  statute  they  were  held  to  stand  on 
vantages  of  a  corporation  aggregate,  the  same  foundation  as  other  corpora- 
Iowa  Code  (1873),  §  1088.  See,  also,  tions  holding  lands  in  succession  at 
po.«<,  chap.  15.  In  Overseers,  etc.,  V.  common  law.  Weston  v.  Hunt,  2 
Sears,  22  Pick  (Mass.)  125,  it  was  said:  Mass.  500.  See  Gen.  Stat.  Mass.,  chap. 
"  We  are  not  aware  that  there  is  any  31;  Brown  v.  Porter,  10  Mass.  93.  a 
instance  of  a  sole  corporation  in  this  '■*  1  Bl.  Com.  471. 
commonwealth,  except  that  of  a  par-  ^g  Kenfs  Com.  375. 
son,  who  may  be  seized  of  parsonage 


6  Private  Cokpokations. 

Sec.  3.  Distinction  between  public  and  private  corporations. — As 
we  propose  to  consider  and  illustrate  the  law  applicable  to  private 
corporations  only,  it  may  be  proper  to  consider  the  distinction  as 
to  membership  between  the  two  great  and  most  common  divisions 
of  corporations,  viz.:  public  and  private  corporations.  In  public 
corporations,  membership  consists  only  in  residence  within  the 
territorial  limits  of  the  corporation,  A  citizen,  for  instance,  of  a 
county,  cit}^,  town,  village,  or  school  district,  duly  incorporated,  is 
a  member  of  such  corporation  ;  and  it  is  not  necessary,  as  with 
private  corporations,  that  the  members  or  citizens  constituting  it 
should,  in  any  manner,  accept  of  the  charter  or  statute  creating 
the  same.  On  the  other  hand,  membership  in  private  corporations 
can,  originally,  only  be  created  by  an  acceptance  of  the  provisions  of 
the  charter  tendered  to  them,  or  voluntarily  organizing  under  the 
provisions  of  the  statutes  providing  for  in  corporation,  or  com])lying 
with  the  provisions  of  the  general  statute  of  the  state  in  relation 
thereto.'  And  it  has  been  held,  that  a  corporation  is  private  as  dis- 
tinguished from  public,  unless  the  whole  interest  belongs  to  the 
government,  or  the  corporation  is  created  for  the  administration 
of  political  or  municipal  power." 

The  distinction  between  private  and  public  corporations  is  thus 
stated  by  Mr.  Dillon  :  "  Private  corporations,"  says  he,  "  are 
created  for  j^rivate  purposes,  as  distinguished  from  governmental 
purposes ;  and  they  are  not,  in  the  contemplation  of  law,  pub- 
lic, because  it  may  have  been  supposed  by  the  legislature  that  their 
establishment  would  promote,  either  directly  or  consequentially, 
the  public  interest.  They  cannot  be  compelled  to  accept  a  charter 
or  incorporating  act.  The  assent  of  the  corporation  is  necessary 
to  make  the  incorporating  statute  operative.  But  when  assented 
to,  the  legislative  act  is  irrevocable,  and  it  cannot,  without  the 
consent  of  the  corporation,  be  impaired  or  destroyed  by  any  sub- 
sequent act  of  legislation,  unless  the  right  to  do  so  was  reserved 
at  the  time.  Public  corporations  are  called  into  being  at  the  pleasure 
of  the  state,  and  while  the  state  may,  it  need  not  obtain  the  con- 
sent of  the  people  of  the  locality  to  be  affected.     The  character 

'  Overseers  of  Poor  v.  Sears,  23  Pick,  cause  it  is  of  general  public  interest. 

(Mass.)  132;  Oakes  v.  Hill,  10  id.  333.  Ten  Eyck  v.  Delaware  &  Raritan  Canal 

•'  Uiiudle  V.  Delaware  &  Raritan  Ca-  Co.,  18  N.  J.  L.  200  ;  Tinsman  v.  Bel- 

nal  Co.,  1  Wall..  Jr.  (U.  S.)  375.   But  a  videre,  etc. ,  R.  R.  Co.,  26  id,  148. 
corporation  is  not  necessarily  public  be- 


Oeigin  and  History  of.  7 

of  a  municipal  corporation  is  in  no  sense  a  contract  between  the 
state  and  the  corporation,  although,  as  we  shall  see,  private  or 
vested  rights  in  favor  of  third  persons,  if  not  in  favor  of  the  cor- 
poration, may  arise  under  it.  Public  corporations,  within  the 
meaning-  of  this  rule,  are  such  as  are  established  for  public  pur- 
poses exclusively  —  that  is,  for  purposes  connected  with  the  ad- 
ministration of  civil  or  local  government ;  and  corporations  are 
public  only  when,  in  the  language  of  Chief- Justice  Marshall, 
the  whole  interests  and  franchises  are  the  exclusive  property  and 
domain  of  the  government  itself."  ' 

Sec.  4.  Quasi  corporations. — There  is  a  class  of  joint-stock  asso- 
ciations, organized  for  private  pecuniary  purposes,  under  special 
statutes,  that  possess  some  of  the  powers  and  attributes,  or  com- 
mon-law incidents  of  corporations,  and  may  be  designated  as  quasi 
corporations.  Provision  was  made  for  these  limited  or  qualitied 
partnerships,  in  France,  as  early  as  1673,  by  an  ordinance,  la 
sooiete  en  commandite,  by  which  one  or  more  special  or  silent 
partners  might  furnish  a  certain  portion  of  capital  to  be  used  in 
the  partnership  affairs,  and  only  be  liable  to  the  extent  of  the 
funds  thus  furnished."  It  is  beheved  that  similar  statutoiw  enact- 
ments may  be  found  in  most  of  the  states  of  Europe,  as  well  as  of 
the  Union ;  and  the  members  of  such  partnerships  or  joint-stock 
associations,  in  respect  to  their  personal  liability  for  the  debts  of  the 
association,  are  placed  on  the  same  footing  as  corporators. 

The  condition  required  in  such  cases,  in  order  to  exempt  from 
unlimited  liability,  is  the  recording  in  some  public  office,  or  the 
publication  in  some  manner,  of  a  statement  or  certificate  of  the 
terms  and  conditions  of  the  copartnership,  and  of  the  extent  or 
limit  of  liability  of  the  partners.  An  English  act  of  parliament 
also  permitted  the  secretary  of  a  commercial  joint-stock  partner- 
ship to  sue  and  be  sued  as  a  representative  of  the  company,  and 
allowed  members  of  the  same  to  sue  the  company.'   This  was  con- 

'1   Dill,  on  Mun.  Corp.,  p^  39,30;  Riias.  Ch.  441.    See,  also,  3  Bell's  Com., 

poft,  chap.  3.  B.   7,  cbap.  3,  p.  627,  e<  seq.;  Story  on 

■^  French  Code,  Repertoire  ou  Juris-  Part.,  §  77  and  notes  ;  25  and  26  Vict., 

prudence  par  Merlin,  tit.  Societe,  art.  chap.  89;  "  The  Companies'  Act,  1863;" 

3,  Code  de  Com.,  b.  1,  tit.  3,  §  1.  30 and  31  Vict.,  chap.  131;  "TheCompa- 

^  See  history  of  early  English  legis-  nies'  Act,  1868,"  regulating  joint-stock 

lation  on  this  subject,  opinion  of  Lord  companies. 
EhDON   in  Van  Sandau    v.    Moore,   1 


8  Pkivate  Ooepokations. 

ferring  upon  a  partnership  an  additional  corporate  quality,  that 
otherwise  it  would  not  possess ;  and  a  recent  English  act/  among 
other  things,  provides  that  the  separate  property  of  the  members 
of  such  companies  as  shall  be  organized  under  it  shall  be  liable 
to  the  satisfaction  of  judgments  obtained  against  such  company, 
only  after  due  diligence  has  been  used  to  obtain  satisfaction  out 
of  the  property  of  the  company. 

Sec.  5.  origin  and  early  history  of  private  corporations. — The 
origin  of  private  corporations  is  hidden  in  the  obscurity  of 
the  remote  past.  They  probably  existed  in  Greece  in  the  age  of 
Solon,  the  law-giver,  as  his  laws  provided  for  the  institution  of 
private  corporations,  on  condition  of  subjection  and  obedience  to 
the  laws  of  the  state.*  They  also  existed  in  Home  at  an  early 
period  in  the  history  of  the  republic ;  authority  being  conferred 
by  the  Twelve  Tables  to  private  companies,  to  make  by-laws,  not 
inconsistent  with  the  public  law ;  which  provision,  it  has  been 
claimed,  was  copied  from  the  laws  of  Greece.  The  probability, 
that  the  Roman  idea  of  corporate  institutions  was  obtained  from 
the  Grecians,  is  perhaps  increased  by  the  fact,  that  Rome  obtamed 
much  of  her  literature,  philosophy,  and  fine  arts,  as  well  as  juris- 
prudence from  Greece.' 

The  value  and  importance  of  corporations,  in  developing  and 
keeping  on  foot  the  leading  industries  of  any  country,  is  incal- 
culable, and  the  desirability  of  such  a  concentration  of  capital  and 
union  of  business  experience  is  illustrated  by  the  very  large  num- 
ber of  such  corporations  in  existence  in  this  country,  and  the  won- 
derful results  which  have  been  wrought  thereby ;  results  which 
could  never  have  been  accomplished  except  through  the  interven- 
tion of  these  agencies,  and  the  prejudices  formerly  existing  against 
"  soulless  corporations,"  as  they  have  been  termed,  are  rapidly 
disappearing. 

»  7  and  8  Vict.,  chap.  110.  '  Table  8 ;  Plut.  Life  of  Numa. 

'Ayliffe's  Treat,  on  Civ.L.  197  ;  Dig. 
47,  22,  4  ;  2  Kent's  Com.  268. 


How    COKPOEATIONS    AEE    CkEATED. 


CHAPTER  II. 


HOW  CORPORATIONS  ARE  CREATED. 

Sec.    6.  Creation  an  act  of  sovereignty. 

Sec.    7.  Creation  by  royal  charter. 

Sec.    8.  Creation  by  act  of  parliament. 

Sec.    9.  Corporations  at  common  law  and  by  prescription- 

Sec.  10.  How  created  in  this  country. 

Sec.  11.  Power  of  congress  to  create. 

Sec.  13.  Sovereign  authority  of  legislatures. 

Sec.  13.  General  statutes  of  incorporation. 

Sec.  14.  The  national  banking  law. 

Sec.  15.  Of  the  power  to  delegate  authority  to  create. 

Sec.  16.  Of  the  power  of  territorial  legislatures  to  create. 

Sec.  17.  Corporations  by  prescription  in  this  country. 

Sec.  18.  Foreign  joint-stock  companies  may  be  corporations. 

Sec.  19.  The  corporate  name. 

Sec.  20.  The  location  of  corporations . 

Sec.  21.  Words  of  incorporation  in  royal  grants. 

Sec.  22.  Common-law  incidents  of  a  corporation. 

Sec.  23.  Acceptance  of  the  grant. 

Sec.  24.  Mode  of  acceptance. 

Sec.  25.  Same  continued. 

Sec.  26.  Acceptance  must  be  unconditional. 

Sec.  27.  Acceptance  under  general  laws. 

Sec.  28.  The  term,  "  constating  instruments.' 

Sec.  29.  Organization  of  a  corporation. 

Sec.  6.  Creation  an  act  of  sovereignty. — The  pOWer  to  confer 
corporate  franchises  and  privileges  is  exclusivelj  vested  in  the 
sovereign  authority  of  the  state  or  general  government.  It  is  an 
act  of  sovereignty.  Hence,  by  the  civil  law,  franchises  could  only 
be  conferred  by  a  decree  of  the  senate,  or  the  imperial  constitu- 
tions ;'  notwithstanding  the  observation  of  Blackstone,  that  under 
the  civil  law,  they  "  seem  to  have  been  created  by  the  mere  act 

'  1  Brown's  Civ.  L.  143  :  Dig.,  vol.  196  ;  Domat's  C.  L.,  Prel.  B,  tit.  11, §  2, 
47,  tit.  22  ;  Wood's  C.  L.  134  ;  Ayliffe,     15. 

2 


10  Pkivate  Corporations. 

and  voluntary  association  of  their  members." '  "  But,"  lie  ob- 
serves, "  with  us,  in  Enghmil,  the  king's  consent  is  absohitely 
necessary  to  the  erection  of  any  corporation,  either  impliedly  or 
expressly  given." " 

A  fundamental  rule,  invariable  iu  its  application,  is  that  no 
corporation  can  exist,  except  under  and  by  the  authority  of  the 
sovereign  power,'  and  companies  or  societies  which  are  not  sanc- 
tioned expressly  by  the  sovereign  power,  pursuant  to  some  gen- 
eral or  special  law,  are  nothing  more  than  ordinary  partnerships,* 
and  the  ground  upon  which  it  is  held  that  incorporation  by  pre- 
scri])tion  may  exist  is  upon  the  presumption  that  a  grant  formerly 
existed,  and  that  all  due  formalities  as  to  organization  under  it 
have  been  observed.* 

No  special  form  of  words  are  necessary  to  create  a  corporation, 
and  a  mere  grant  of  the  power  to  perform,  corporate  acts,  of  itself, 
implies  a  grant  of  corporate  powers,*  and  if  no  act  is  required  to 
be  done  to  bring  the  corporation  into  being,  the  franchise  attaches 
at  once;  but  if  some  future  act  is  required  to  be  done  to  bring  the 
corporation  into  existence,  the  franchise  remains  in  abeyance  until 
such  act  is  done,  and  then  attaches  immediately,  and  the  corpora- 
tion is  endowed  with  a  legal  existence.''  A  mere  grant  of  lands 
by  the  state  to  individuals,  to  be  possessed  and  enjoyed  by  them 
in  a  corporate  character,  has  been  held  in  itself  to  confer  upon 
such  individuals  capacity  to  take  and  hold  in  a  corporate  character.* 

Sec.  7.  Creation  by  royal  charter. —  According  to  the  ancient 
common  law  of  England,  the  king,  by  virtue  of  his  prerogative, 
was  the  only  creator  of  corporations ;  and  this  right  was  said  to 

'1   Bl.  Com.  472.     "It  does  not  ap-  ^  vVells   v.  Gatea,  18   Barb.  (N.  Y.) 

pear    that   the   prince's   consent    was  554. 

necessary  to  be  actually  given  to  the  *  All    Saints'   Church   v.    Lovett,     1 

foundation  of  them,  but  merely  that  Hall   (N.  Y.),   191  ;    United    States   v. 

the  original  founders  of  these  friendly  Amedy,  11  Wheat.  (U.  S.)  392. 

societies,    for   they    were   little    more  *  Com.  v.  West  Chester  R.  R.  Co.,  3 

than  such,  should  not   establish    any  Grant's  Cas.  (Penn.)  200. 

meetings  in  opposition  to  the  laws  of  '  Dartmouth  College  v.  Woodward,    . 

the  state."  Id.  4  Wheat.  (U.  S.)  518. 

'  Id.  ®  North  Hempstead  v.  Hempstead,  2 

3  Ernst   V.  Bartle,  1   Johns.  (N.   Y.)  Wend.  (N.  Y.)  119, 
Cas.  319  ;  Medical  Inst.  v.  Patterson, 
1  Den.  (N.  Y.)  61. 


How    COKPORATIONS    AKE    CrEATED. 


11 


be  "  tlie  flower  of  the  prerogative."  '  But  more  recently  it  was 
held  that  the  king's  charter  could,  under  the  English  constitution, 
confer  only  ordinary  corporate  powers,  and  that  extraordinary 
authority  could  only  be  granted  by  the  transcendent  power  of 
parliament.'*  And  if  the  king  grants  charters  and  attemj^ts  to 
confer  powers  therein,  which  infringe  upon  constitutional  rights, 
they  are  void." 

Sec.  8.  Creation  by  act  of  parliament. —  Notwithstanding  the 
claims  made,  that  the  granting  of  charters  to  corporate  bodies 
belongs  to  the  king's  prerogatives,  it  seems  that  parliament,  as  the 
representative  also  of  sovereignty,  may,  by  act,  create  corpora- 
tions, to  which  the  royal  assent  is,  however,  presumed  to  be 
given.*  But  acts  of  parliament,  relating  to  corporate  franchises, 
were  formerly  confined  to  confirmation  of  those  charters  pre- 
viously granted  by  the  king,  or  they  conferred  on  the  king  power 
to  create  them  infuturo.  In  the  latter  case,  "  however,  the  im- 
mediate creative  act  was  usually  performed  by  the  king  alone,  in 
virtue  of  his  royal  prerogative."  * 


1 1  Bl.  Com.  472;  4  Co.  107  b.;  10  id. 
33  b.;  2  Bac.  Abr.  (Am.  ed.)  438,  tit. 
Corp. ;  2  Kyd  on  Corp.  42 ;  Miller's 
Eng  Gov.  149  ;  Aug.  &  Am.  on  Corp., 
§  67  ;  1  Wile,  on  Corp.  25  ;  1  Dill,  on 
Corp.  53. 

« 1  BL  Com.  474  ;  1  Dill,  on  Corp., 
§  15 

3  Id. 

4  I  Bl.  Com.  473  ;  10  Co.  Rep.  29  ; 
1  Roll.  Abr.  512. 

*  1  Bl.  Com.  473.  See,  also,  respect- 
ing the  authority  of  the  crown  to  grant 
charters  to  incorporate  towns,  General 
Municipal  Corp.  Act  of  England,  1835; 
also,  Rutter  v.  Chapman,  8  M.  &  W.  1; 
Reg.  V.  Boucher.  3  Q.  B.  654  ;  Dill,  on 
Corp.,§  16. 

General  statutes  have  been  enacted 
in  England,  under  which  most  of  the 
corporations  are  now  instituted,  auaong 
which  are  the  following: 

The  Companies  Act,  1862,  25  and  26 
Vict.,  chap.  89  ;  and  The  Companies 
Act,  1867,30  and  31  Vict.,  chap.  131, 
which  relate  to  and  regulate  all  joint- 
stock  companies  not  created  by  special 
acts,  or  charters  ;  The  Industrial  and 
Provident  Societies  Act,  1862,  25  and 


26  Vict.,  chap.  87,  which  was  amended 
by  30  and  31  Vict.,  chap.  117,  and  34 
and  35  Vict.,  chap.  80,  which  relate  to 
friendly  societies,  and  other  similar 
associations ;  The  Life  Assurance  So- 
cieties Act,  1870,  33  and  34  Vict.,  chap. 
61,  as  amended  by  34  and  35  Vict., 
chap.  58, and  35  and  36  Vict.,  chap.  41 ; 
The  Companies  Clauses  Consolidation 
Act,  8  and  9  Vict.,  chap.  16;  and  the 
Railways  Clauses  Consolidation  Act, 
chap.  20. 

"  The  above  statutes  and  especially 
the  first  two,  The  Companies  Acts  of 
1862  and  1867,"  observes  Mr.  Brice, 
"  enable  persons  by  a  very  simple  and 
speedy  process  to  unite  themselves 
into,  and  thereby  create  a  corporation 
for  almost  any  and  every  purpose  of 
life,  commercial  or  otherwise.  The 
constitution  of  such  corporation,  its 
objects  and  purposes,  its  rights  and 
powers,  and  those  of  its  various  mem- 
bers, will  be  determined  by  the  instru- 
ments drawn  up  —  the  memorandum 
and  articles  of  association — at  tlie 
time  of  registration.  The  acts  them- 
selves contain  but  little  upon  these 
heads.     The  chief  specific   provisions 


12 


Private  Corporations. 


Seo.  9.  Corporations  at  common  law  and  by  prescription. —  In  Eng- 
land corporations  exist,  also  bj  what  is  termed  bj  common  law, 
and  by  prescription.  But  in  such  cases  a  grant  by  charter  of  the 
king  or  act  of  parliament  must  be  presumed.  Tliose  recognized 
at  common  law  are  such  as  have  continued  from  time  immemorial 
to  exercise  corporate  privileges,  but  whose  grant  or  charter  cannot 
be  found.  And  the  same  may  Ije  said  in  reference  to  corpora- 
tions by  prescription. 

Each  rests  upon  a  supposed  grant,  and  it  is  difficult  to  draw  any 
distinction  in  this  respect  between  them,  though  they  have  been 
frequently  thus  designated  and  distinguished.' 

In  this  country  also,  presumptions  are  sometimes  made  in  favor 
of  the  incorporation  of  associations,  without  actual  proof  of  the 
same.  And  proof  of  the  existence  of  a  corporation  by  reputation 
has  been  allowed  from  user,  where  it  had  continued  to  act  as  such 
for  several  years,  but  the  original  act  of  'incorporation  could  not 


found  in  them  relate  to  the  formalities 
and  other  circumstances  connected 
with  the  foundation  and  the  dissolu- 
tion, voluntary  or  forced,  of  the  cor- 
poration, and  with  the  assembling 
periodically  of  the  members.  The 
enactments  that  concern  the  working 
and  control  of  the  corporation,  and 
the  rights  and  liabilities  of  the  share- 
holders and  other  matters  belonging 
to  the  internal  management  of  the 
association,  are  but  mere  generalia,  it 
beinsr  left  to  the  individuals  from  time 


to  time  composing  the  association,  to 
fix  and  prescribe  these  in  a  more  par- 
ticular manner,  and  in  accordance  with 
the  exigencies  and  requirements  of 
the  undertaking  in  which  they  propose 
to  engage.  These  statutes  give  to  the 
bodies  coming  within  their  purview 
no  arbitrary  or  compulsory  power  of 
dealing  with  the  rights,  pecuniary  or 
proprietary,  of  others  than  their  own 
members."  Green's  Brice's  Ultra 
Vires,  34.  See,  also,  Buckley,  pp.  15, 
345. 


I  \  Bl.  Com.  473 ;  Dill,  on  Corp.,  §  15; 
1  Kyd  on  Corp.  41,  43 ;  3  Kent's  Com. 
377;  Town  of  Pawlet  v.  Clark,  9 
Cranch  (U.  S.),  393;  3  Inst.  330; 
Bract.  1,  chap.  34,  f.  55;  10  Co.  33; 
Ayliffe,  310.  There  are  a  class  of  as- 
sociations, not  incorporated,  partaking, 
however,  of  the  nature  of  both  cor- 
porations and  partnerships,  that  are 
in  some  respects  entitled  to  the  ad- 
vantages of  corporations,  and  which 
are  sometimes  called  quani  corpora- 
tions. Bullard  v.  Kinney,  10  Cal.  60; 
Williams  v.  Bank  of  Michigan,  7 
Wend.  (N.  Y.)  543  ;  Atkins  v.  Hunt, 
14  N.  H.  305;  Babb  v.  Reed,  5  Rawle 
(Penn.),  151  ;  Wells  v.  Gates,  18  Barb. 
(N.  Y.)554;  Cox  v.  Bodfish,  35  Me. 
303.     But  such  associations  cannot  be 


regarded  as  even  quasi  corporations, 
because  they  have  not  the  capacity 
to  sue  or  be  sued  as  an  artificial 
person.  Com.  v.  Green,  4  Whart. 
(Penn.)  531;  Niven  v.  Spickerman, 
13  Johns.  (N.  Y.)  401 ;  but  must  sue 
either  in  the  name  of  all  the  mem- 
bers, Hahicht  v.  Pembertou,  4  Sandf. 
(N.  Y.)657;  or,  where  the  members 
are  numerous,  in  the  name  of  one  or 
more  for  the  benefit  of  all.  Wood  v. 
Draper,  34  Barb.  (N.  Y.)  187;  Dennis 
V.  Kennedy,  19  id.  517  ;  so,  too,  there 
is  another  very  important  distinction 
existing  between  these  associations 
and  corporations,  which  is,  that  a 
member  of  the  association  cannot  sue 
it.  Bullard  v.  Kinney,  10  Cal.  60; 
Ewing  V.  Medlock,  5  Port,  (Ala.)  83. 


How  Corporations  are  CREATiiiD.  13 

be  found.'  And  it  has  been  lield  in  this  country,  th;it  the  exer- 
cise of  corporate  powers  for  a  long  time  (twenty  years)  without 
objection,  and  witli  the  knowledge  and  assent  of  the  legislature 
of  the  state,  furnished  conclusive  evidence  of  a  charter,  or  con- 
stitnted  a  corporation  by  prescription,  which  supposes  an  original 
grant." 

Sec.  10.  How  created  in  this  country. —  In  this  country  corporate 
rights  can  only  be  conferred  by  legislative  acts.^  According  to 
the  theory  of  our  government  the  sovereign  or  supreme  authority 
is  vested  in  congress  and  the  legislatures  of  the  various  states, 
each  having  its  proper  and  limited  sphere  of  action.  Hence  cor- 
porate franchises,  which  can  only  be  conferred  by  the  sovereign 
authority,  must  be  secured  by  either  an  act  of  congress  or  of  the 
legislature  of.  the  state  where  the  corporation  is  to  be  created.* 
So,  a  legislature  may  provide  for  the  creation  of  an  indefinite 
number  of  corporations  in  one  act,  as  well  as  a  definite  number.* 
And  there  is  no  legal  difficulty  in  the  way  of  the  creation  of  a 
single  corporation  by  the  concurrent  action  of  the  legislatures  of 
two  or  more  states,  nor  of  the  creation  of  a  corporation,  where 
one  of  the  constituents  is  a  foreign  corporation.' 

Sec.  11.  Power  of  congress  to  create.  —  The  congress  of  the 
United  States  is  sovereign  in  respect  to  those  powers  conferred 
upon  it  by  the  constitution  of  the  general  government,  and  the  legis- 
latures of  the  several  states  are  sovereign  in  respect  to  those  pow- 
ers, unless  prohibited  by  the  constitutions  of  the  respective  states, 
or  in  conflict  with  the  federal  constitution.     On  general  principles 

'  DilliDgham  v.  Snow,  5  Mass.  547.  pany,  2  Nev.  86;  Railroad  Co.  v,  Plu- 

See,  also,  Bassett  v.  Porter,  4  Cusli.  mas  Co.,  37  Cal.  354. 

(Mass.)  487:  Barnes  v.  Barnes,  G  Vt.  n  Dill,   on   Corp.,  §   17;    2   Kent's 

388;   Londonderry   v.  Andover,  28  id.  Com.  277;  United  States  Trust  Co.  v. 

4.16;   Sherwin  v.  Bugbee,  16  id.  439;  Brady,    20  Barb.   119;  Pennsylvania, 

Ryder  v.   Railroad   Co.,    13    111.  523;  etc.,  R.  Co.  v.  Canal  Com.,  21  Penn. 

Highland  Turnpike    Co.   v.   McKean,  St.  9. 

10  Johns.  (N.    Y.)  154;    Owings   v.  ^Franklin   Bridge   Co.  v.  Wood,  14 

Speed,   5  Wheat.    (U.  S.)  420;  New  Qa.  80. 

Boston  V.  Dumbarton,  15  N.  H.  201.  ^Falconer  v.   Campbell,  2    McLean 

2  Bow  V.  Allenstown,  34  N.  H.  351.  (U.  S.  C.  C),  195. 

Pee,  also,  Jameson  v.  People,   16  111.  ^uisi^op  v.  Brainerd,  28  Conn.  289. 

257  ;  People  v.  Maynard,  15  Mich.  463;  The  life  of  a  private  corporation  dates 

Railroad  Company  v.  Chenoa,  43  111.  from    the   time    it    commences   to   do 

209:  Virginia   City   v.   Mining   Com-  business.     Hanna  v.  International  Pe- 
troleum Co.,  23  Ohio  St.  622. 


14  Private  Corporations. 

it  is  evident  that  each  state  has  the  power  to  create  corporations, 
or  make  general  laws  wherebj  they  may  he  created  (unless  ex- 
pressly prohibited  from  so  doing  by  constitutional  provisions),  as 
incidental  to  their  sovereign  power  and  authority,  and  althongh 
not  particularly  enumerated  among  its  constitutional  powers. 
This  doctrine  was  settled,  after  much  discussion  and  consideration, 
by  our  courts  at  an  early  period  in  the  history  of  our  government ; 
and  those  early  decisions  have  been  followed,  not  only  by  the 
federal,  but  by  the  various  state  courts.  In  an  early  case  in  the 
sujDreme  court  of  the  United  States,  in  reference  to  the  inciden- 
tal and  implied  powers  -of  congress  to  create  corporations,  the 
court  said :  "  If  we  look  to  the  origin  of  corporations,  to  the 
manner  in  which  they  have  been  framed  in  that  government  from 
which  we  have  derived  most  of  our  legal  principles  and  ideas,  or 
the  uses  to  which  they  have  been  applied,  we  find  no  reason  to 
suppose^that  a  constitution  omitting,  and  wisely  omitting,  to  enu- 
merate all  means  for  carrying  into  execution  the  great  powers 
vested  in  government,  ought  to  have  specified  this. "  * 

Although  no  express  power  is  found  in  the  federal  constitution 
for  the  creation  of  corporations,  the  right  is  now  universally  re- 
cognized by  the  courts,  and  has  frequently  been  exercised  by 
congress,  not  only  by  special  and  general  statutes  for  the  creation 
of  national  banks  within  the  states,  but  also  for  the  creation  of 
corporations,  both  public  and  private,  in  the  several  territories  of 
the  Union." 

•   Sec.  12.    Sovereign  authority  of  state  legislatures. —  The  legislatures 

of  the  several  states  have  the  power  to  make  laws,  and  legislate 
upon  all  subjects  pertaining  to  the  public  benefit,  and  this,  in  the 
absence  of  express  provisions  on  the  subject  in  the  constitution, 
carries  with  it,  by  implication,  the  right  to  use  all  the  means  re- 
quisite to  the  accomplishment  of  the  objects  of  legislation,  con- 
sistent with  the  purposes  for  which  the  government  is  instituted, 
and  with  the  state  and  national  constitutions.     The  public  benefit 

1  McCullocli  V.  State  of  Maryland,  4  of  U.  S.,  9  id.  738  :  Tliomaon  v.  Pacific 

Wheat.  (U.  S.)  421.   See,  also.  1  Ham.  R.  Co  ,  9  Wall.  (U.  S.)  579  ;  Pacific  R. 

Works,  111.  Co.  V.  Lincoln  Co.,  1  Dill.  (U.  S.  C.  C.) 

^  See  ante,  §  1^)  ;  Dill  on  Corp  ,  §  18  ;  314.     See,  also,  hs  to  national  banks, 

McCulloch   V.    State   of   Maryland,    4  U.  S.  Rev.  Stat.  (1874).  p.  998. 
Wheat.  (U.  S.)  31G  ;    Osboru  v.  Bank 


How  Corporations  are  Created.  15 

to  be  derived  is  the  consideration  on  tlie  part  of  tlie  state  for  the 
creation  of  private  corporations.  Tlie  motive  of  the  sovereign 
creating  it  is  supposed  to  be  some  good  that  the  public  will  derive 
from  it.'  This  advantage  has  been  considered  suthcient  to  bring 
their  creation,  by  the  legislatures,  within  the  scope  of  their  gene- 
ral powers  to  legislate  for  the  public  benefit,  and  it  seems  now  to 
be  universally  recognized.'' 

Sec.    13.      General  statutes  for  incorporation. —  It    is    undoubtedly 

the  true  public  policy  to  provide  for  the  incorporation  of  corpo- 
rations, either  public  or  private,  by  general  statutes  enacted  for 
that  purpose.  Mr.  Dillon  alludes  to  this  policy  iu  reference  to 
municipal  corporations ;  and  the  advantages  of  genei*al  statutory 
enactments  in  relation  to  incorporations  for  municipal  purposes, 
would  be  equally  applicable  to  private  ones.  He  says:  "1.  It 
tends  to  prevent  favoritism  and  abuse  in  procuring  extraordinary 
grants  of  special  powers.  2.  It  secures  uniformity  of  rule  and 
construction.  3.  All  being  created  and  endowed  alike,  real  wants 
are  sooner  felt  and  provided  for,  and  real  grievances  sooner  re- 
dressed." ' 

Governed  by  this  evident  public  policy,  the  legislatures  of  most 
of  the  states  have  passed  general  statutes  for  the  incorporation  of 
private  associations  for  all  the  various  objects  and  private  pur- 
poses to  which  the  talents  and  capital  of  the  citizen  may  be 
profitably  directed.  In  fact,  the  constitutions  of  many  states 
particularly  prohibit  special  acts  of  incorporation,  or  only  permit 
incorporations  under  general  laws.*  General  statutes  on  the  sub- 
ject of  incorporations  generally  prescribe  the  manner  in  which 
private  corporations  may  be  organized ;  the  business  to  be  con- 

'  Doraat's   Civ.  L.  453;  1  Bl.  Com.  should  not  be  treated  as  a  corporation. 

467  ;  Dartmouth  College  v.  Woodward,  Liverpool  Ins.  Co.  v.  Massachusetts,  10 

4  Wheat.  (U.  S.)  637  ;  Carrie's  Adm.  Wall.  (U.  S.)  566. 

V.  Mut.   Assur.  Co.,  4  H.  &  M.   (Va.)  n  Dill,  on  Mun.  Corp.,  ij  20. 

347.  *  Const.  la.,  art.  3  (Leg.  Def.),  §  30  ; 

2  United  States  Trust  Co.  v.  Brady,  Const.  Cal.,  art.  4,  §  31 ;  Const.  N.  Y., 

20  Barb.  (N.  Y.)  119  ;  1  Dill,  on  Corp.,  1846,  art.  3,  §  17.    'if  the  constitution 

5^    17;     Black    River,  etc.,   R.    Co.   v.  prohibits    the   creation    except    under 

Barnard,  31  Barb.  (N.  Y.)  258.  general  laws,   it  is   restrictive  in  the 

An    English    joint-stock    company,  strict  sense  of  the  term  ;  and  no  pow- 

having  powers  incident  to  a  corpora-  ers  can   be  granted  by  a  special  act. 

tion,  has  been  treated  as  a  corporation  City  of  San  Francisco  v.  S[)ring  Valley 

in  this  country,  although  an  act  of  par-  Water- Works,  48  Cal .  493. 
lianient  declared  that  such  company 


16  Private  Corporations. 

ducted  by  tliem ;  the  limit  of  the  liability  of  members ;  and,  in 
general,  the  powers,  privileges  and  immunities  intended  to  be 
conferred,  and  the  liabilities  imposed,  among  which  are  usually 
the  following :  1.  To  have  perpetual  succession  ;  2.  To  sue  and 
be  sued  by  the  corporate  name;  3.  To  have  a  common  seal  which 
they  may  alter  at  pleasure ;  4.  To  render  the  interests  of  the 
stockholders  transferable  ;  5.  To  exempt  the  private  property  of 
members  from  liability  for  corporate  debts  ;  6.  To  make  contracts, 
acquire  and  transfer  property,  possessing  the  same  powers  and 
rights,  and  subject  to  the  same  liabilities  in  those  respects  as  pri- 
vate individuals ;  7.  To  establish  by-laws  and  make  all  rules  and 
regulations  deemed  expedient  for  the  management  of  their  affairs 
in  accordance  with  law. 

These  powers  and  franchises  it  will  be  noticed  are  among  the 
common-law  incidents  of  corporations.  But  the  power  of  the  leg- 
islature is  supreme  in  this  respect,  and  there  can  be  no  doubt  of 
its  right  to  extend  or  limit  the  common-law  rights  of  corporations, 
or  prohibit  them  altogether.  The  mode  of  organizing  private 
corporations  for  pecuniary  gain  under  these  general  statutory 
provisions  is,  as  we  have  observed,  provided  for,  and  directed  by 
them.  Parties  desiring  to  become  incorporated  are  usually  re- 
quired, preliminary  thereto,  to  subscribe  certain  articles  of  asso- 
ciation, containing  generally  the  following  items,  or  some  of  them, 
to-wit : 

The  name  of  the  corporation,  and  the  principal  place  of  trans- 
acting businese ;  the  general  nature  of  the  business  to  be  trans- 
acted ;  the  amount  of  the  capital  stock  authorized  and  the  times 
and  conditions  of  payment ;  the  time  of  the  commencement  and 
termination  of  the  corporation  ;  by  what  officers  or  persons  its 
affairs  are  to  be  conducted,  and  the  times  at  which  they  will  be 
elected ;  and  the  highest  amount  of  indebtedness  to  which  it  is  at 
any  time  to  subject  itself.  Other  things  may  be  required,  but 
these  items  will  perhaps  cover  the  general  requirements  of  such 
articles  by  the  statutes.  These  articles  are  also  usually  required 
to  be  recorded  in  some  public  office,  and  some  notice  of  the  same, 
in  some  manner,  publicly  given.  And  they  not  only  frequently 
provide  for  the  punishment  of  the  corporators  guilty  of  fraud  in 


HoAV  Corporations  are  Created. 


17 


tlie  organization  and  management  of  the  same,  but  subject  them 
to  personal  liability  therefor/ 

Sec.  14.  The  national  banking  law.—  The  act  of  congress,  provid- 
ing for  the  association  and  incorporation  of  persons  for  the  carry- 
ing oil  of  the  business  of  banking,  provides  that  they  shall  con- 
sist of  not  less  than  five  persons,  who  are  required,  as  a  preliminary 
step  to  incorporation,  to  sign  articles  of  association,  which  must 
specify  in  general  terms  the  object  for  which  the  association  is 
formed,  and  may  contain  any  other  provisions,  not  inconsistent 
with  law,  which  the  association  may  think  fit  to  adopt  for  the 
regulation  of  its  business,  and  the  management  of  its  affairs;  and 
they  are  required  to  be  signed  by  the  persons  uniting  to  form  the 
association,  and  a  copy  of  them  is  required  to  be  filed  in  the  office 
of  the  comptroller  of  the  currency.* 


'  Code  Iowa,  tit.  Corp.  183  ;  Mass. 
St.  1870,  chap.  324  ;  statute  1873,  173  ; 
1874,  chap.  2U,  165,  349.  On  the  subject 
of  the  personal  liability  of  members  or 
stockholders  of  corporations  in  the  va- 
rious states,  see  2)ost,  ^  71,  note  3. 

2  Act  June  3,  1864,  chap.  106,  §  5,  v. 
13,  Par,  100;Rev.Stat.(1874),p.  998,  tit. 
62,  §  5133.      This  act  further  provides: 

Sec.  5134.  The  persons  uniting  to 
form  such  an  association  shall  under 
their  hands  make  an  organization  cer- 
tificate, which  shall  specifically  state: 

First.  The  name  assumed  by  such 
association;  which  name  shall  be  sub- 
ject to  the  approval  of  the  comptroller 
of  the  currency. 

Second.  The  place  where  its  opera- 
tions of  discount  and  deposit  are  to  be 
carried  on,  designating  the  state,  terri- 
tory or  district,  and  the  particular 
county,  and  city    town  or  village. 

Third.  The  amount  of  capital  stock 
and  the  number  of  shares  into  which 
the  same  is  to  be  divided. 

Fourth.  The  names  and  places  of 
residence  of  the  shareholders,  and 
number  of  shares  held  by  each  of 
them. 

Fifth.  The  fact  that  the  certificate 
is  made  to  enable  such  persons  to 
avail  themselves  of  the  advantages  of 
this  title. 

Sec.  5135.  The  organization  certifi- 
cate shall  be  acknowledged  before  a 


judge  of  some  court  of  record,  or  notary 
public;  and  shall  be,  together  with  the 
acknowledgment  thereof,  authenti- 
cated by  the  seal  of  such  court  or  no- 
tary, transmitted  to  the  comptroller  of 
the  currency,  who  shall  record  and 
carefully  preserve  the  same  in  his 
oflSce. 

Sec.  5136.  Upon  duly  making  and 
filing  articles  of  association  and  an  or- 
ganization certificate  the  association 
shall  become  as  from  the  date  of  the 
execution  of  its  organization  certificate 
a  body  corporate,  and  as  such  and  in 
the  name  designated  in  the  organiza- 
tion certificate,  it  shall  havepower  : 

First .  To  adopt  and  use  a  corporate 
seal. 

Second.  To  have  succession  for  the 
period  of  twenty  years  from  its  organi- 
zation, unless  it  is  sooner  dissolv^ed  ac- 
coi'ding  to  the  provisions  of  its  articles 
of  association,  or  by  the  act  of  its 
shareholders  owning  two-thirds  of  its 
stock,  or  unless  its  franchises  become 
forfeited  by  some  violation  of  law. 

Third.     To  make  contracts. 

Fourth.  To  sue  and  be  sued,  com- 
plain and  defend,  in  any  court  of  law 
or  equity,  as  fully  as  natural  persons. 

Fifth.  To  elect  or  appoint  directors, 
and  by  its  board  of  directors  to  appoint 
a  president,  vice-president,  cashier  and 
other  officers,  define  their  duties,  re- 
quire bonds  of  them  and  fix  the  pen- 


18 


Pkivate  Corporations. 


Sko.  15.     Of  the  power  to  delegate  authority  to  create  a  corporation. — 

Altliougli  it  was  fonnorlj  licld  in  England  that  the  act  of  incor- 
poration must  bo  the  immediate  act  of  the  sovereign  authority, 
yet  tlie  law  seems  now  well  settled  there,  that  the  king  may  give 
a  general  authority  to  some  other  person  to  create  them,  on  the 
principle  that,  quifaoitper  aliwm  facit per  se}  For  instance,  it 
has  been  held  that  the  chancellor  of  the  university  of  Oxford  is 
authorized  to  grant  corporate  privileges  by  virtue  of  the  royal 
authority  conferred  upon  him,  and  that  by  virtue  of  such  author- 
ity he  may  create  incorporated  companies  of  tradesmen  ;  but  this 
is  upon  the  theory,  after  all,  that  the  king  creates.^ 

Sec.  16.  of  the  power  of  territorial  legislatmres  to  create. —  it  IS 
evident  that  the  various  legislatures  of  our  territories,  under  the 
general  legislative  authority  conferred  by  congress,  may  create 
corporations  as  incident  to  the  authority  possessed  by  them,  sub- 
ject, however,  to  the  provisions  of  the  acts  of  congress  conferring 


alty  thereof,  dismiss  such  officers  or 
any  of  them  ut  pleasure,  and  appoint 
others  to  fill  their  places. 

Sixth.  To  prescribe,  by  its  board  of 
directors,  by-laws,  not  inconsistent 
with  law,  regulating  the  manner  in 
which  its  stock  shall  be  transferred,  its 
general  business  conducted,  and  the 
privileges  granted  to  it  by  law  exer- 
cised and  enjoined. 

Seventh.  To  exercise  by  its  board 
of  directors  or  duly  authorized  offi- 
cers or  agents,  subject  to  law,  all 
such  incidental  powers  as  shall  be 
necessary  to  carry  on  the  busiiiess  of 
banking ;  by  discounting  and  negotiat- 
ing promissory  notes,  drafts,  bills  of 
exchange  and  other  evidences  of  debt; 
by  receiving  deposits  ;  by  buying  and 
selling  exchange,  coin  and  bullion ; 
by  loaning  money  on  personal  security; 
and  by  obtaining,  issuing,  and  circu- 
lating notes  according  to  the  provis- 
ions of  this  title.  But  no  association 
shall  transact  any  business  except  such 
as  is  incidental  and  necessarily  pre- 
liminary to  its  organization,   until  it 


has  been  authorized  by  the  comptroller 
of  the  currency  to  commence  the  busi- 
ness of  banking. 

Sec.  5137.  A  national  banking  asso- 
ciation may  purchase,  hold,  and  con- 
vey real  estate  for  the  following  pur- 
poses, and  for  no  others  : 

First.  Such  as  shall  be  necessary 
for  its  immediate  accommodation  in 
the  transaction  of  its  business. 

Second.  Such  as  shall  be  mortgaged 
to  it  in  good  faith  by  way  of  security 
for  debts  previously  contracted. 

Third.  Such  as  shall  be  conveyed 
to  it  in  satisfaction  of  debts  previously 
contracted  in  the  course  of  its  dealings. 

Fourth.  Such  as  it  shall  purchase  at 
sales,  under  judgments,  decrees  or 
mortgages  held  by  the  association,  or 
shall  purchase  to  secure  debts  due  it. 
But  no  such  association  shall  hold 
such  real  estate  under  mortgage,  or 
the  title  and  possession  of  any  real 
estate  purchased  to  secure  any  debts 
due  to  it  for  a  longer  period  than  five 
years. 


'  1  Kyd  on  Corp.  50  ;  1  Bl.  Com.  473. 

2 1  Bl.  Com.  473.  See,  also,  3  Wills., 
§  409  ;  St.  Mary's  Church,  7  S.  &  R. 
517  ;  State  v.  Armstrong,  3  Sneed,  634; 


Riddick  v.  Amelin,  1  Mo.  5 ;  Mayor, 
etc.,  V.  Shelton,  1  Head  (Tenn.),  24; 
Vance  v.  Farmers'  Bank.  1  Blackf. 
(Ind.)  80. 


How  Corporations  are  Created.  19 

this  authority.  In  such  cases  tlic  soveriegn  authority  of  the 
Uuited  States,  or  of  congress  as  the  representative  of  it,  is  con- 
ferred upon  the  legislature  of  the  territory,  and  the  territorial 
authority  in  this  respect  is  supreme. 

It  is  now,  however,  expressly  provided  by  an  act  of  congress 
that  "  the  legislative  assemblies  of  the  several  territories  shall 
not  grant  private  charters  or  special  privileges,  but  may,  by  gen- 
eral incorporation  acts,  permit  persons  to  associate  themselves  to- 
gether as  bodies  corporate,  for  mining,  manufacturing  and  other 
industrial  pursuits,  or  the  construction  or  operation  of  railroads, 
irrigating  ditches,  and  the  colonization  and  improvement  of  lands 
in  connection  therewith,  or  for  colleges,  churches,  libraries,  or  any 
benevolent,  charitable  or  scientific  association."  ' 

If,  by  virtue  of  any  special  or  general  act  of  such  territorial 
legislature,  a  corporation  is  created  or  organized,  it  could  not  be 
affected  in  respect  to  its  corporate  rights  by  the  subsequent  adop- 
tion of  a  state  constitution,  or  by  any  change  made  by  subsequent 
acts  of  the  legislature  thereunder  in  relation  to  incorporations.^ 

Sec.  it.  Corporations  by  prescription  in  this  country. —  vV  e  have 
already  referred  to  the  existence  of  corporations  by  prescription 
in  England,  and  shown  that  even  in  this  country  the  same  doc- 
trine has  been  recognized  in  refel'ence  to  corporate  existence."  The 
English  doctrine  has  been  recognized  in  relation  to  a  class  of  cor- 
porations now  very  limited  in  this  country,  where  the  corporate 
rights  were  conferred  previous  to  our  independence.  The  com- 
mon law  of  England  at  that  time  became  apart  of  our  inheritance, 
and  corporations  then  existing  here,  with  all  their  common-law 
incidents,  continued  to  exist,  and  were  not  affected  by  the  new 
organization  and  establishment  of  our  government.  At  that 
time  the  English  church  establishment  existed  in  this  country, 
carrjdng  with  it  those  corporate  rights  of  the  parsons  thereof  to 
take  in  succession,  and  securing  to  him  and  other  officers  of  the 
church  all  the  common-law  corporate  rights  pertaining  to  them. 
If  before  the  Revolution  an  Episcopal  church  was  duly  estab- 

1  Rev.  Stat  U.  S.  (1874),  tit.  23,  chap.  4  How.  268  ;  Myers  v.  Bank,  20  Ohio, 
1  ;  tit.  Territories,  p.  333,  §  1889.  83. 

^Vincennes  University  v.  Indiana,         ^  Ante,  §  13  ;  2  Kent's  Com.  277. 


20  PkIVATE    COKPORAIIONS. 

lislied,  the  parson  was  by  the  common  law  entitled  to  the  glebe 
jitre  ecdesice,  and  was  capable  of  transmitting  the  inheritance ; 
and  such  corporations  have  been  recognized  by  our  courts  since 
the  establishment  of  our  govermnent.^  Where  a  parish  had  acted 
as  a  corporation  for  more  than  forty  years  it  was  held  proper  to 
show  its  corporate  existence  by  reputation.^  And  where  for  thirty 
years  a  town  had  exercised  corporate  privileges,  it  was  permitted 
to  show  this  by  parol  as  tending  to  prove  that  it  had  been  duly 
incorporated  with  the  ordinary  powers  of  incorporated  towns." 

On  the  subject  of  the  continuance  of  corporate  rights  existing 
in  this  country  at  the  time  of  the  establishment  of  our  independ- 
ence, Mr.  Kent  observes :  "  There  are,  however,  several  of  the 
corporations  now  existing  in  tliis  country,  civil,  religious  and 
eleemosynary,  which  owed  their  origin  to  the  crown  and  under 
the  colonial  administration.  Those  charters  granted  prior  to  the 
E-e volution  were  upheld  either  by  express  provision  in  the  consti- 
tutions of  the  states,  or  by  general  principles  of  public  and  com- 
mon law,  of  universal  reception ;  and  they  were  preserved  from 
forfeiture  by  reason  of  any  nonuser  or  misuser  of  their  powers 
during  the  disorders  which  necessarily  attended  the  Kevolu- 
tion." ' 

The  recognition  of  corporations  by  prescription  is  from  the 
reasonable  presumption,  that  as  they  have  been  recognized  and 
suffered  to  exist  for  a  long  time  they  were  originally  lawfully 
created.  In  England  the  doctrine  is  more  important  than  in  this 
country,  where  our  existence  as  a  nation  is  comparatively  short, 
where  corporations  are  all  created  by  legislative  acts,  and  there 
are  few  occasions  for  the  application  of  it  to  corporate  claims. 

Sec.  18.  roreign  joint-stock  companies  may  be  corporations. —  In 
a  recent  case  in  this  country,  an  English  joint-stock  company,  hav- 
ing the  incidents  and  powers  of  a  corporation  at  common  law,  was 
held  to  be  a  corporation,  although  acts  of  parliament,  in  accord- 
ance with  a  local  policy,  declared  that  it  should  not  be  so  held. 
The  company  was  organized  under  the  laws  of  Great  Britain, 

'  Town  of  Pawlet  V.  Clark,  9  Crancli,  5  H.  &  J.  (Md.)  122  ;  Warden,   etc.,  v. 

294  ;  Terrett  v.  Taylor,  id.  43.  Hart,  1  C,  &  P.  113.     See,  also,  1  Dill. 

'■'Dillingham  v.  Snow,  5  Mass.  547.  on  Corp.,  S  17  ;  ante,  §  14. 

^Hagerstown  Turn.  Co.  v.  Creeger,  *2  Kent  s  Com.  276. 


How  Corporations  are  Created.  21 

for  the  purpose  of  conducting  the  business  of  insurance  under  a 
certain  deed  of  settlement,  legalized  and  enlarged  by  acts  of  par- 
liament, and  by  virtue  of  such  deed  and  such  acts  possessing  the 
following  characteristics  and  powers :  1.  A  distinctive  and  artifi- 
cial name,  by  which  it  could  make  contracts ;  2.  A  statutory 
authority  to  sue  and  be  sued  in  the  name  of  its  oflicers  as  the 
representatives  of  the  whole  body ;  3.  Perpetual  succession  by 
the  transfer  and  transmission  of  the  shares  of  its  capital  stock, 
when  new  members  were  introduced  in  the  place  of  those  who  died 
or  sold  out ;  4.  An  existence  as  an  entity  apart  from  the  share- 
holders, which  enables  it  to  sue  its  stockholders  and  be  sued  by 
them.  A  statute  of  Massachusetts,  where  the  company  was  tran- 
sacting business,  imposes  upon  "  each  fire,  marine,  and  each  fire 
and  marine  insurance  company,  incorporated  or  associated  under 
the  laws  of  any  government  or  state,  other  than  one  of  the  United 
States,  a  tax  of  four  per  cent  upon  all  premiums  charged  or 
received  on  contracts  made  in  this  commonwealth  for  insurance 
of  property."  The  same  statute  imposes  a  tax  of  but  two  per 
cent  upon  such  premiums  M'hen  the  company  is  incoi^porated 
under  the  laws  of  any  one  of  the  United  States  other  than  Massa- 
chusetts; and  upon  such  companies  incorporated  by  itself  in 
Massachusetts  only  one  per  cent,  while  no  tax  is  imposed  by  the 
laws  of  the  state  upon  the  business  of  insurances  transacted  by 
any  natural  persons  citizens  of  the  same.  The  company  failed 
to  pay  the  tax  prescribed  by  the  statute,  and  the  state  filed  a  bill 
in  the  proper  court  to  enforce  the  payment  of  the  same  or  the 
suspension  of  the  business  of  the  company.  In  defense  the  com- 
pany claimed  that  it  was  not  incorporated  at  all,  but  was  merely 
an  association  under  the  laws  of  Great  Britain,  having  the  legal 
character  of  a  partnership ;  and  that  it  could  not  be  taxed  as  a 
"company  incorporated  nnder  the  laws  of  any  government  or 
state  other  than  one  of  tlie  United  States  ; "  that  the  character  of 
the  association  must  be  determined  by  the  laws  of  Great  Britain  ; 
that  under  those  laws  the  association  was  a  mere  partnership  of  a" 
large  number  of  persons,  having  certain  privileges  granted  by 
statute ;  that  these  privileges  cannot  be  enjoyed  in  this  country ; 
that  they  relate  to  remedies  ;  that  the  acts  of  parhament  are  in- 
operative beyond  the  limits  of  the  jurisdiction  of  the  courts  of 


22  PkIVATE    CoRrORATIONS. 

Great  Britain;  tliat  the  riglit  to  be  sued  in  the  names  of  its  offi- 
cers is  of  no  avail  in  tliis  country;  and  that  the  English  authori- 
ties sliow  that  the  association  is  not  a  corporation.'  On  the 
other  side  it  was  chiimed  that  this  association  was,  by  act  of  par- 
liament, clothed  with  all  the  characteristics  of  a  corporation  ;  and 
that  its  legal  character  could  not  be  changed  by  calling  it  some- 
thing else. 

On  the  final  hearing  of  this  case  the  company  was  enjoined 
from  the  further  prosecution  of  its  business  until  the  taxes  found 
due  should  be  paid.  And  the  supreme  court  of  the  United  States, 
to  which  the  case  was  taken,  affirmed  this  judgment.  Justice 
Miller,  in  delivering  the  ojDinion  of  the  court,  remarks :  "  The 
bankino;  business  of  the  states  of  the  Union  is  now  conducted 
chiefly  by  coi-porations  organized  under  a  general  law  of  congress, 
and  it  is  believed,  that  in  all  the  states,  the  articles  of  association 
of  this  company  would,  if  adopted  with  the  usual  formalities, 
constitute  it  a  corporation  under  their  general  laws,  or  it  would 
become  so  by  such  legislative  ratification  as  is  given  by  the  acts  of 
parliament  we  have  mentioned.  To  this  view  it  is  objected  that 
the  association  is  nothing  but  a  partnership,  because  its  members 
are  liable  individually  for  the  debts  of  the  company.  But,  how- 
ever the  law  on  this  subject  may  be  held  in  England,  it  is  quite 
certain  that  the  principle  of  personal  liability  of  the  shareholders 
attaches  to  a  very  large  portion  of  the  corporations  of  this  country, 
and  it  is  a  principle  which  has  warm  advocates  for  its  universal 
application  when  the  organization  is  for  pecuniary  gain.  So,  also, 
it  is  said  that  the  fact  that  there  is  no  provision,  either  in  the 
deed  of  settlement  or  the  act  of  parliament,  for  the  company 
suing  or  being  sued  in  its,  artificial  name  forbids  the  corporate 
idea.  But  we  see  no  real  distinction,  in  this  i-espect,  between  the 
act  of  parliament,  which  authorizes  suits  in  the  name  of  the 
Liverpool  and  London  Fire  and  Life  Insurance  Company,  and 
that  which  authorized  suit  against  that  company  in  the  name  of 
its  principal  officer.  If  it  can  contract  in  the  artificial  name  and 
sue  and  be  sued  in  the  name  of  its  officers  on  those  contracts,  it 

'  Harrison  v.  Timmons,  4  M.  c&  W.  &  G.  563  ;  Mavliew's  case.  5  id.  837  ; 

510  ;  Bartlett  v.  Pentland,  1  B.  &  Ad.  Blakeley's      Ex'rs,     13     Beav.     133 ; 

704  ;  Van  Sandau  v.   Moore,   1  Russ.  Barnes  v.  Pennell,  2  H.  of  L.  C.  497. 
441  ;  Cape's   Ex'rs,    2  De  Oex,  Macn. 


How  Corporations  are  Crkated.  23 

is  in  effect  the  same,  for  process  would  have  to  be  served  on  some 
such  officer,  even  if  the  suit  were  in  such  artificial  name.  It  is 
also  urged  that  the  several  acts  of  parliament  we  have  mentioned 
expressly  declare  that  they  shall  not  be  held  to  constitute  the 
corporate  body  a  corporation.  But  whatever  may  be  the  effect 
of  such  a  declaration  in  the  courts  of  that  country,  it  cannot  alter 
the  essential  nature  of  a  corporation  or  prevent  the  courts  of 
another  jurisdiction  from  inquiring  into  its  true  character,  when- 
ever that  may  come  in  issue.  It  appears  to  have  been  the  policy 
of  the  English  law  to  attach  certain  consequences  to  incorporated 
bodies,  which  rendered  it  desirable  that  such  associations  as  these 
could  not  become,  technically,  corporations.  Such  local  policy 
can  have  no  place  here  in  determining  whether  an  association, 
whose  powers  are  ascertained  and  its  privileges  conferred  by  law, 
is  an  incorporated  body.  The  question  before  us  is,  whether  an 
association,  such  as  the  one  we  are  considering,  in  attempting  to 
carry  on  its  business  in  a  maimer  which  requires  corporate  powers 
under  legislativ^e  sanction,  can  claim,  in  a  jurisdiction  foreign  to 
the  one  which  gave  those  powers,  that  it  is  only  a  partnership  -of 
individuals.  We  have  no  hesitation  in  holding  that,  as  the  law 
of  corporations  is  understood  in  this  country,  this  association  is  a 
corporation,  and  that  the  law  of  Massachusetts,  which  only  per- 
mits it  to  exercise  its  corporate  function  in  that  state,  on  the  con- 
dition of  a  payment  of  a  specific  tax,  is  no  violation  of  the 
federal  constitution,  or  of  any  treaty  protected  by  said  con- 
stitution." 

Sec.  19.  The  corporate  name. —  In  whatever  manner  a  corpora- 
tion is  created,  it  is  necessary  that  it  be  designated  by  a  particu- 
lar name.  If  it  is  created  by  charter  or  special  legislative  act,  the 
name  is  necessarily  given,  "for  the  name  is  as  it  were  the  very 
being  of  the  constitution,  without  which  they  could  not  perform 
their  corporate  acts,  for  it  is  nobody  to  plead  and  be  impleaded, 
to  take  and  give,  until  it  hath  gotten  a  name."  '^  The  name  of  a 
corporation  is  the  name  of  its  baptism.     Blackstone  observes ; 

'  Liverpool  L.  &  G.  Ins.  Co. v.  Comm.,        ^  Bac.  Abr.,  tit.  Corp.  Co. 
10  Wall.  566.     See,  also,  Paul  v,  Vir- 
ginia, 8  id.  168. 


24  Private  Coepoeations. 

"  Where  a  corporation  is  erected  a  name  must  be  given  to  it,  and 
by  that  name  it  must  sue  and  be  sued,  and  do  all  legal  acts, 
though  a  minute  variation  therein  is  not  material.  Such  name  is 
the  very  being  of  its  constitution,  and  through  it  the  will  of  the 
king  that  erects  the  corporation  is  expressed,  and  the  name  is  the 
knot  of  its  combination,  without  which  it  could  not  perform  its 
corporate  functions."'  It  is  not  only  essential  that  it  should  have 
a  particular  name  to  distinguish  it  from  other  corporations,  but 
also  by  which  it  may  contract,  and  grant  and  receive  property, 
and  sue  and  be  sued.^  A  corporation  may  acquire  a  name  by 
prescription''  and,  it  seems,  may  have  more  than  one  name,*  but 
this  is  confined  to  corporations  by  prescription,  and  those  consti- 
tuted by  charter,  or  under  statutes,  and  have  but  one  name  at  the 
same  time,  for  the-  same  purpose'  unless  so  provided  in  the 
charter.  It  seems,  however,  that  a  corporation  may  be  incor- 
porated by  one  name  and  have  power  to,sue  and  hold  property  by 
another.  ° 

If  a  corporation  is  organized  under  general  statutory  provisions, 
it  is  usually  provided  that  it  shall  have  some  name,  as  well  as  a 
location,  and  by  such  name  only  can  it  exercise  the  corporate  func- 
tions ;  and  the  name  given  by  the  charter  or  special  act,  or 
assumed  under  general  laws,  cannot  be  changed  by  corporate 
action.'  But  where  the  constitution  prohibits  the  creation  of  cor- 
porations by  special  enactments,  this  does  not  prohibit  the  chang- 
ing of  tlie  name  of  a  corporation  by  such  legislation.  In  a  recent 
case  in  California,  involving  this  question  it  was  held,  that  the 
mere  changing  of  the  name  of  a  corporation  was  not  the  creation 

1 1  Bl.  Com.  474.     "  Every  corpora-  Hall  (N.  Y.),  191  ;  Middlesex  Husband- 

tion  should  have  a  name  by  which  it  men  v.  Davis,  3  Met.  (Mass.)  183. 

should    be    known    as     grantor    and  ^  Knight  v.  Mayor,!  Ld.Raym.  80; 

grantee,  and  to  sue  and  be  sued,  and  Anon.,  1  Salk.  103. 

do  all  legal  acts.     Such  name  is  the  ^  Butler  v.  President  of  the  College 

very    being   of    its   constitution,    the  of  Physicians,  Cro.  Cas.  256. 

'knot    of    its    combination,'    without  '  1  Dill. on  Corp.,  §§  119,  120.  "  Part- 

which  it  could  not  perform   its  corpo-  nerships  and  simply  joint-stock  trading 

rate  functions."  Smith's  Mer.  Law,  133.  companies  may  be  at  liberty  to  change 

'■^  1  Dill,  on  Corp.,  §  117;   Walker  on  their  name  or  style,  yet  after  a  com- 

Am.  Law,  224.  pany  has  been  incorporated  by  a  name 

2  Smith   V.    Plankroad    Co.,  30  Ala.  set  forth  in   the  act  of  incorporation, 

650  ;  Dutch  West  India  Co.  v.  Moses,  such  incorporated  company  has  not  the 

1  Strange,  614.  right   nor   the    power   to    change    its 

^All   Saints'   Church   v.    Lovett,    1  name."  Id.;  Regina  v.  Registrar,  etc., 

10  Ad.  &E1.  (N.  S.)839. 


How  Corporations  are  Created. 


25 


of  a  corporation  in  the  sense  of  the  constitution ;  that  it  was  no 
more  the  creation  of  a  corporation  than  the  changing-  of  the  name 
of  a  natural  person  is  the  begetting  of  a  natural  person,  and  that 
a  change  of  name  is  not  a  change  of  being.' 

But  it  is  said  the  name  may  not  only  be  expressed  in  the 
patent,  but  implied  in  the  nature  of  the  thing.  As  if  the  king 
should  incorporate  the  inhabitants  of  Dale,  with  power  to  choose 
a  mayor  annually,  though  no  name  be  given,  yet  it  is  a  good  cor- 
poration by  the  name  of  the  mayor  and  commonalty." 


'  Pacific  Bank  v.  De  Roe,  37  Cal.  538; 
Wile,  on  Corp.  34  ;  Episcopal  Society 
V.  Episcopal  Churcii,  1  Pick.  373.    But 
the  mere  fact  of    similarity    iu    name 
without  proof  that  the   first  company 
is   likely  to   suffer  injury   thereby,  is 
not  sufficient  to  justify  a  court  of  equity 
in  restraining  the  latter  company  from 
using  such  name.     London  and   Pro- 
vincial Law  Association  Society  v. Lon- 
don   Provincial  Joint-Stock  Life  Ins. 
Co.,  11  Jur.  938.     A  change  of  name 
does  not  necessarily  involve  a  change 
of    the    identity    of   the    corporation. 
Girard  v.  Philadelphia,  7  Wall.  1 .     In 
a  recent  case  in  Tennessee  it  was  held 
that  a  court  of  equity  may,  upon  ob- 
jection being  made  to  the  organization 
of  a  corporation  by  a  specific  name,  on 
the  ground  that  another  corporation  has 
already  adopted  the  proposed  name,  or 
one  so  near  like  it  as  to  lead  to  confu- 
sion, requires  a  sufficient  modification 
of  it  as  to  obviate  the  objection.     Ex 
parte  Walker,  1  Tenn.  Ch.  97.  See,  also, 
Newby  v.  Oregon,  etc.,  R.  Co.,  Deady 
(U.  S.  C.  C),  609;  Holmes  v.  Holmes 
Man.  Co.,  37  Conn.  378.  Although  the 
name  of  a  corporation  has  been  changed 
by  an  act  of  the   legislature,  yet  if  it 
continues  to  conduct  its  business  in  its 
original   name,  and   otherwise    exclu- 
sively uses  such  name,  it  may  by  usage 
retain  and  regain  its  original  name  and 
sue  and  be  sued  thereby.     Alexander 
V.  Berney,  38  N.  J.  Eq.  90.     As  to  the 
sufficiency  of  a  name  under  the  Indiana 
statute  of  May  13,  1853,  see  Naber  v. 
Bright,  33Ind.  G9.  A  corporation  may 
acquire  a  name  by  usage.     Smith  v. 
Plankroad  Co..  30   Ala.  650.     A   mere 
change  of  name  by  the  legislatuie  does 
not  affect  the  rights  of   third  peisons. 
Rosenthal  V.  Madison,  etc.,  R.  Co.,  10 
Ind.  359.   A  corporation  may  be  known 
4 


by  one  name  by  prescription  and  one  by 
grant;  but  where  there  is  more  than 
one  grant  the  last  grant  will  take  the 
place  of  the  others.  Knight  v.  Wells, 
1  Ld.  Raym.  80 ;  Anonymous,  3  Salk. 
103  ;  Manufactui:ing  Company  v.  Davis, 
14  Johns.  838 ;  Middlesex,  etc. ,  v.  Davis, 
3  Mete.  133;  Trustees,  etc.,  v.  Peaslee, 
15N.  H.  317. 

"The  name  of  incorporation,"  says 
Sir  Edward  Coke,  "  is  a  proper  name 
or  name  of  baptism  ;  and  therefore 
when  a  private  founder  gives  his  col- 
lege or  hospital  a  name,  he  does  it  only 
as  god-father,  and  by  that  same  name 
the  king  baptizes  the  corporation.  But 
though  the  name  of  a  corporate  body 
is  compared  to  the  Christian  name  of  a 
natural  .person,  yet  the  comparison  is 
not  in  all  respects  perfectly  correct.  A 
Christian  name  consists  in  general  of  a 
word,  as  Oliver  or  Robert,  in  which 
the  alteration  or  omission  of  a  single 
letter  may  make  a  material  alteration 
in  the  name.  The  name  of  a  corpora- 
tion frequently  consists  of  several 
words,  and  an  omission  or  alteration 
of  some  of  them  is  not  material."  1 
Com.  Dig.,  tit.  Franchise,  F.  9.;  10  R. 
39  b.;  Smith's  Mer.  L.  133  ;  Bac.  Abr., 
tit.  Corp.;  1  Kyd  on  Corp.  337. 

In  Missouri  it  has  recently  been  held 
that  after  the  changing  of  a  name  of  a 
corporation  for  convenience,  where  it 
continues  the  same  business  with  the 
same  ofiicers,  it  is  responsible  under 
the  new  name  for  all  its  previous  debts 
Dean  v.  La  Motte  Lead  Co.,  59  Mo.  533. 

'  Anon.,  1  Salk.  191;  10  Co.  33.  If  a 
note  or  other  obligation  is  executed  to 
a  corporation  by  a  name  differing  from 
the  corporate  name,  suit  may  be 
brought  thereon  by  the  corporation  iu 
its  true  name,  by  alleging  that  it  is  the 
party    to    whom    the   obligation   was 


26 


PkIVATB    C0KPOKA.TIONS. 


Sec.  20,  The  location  of  corporation. —  Tlie  location  of  corpora- 
tion should,  in  all  cases,  be  designated.  The  legal  existence 
of  a  corporation  is  confined  to  the  territory  of  the  sovereignty 
creating  it ;  and  it  is  held  that  it  cannot  lawfully  meet  and  act  in 
a  corporate  cajsacity,  outside  the  boundaries  of  the  state  in  which 
it  was  created.'  But  this  rule  in  reference  to  meetings  does  not 
apply  to  directors,  or  other  agents  and  officers  of  the  company 
who  may  assemble  or  transact  business.*  But  corporate  meetings 
will  constitute  the  subject  of  a  subsequent  chapter,  where  it  will 
be  fully  considered.  A  corj)oration  should  be  constituted  of  some 
place,  and  it  has  no  legal  existence  outside  of  the  terri- 
tory of  the  sovereignty  by  which  it  was  created."  But  its  legal 
residence  is  not  necessarily  confined  to  tlie  locality  of  its  principal 
office  of  business,  but  may  be  anywhere  within  the  territorial 
limits  of  the  state.^  And  a  corporation  may,  through  its  agents, 
transact  business  and  enjoy  corporate  privileges  in  other  states. 
It  may,  byt  he  comity  of  states,  carry  on  its  lawful  business,  ac- 
quire, hold  and  transfer  property  in  any  of  the  states  or  teri'ito- 


made.  African  Society  v.  Varick,  13 
Johns.  3b;  Trustees,  etc.,  v.  Reneau,  3 
Swau  (Teim.),y4;  Fort  Wayne  v.  Jack- 
son, 7  Blackt.  (lud.)  36 ;  Thatcher  v. 
West  River  National  Bank,  19  M4ch. 
196.  In  Hammond  v.  Shepard,  29 
How.  Pr.  (N.  Y.),  188,  an  objection 
that  the  promise  sued  on  was  to  the 
"New  York  Central  College,"  when 
the  true  name  was  the  "  New  York 
Central  College  Association,"  was  held 
to  be  obviated  by  proof  that  the  col- 
lege was  known  by  both  names.  See, 
also,  Coulter  v.  Trustees,  etc.,  29  Md. 
69.  In  Johnson  v.  Indianapolis,  16 
Ind.  227,  the  general  law  authorized  a 


town  or  city  to  adopt  its  provisions  as 
a  charter,  and  a  city  having  done  this, 
it  was  held  that  it  was  authorized 
to  retain  its  former  name,  and  would 
be  presumed  to  have  done  so.  A  deed 
made  to  a  corporation  by  a  name  dif- 
fering from  its  true  one  may  be  sued 
in  its  true  name,  it  being  averred  in 
the  complaint  that  the  deed  was  in- 
tended for  it.  North-western  Distillery 
Co.  V.  Brant,  09  III.  658. 

If  a  corporation,  sued  by  a  wrong 
name,  appears  and  answers  to  the  suit 
without  objection,  the  defect  is  cured. 
Virginia,  etc.,  S.  Nav.  Co.  v.  U.  S., 
Taney  (U.  S.  C.  C),  418. 


1  Miller  v.  Ewer,  37  Me.  506;  McCall 
V.  Byram  Manuf.  Co.,  6  Conn.  428  ; 
Bank  of  Augusta  v.  Earle,  13  Pet.  519  ; 
Barnum  v.  Blackstone  Canal  Co.,  1 
Sumn.  47;  Runyon  v.  Lessee,  etc.,  14 
Pet.  129  ;  Day  v.  Newark  India  Rub- 
ber Co.,  1  Biatchf.  628  ;  Marshall  v. 
The  Baltimore,  etc.,  R.  R.  Co.,  16 
How.  314;  The  Covington  Draw  Bridge 
Co.  V.  Shepherd,  20  id.  233;  1  Redf.  on 
Rail.  56,  57. 

"^  Wood  Hydraulic,  etc.,  Co.  v.  King, 


45  Ga.  34 ;  McCall  v.  Byram  Manuf 
Co.,  6  Conn.  428. 

'^  See,  also.  Bank  of  Augusta  v.  Earle, 
13  Pet.  519  ;  Miller  v.  Ewer,  27  Me. 
509;  Farnum  v.  Blackstone  Canal  Co., 
1  Sumn.  47;  Runyon  v.  Lessee,  14 
Pet.  129;  Covington  Draw-Bridge  Co. 
V.  Shepherd,  20  How.  233;  Day  v. 
Newark,  etc.,  Co.,  1  Biatchf.  (C.  C.) 
638;  McCall  V.  Byram  Manuf.  Co.,  6 
Conn.  428. 

•*Glaize  V.  S.  C.  R,  R.  Co.,  1  Strobh. 
(S.  C.)70. 


How    CORPOKATIONS    ARE    CeEATED.  27 

ries,  the  same  as  individuals  might  do,  and  enforce  its  legal  riglits 
and  obtain  i-edress  of  its  wrongs,  and  may  sue  and  be  sued  on  its 
contracts/ 

Sec.  21.  Words  of  incorporation  in  royal  charters. —  Questions  fre- 
quently arose  in  former  times,  as  to  the  sufficiency  of  the  language 
used  in  royal  charters,  to  confer  corporate  powers  and  privileges. 
The  words  most  commonly  used  for  this  purpose  were  "  we 
create,  erect,  found  and  incorporate  ; "  creamus^  erigim,us,  fun- 
damics,  incorporamus.  But  while  these  words  were  commonly 
used  to  create  corporations,  it  was  held  that  they  were  not  essen- 
tial." Questions  of  this  kind  can  seldom  arise  in  this  country, 
where  all  our  corporations  are  constituted  such,  by  legislative 
acts,  and  usually  under  some  general  statute.  These  statutes 
provide  for  the  incorporation  of  persons  on  their  complying  with 
the  requirements  of  the  statutes.  And  where  no  special  powers 
are  conferred  by  the  statutes,  the  organization  would  undoubtedly 
secure  the  ordinary  common-law  powers,  franchises  and  incidents 
of  a  corporation.  And  under  theinodeof  incorporation  by  legis- 
lative authority  there  can  seldom  arise  any  question  requiring 
any  application  of  the  English  doctrine  of  incorporation  by  im- 
plication.' "It  is  not  necessary,"  observes  Mr.  Kyd,  "that  the 
charter  should  expressly  confer  those  powers,  without  which  a 
collective  bod}^  of  men  cannot  be  a  corporation,  such  as  the  power 
of  suing  and  being  sued,  and  to  take  and  grant  property  ;  though 
powers  are,  in  general,  expressly  given,"  ^  And  if  the  name 
should  be  omitted  in  the  charter,  still,  if  from  its  language,  or  the 
nature  of  the  tiling  granted,  this  could  be  ascertained,  it  would 
be  sufficient  to  constitute  a  corporation,  by  the  name  thus  indi- 
cated.^    And  where  an  act  of  the  legislature  of  Arkansas  merely 

* 

1  Ducat  V.  The  City  of  Chicago,  48  30 ;  1  Roll.  Abr.  513 ;  Conservators  of 
111.  173  ;  Cowell  v.  Colorado  Springs  the  River  Tone  v.  Ash,  10  B.  &  C.  349. 
Co.,  100  U.  S.  55.  See,  also,  3  Kent's  Com.  376  ;    Sutton 

2  The  case  of  Sutton's  Hospital,  10  Hospital,  10  Co.  37;  Roll.  Abr.,  tit. 
Coke,  37a,  38a,  39b,  30  ;  1  Kyd  on  Corp.  Corp.  F. ;  Dyer's  R.  100. 

63  ;  3  Kent's  Com.  376  ;  1  Roll.  Abr.,  ^  1  Kyd  on  Corp.  63.  See,  also,  Case 

tit.  Corp.    F.;    Denton  v.   Jackson,   3  of  the  Borough  of  Yarmouth,  3  B.  & 

Johns.  Ch.  335.  G.  393  ;  Poor,  etc.,  v.  Sears,  33  Pick. 

3 "If  the   king  grants  to  a   sat    of  133;  1  Dill,  on  Corp.,  ^  31. 

men  to  have  guildham  mercatorUim,  a  ^  Trustees,  etc.,  v.  Parks,  10  Me.  441; 

mercantile  meeting  or  assembly,  this  School   Comm'rs   v.  Dean,  3  Stew.    & 

is   alone  sufficient  to  establish   them  Port.  (Ala.)  190. 
forever."     1   Bl.    Com.  474 ;    10   Rep. 


28  PiiivATE  Corporations. 

provided  that  a  bank  should  be  established,  without  otlier  incor- 
porating words,  but  it  also  provided  for  a  certain  number  of 
directors,  and  the  usual  banking  powers  were  conferred  upon 
them,  it  was  hekl  that  the  directory  was  incorporated  by  implica- 
tion, and  that  they  possessed  the  ordinary  powers  of  a  corporate 
body.*  It  may  be  affirmed,  as  a  general  principle,  that  where 
rights,  franchises  and  powers  are  granted  by  a  competent  author- 
ity to  a  body  or  association  of  persons,  and  the  exercise  of  these 
cannot  be  enjoyed,  unless  they  are  considered  as  a  corporate  body, 
they  will  be  considered  as  such  by  implication,  although  no  cor- 
porate powers  are  expressly  granted.^ 

Sec.  22.  Common-law  incidents  of  a  corporation. —  The  COmmon- 
law  incidents  of  a  corporation  are  perpetual  succession ;  and  the 
right  to  sue  and  be  sued  in  the  corporate  name  ;  to  plead  and  be 
impleaded;  to  grant  and  receive  property;  to  purchase  lands  and 
hold  them  for  the  benefit  of  themselves  and  their  successors ;  to 
have  a  common  seal ;  and  to  make  by-laws  for  the  regulation  and 
government  of  the  affairs  of  the  corporation.^ 

Sec.  23.  Acceptance  of  the  grant.—  The  acceptance  of  the  charter 
or  act,  or  the  provisions  of  the  general  statutes  providing  for 
incorporation,  is  necessary  in  order  to  create  a  private  corporation. 
In  this  respect  a  private  corporation  differs  from  a  public  one,  as 
we  shall  hereafter  more  particularly  notice.*     A  charter  or  legis- 

'  Mahoiiy  v.  Bank  of  Arkansas ,  4  construed  upon  the  same  principles 
Ark.  620;  Murphey  v.  Bank  of  Ar-  which  apply  to  contracts  between  in- 
kansas,  2  Engl.  (Ark.)  57  ;  Woodruff  v.  dividuals.  State  v.  Noyes,  47  Me.  189. 
Attorney-General,  8  id.  836  ;  1  Kyd  on  But  where  the  rights  of  individuals, 
Corp.  63  ;  Falconer  v.  Campbell.  2  Mc-  in  the  lawful  enjoyment  of  their  prop- 
Lean  (C.  C),  195.  erty,  is  involved,  in  the  determination 

-Stebbins  v.  Jennings,  10  Pick.  187  ;  of  corporate  claims,  the  rights  of  cor- 

Commouwealth  v.   Westchester  R.  R.  porations  under  their  charters  are  not 

Co.,  8  Grant's  (Penu.)  Cas.  200  ;  New  to  be  extended  by    implication.     Au- 

Boston  V.   Dunbarton,   15  N.   H.  201.  burn,  etc.,   R.  R.  Co.  v.  Douglass,   9 

But  a  corporation  created  by  statute  N.  Y.  444.     See,  also,  Bank  of  Penn- 

can  exercise  no  powers  except  those  sylvania  v.  Commonwealth,  19  Penn. 

expressly  given  or  necessarily  implied.  St.  144. 

Perrine  V.  Chesapeake,  etc.,  Canal  Co. ,         ^1  Bl.  Com.   475;   2    Kent's    Com. 

9  How.  1S2.     The  construction  of  the  277;  Kyd  on  Corp.  13,  69,  70. 
charter  must  be  such    as  would  best         *  See  post,  chap.  3.    The  king  cannot 

carry  ii}to  effect  the  will  of  the  legis-  incorporate  a   body    of   men    without 

lature.   Chesapeake,  etc.,  Canal  Co.  v.  their  assent.      Until   his    charier   has 

Key,3Cranch(C.  C),  599.  The  contract  been  accepted,  it  is  inoperative.   When 

between  the  government  and  a  corpo-  once  accepted,  the  acceptance  is  irre- 

ration  created  by  its  charter  is  to  be  vocable.     The  acceptance  must  be  by 


How  Corporations  are  Created.  29 

lative  act  of  incorporation  is  nsuall}^  a  mere  offer  or  tender  of  the 
corporate  privileges  contained  in  it,  or  if  no  privileges  are  speci- 
fied, then  of  the  common-law  powers  and  immnnities,  and  the 
common-law  incidents  of  corporations.  The  sovereign  authority 
cannot  compel  persons  to  become  a  private  corporation.  They 
can  only  become  such  by  their  voluntary  consent.  But  this  con- 
sent, as  we  shall  have  occasion  hereafter  to  consider,  may  be  in- 
ferred from  their  acts,*  A  charter  or  act  of  incorporation,  for 
private  purposes  and  personal  objects,  if  accepted,  becomes  a  con- 
tract between  the  parties  accepting  and  the  state,  and  an  offer  of 
corporate  privileges,  on  the  one  side,  must  be  accepted  on  the 
other,  in  order  to  give  the  contract  full  force  and  virtue.  This 
doctrine  is  established  by  the  uniform  current  of  decisions  of 
courts  of  highest  authority,  not  only  in  this  country  but  in  Eng- 
land. In  the  Dartmouth  college  case,  the  court  say :  "  Dr. 
Wheelock,  acting  for  himself,  and  for  those  who,  at  his  solicitation, 
had  made  contributions  to  his  school,  applied  for  this  charter,  as 
the  instrument  which  should  enable  him  and  them  to  perpetuate 
their  benevolent  institution.  It  was  granted.  An  artificial 
immortal  being  was  created  by  the  crown,  capable  of  receiving 
and  distributing  forever,  according  to  the  will  of  the  donors,  the 
donations  which  should  be  made  to  it." 

After  a  charter  has  been  accepted,  it  is  within  the  power  of  the 
legislature  to  amend  it  in  every  respect,  so  that  it  does  not  im- 
pair any  vested  right,  and  in  that  event  the  corporation  is  bound 
by  the  amendment,  and  if  it  continues  business  after  its  adoption 
it  is  presumed  that  it  accepted  it,  and  no  other  proof  of  accept- 
ance is  necessary.^     The  rule  is,  that  when  the  powers  of  a  corpo- 

those  to  whom  it  is  addressed  ;  and  it  or  not  at  all,  for  there  can  be  no  partial 

is  held  that  a   valid  acceptance   may  acceptance  without  the  consent  of  the 

be  made  by  a  majority  of  the  grantees,  crown,  which  must  be  shown  by  mat- 

The  charter  must  be  accepted  in  toto,  ter  of  record.     Dill,  on  Corp.,  §  15. 

'  2  Kent's  Com.  277  ;  Charles  River  partment,  etc.,  v.  Kipp,  10  Wend. 266; 

Bridge  v.  Warren  Bridge,  7  Pick.  344;  Falconer  v.  Campbell,  2  McLean   (C. 

Bank  of  United  States  v.   Dandridge,  C),  196;  Dartmouth  College  v.  Wood- 

12  Wheat.  70.     See,  also.  Goddard  v.  ward,  4  Wheat.  518. 

Pratt,    16   Pick.   412  ;  Green   v.   Sey-  '•^  Cincinnati,  etc.,  R.  R.  Co.  v.  Cole,  29 

mour,   3  Sandf.  Ch.  285 ;  York  &  Co.  Ohio   St.    126  ;    Talladega   Ins.    Co.  v. 

v.    Regina,   18   Eng.    L.    &   E.    199;  Landers,  43  Ala.   115;  Logan  v.   Mc- 

Ellis  v.  Marshall,  3  Mass.  269  ;  Lincoln  Allister,  2  Del.  Ch.  176. 
v.  Richardson,  1   Me.   79  ;    Fire  De- 


30  Private  Cokporations. 

ration  are  enlarged  or  curtailed  by  the  legislature  without  provid- 
ing any  mode  for  their  acceptance,  the  exercise  of  such  powers  by 
it  is  sufficient  evidence  of  acceptance,  and  this  rule  applies  equally 
in  a  case  where  the  powers  are  conferred  by  general  law,  which 
is  declared  applicable  to  any  corporation  that  may  accept  its  pro- 
visions.* So,  too,  the  organization  of  a  company  under  a  charter 
is  sufficient  evidence  of  its  acceptance.  Indeed,  exercising  the 
privileges  granted  is  conclusive  evidence  of  the  fact  of  acceptance.'' 

Sec.  24.  Mode  of  acceptance.—  The  charter  or  act  may  be  ac- 
cepted by  a  vote  of  a  majority  of  the  corporators ;  ^  but  such 
direct  action  is  not  essential.  If  the  persons  or  association  to 
whom  a  grant  of  corporate  privileges  is  tendered  proceeds  to  act 
under  it,  this  is  an  acceptance,  and  the  contract,  between  the  state 
and  the  corporators,  becomes  complete.  If  the  persons  have 
applied  for  a  charter,  the  offer  of  it  to  them  is 'said  to  be  in  fieri, 
and  they  may  still  accept  or  refuse  it.*  Although  the  secretary 
may  be  required  to  keep  a  record  of  the  proceedings  of  meetings 
of  the  stockholders  or  members,  and  of  the  directors,  it  is  not  nec- 
essary that  a  record  be  made  showing  an  acceptance  of  the  grant, 
but  acceptance  may  be  inferred  from  the  acts  of  its  agents." 

If  certain  acts  are  required  to  be  done  by  corporators  under  the 
provisions  of  either  a  special  or  general  act,  then,  unless  those 
acts  are  done,  the  corporation  cannot  be  considered  as  in  being.' 
But  if  such  acts  are    done  by  the  persons  intended  to  be  bene- 

>  Goodin  V.  Evans,  18  Ohio  St.  150.  33.     See,  also.  Rex  v.  Westwood,  4  B. 

'  Logan  v.McAUister,  ante;  Talladega  &  C.  786. 

Ins.  Co.  V. Landers,  43  Ala.  115  ;  Hope,  It  is  not  necessary  that  the  records 

etc.,  Ins.  Co.    v.  Beekrtian,  47  Mo.  93  ;  of  a  corporation  should  show  a  formal 

Kenton   County  v.    Bank   Lick   Turn-  acceptance  of  the  act.     Russell  v.  Mc- 

pikeCo. ,  10  Bush  (Ky.),  539.  Lellan,  14  Pick.   03.     See,  also,  Sim- 

'  Lincoln,  etc.,  Bank  v.  Richardson,  rail  v.  Mutual   Ins.   Co.,   40  Mo.  27; 

supra  ;  Commonwealth  v.  Jarrett,  7  S.  Taylor  v.   Newberne,  3  Jones'  (N.  C.) 

&  R.  461  ;  Dartmouth  College  V.  Wood-  Eq.  141  ;  Hudson   v.   Carman,  41   Me. 

ward,  s?/p?a.  84;    Mead    v.    Keeler,    24    Barb.   20; 

*  Charles  River  Bridge   v.   Warren  Zabriskie  v.C  ,  C.  &  C.  R.  Co.,  33  How. 

Ri V.  Bridge,  7  Pick.  344  ;  State  v.  Daw-  (U.  S . )  381. 

son,  16  Ind.  40.  «  Yhv.  Dept.  v.  Kipp,  10  Wend.  266  ; 

5  Taylor    v.    Griswold,  14  N.   J.   L.  2  Kent's  Com.  393;  1  Redf.  on  Rail  w. 

223  ;  Fairfield  Turnpike  Co.  v.  Thorp.  64  ;  Minor  v.  The  Mech.  Bk.,  1  Pet.  46  ; 

13  Conn.  173 ;  Rex  v.  Ash  well,  12  East,  Burt  v.  Farrar,  34  Barb.  518. 


How    COKPOKATIONS    ARE    CrEATED.  31 

fitecl  or  incorporated,  the  corporation  is  complete,  and  the  duties 
imposed  by  the  act  will  attach  to  the  corporation.' 

Sec.  25.  If  they  have  held  meetings,  adopted  by-laws,  elected 
officers,  or  done  other  corporate  acts,  this  would  be  evidence  of 
acceptance  of  the  grant,  though  no  formal  acceptance  of  record 
could  be  shown.  And  the  doing  of  acts  by  persons  acting  in  the 
usual  way  of  corporate  agents,  and  which  would  not  be  consistent 
except  upon  the  theory  of  acceptance,  would  be  evidence  of  it.^ 
It  has  been  held  in  Michigan  that  a  person  who  has  dealt  with  a 
body  professing  to  act  as  a  corporation  as  such,  cannot  question 
its  corporate  existence,  for  the  purpose  of  charging  its  members 
with  liability  as  partners,^  unless,  perhaps,  he  has  been  misled  by 
the  acts  and  representations  of  the  persons  composing  it. 

Sec.  26.  Acceptance  must  be  unconditional. —  If  a  charter  IS  of- 
fered, it  is  only  necessary,  as  a  general  rule,  that  it  be  accepted  by 
a  majority  of  the  persons  mentioned  as  corporators.*  But  it  must, 
in  all  cases,  if  accepted,  be  taken  unconditionally  ;  and  by  accept- 
ing the  privileges  conferred,  the  corporators  will  be  required  to 
perform  the  conditions  imposed  by  it.  Nor  can  the  corporators 
claim  the  benefits  of  the  charter  unless  they  perform  all  the  pre- 
cedent conditions  required  by  it  in  order  to  constitute  the  corpo- 
ration. These  conditions  precedent  are  any  thing  which,  l)y  the 
express  provisions  of  the  charter  or  act,  are  required  to  be  per- 
formed by  the  persons  claiming  the  benefit  of  it,  as  a  preliminary 
to  incorporation,  or  the  foundation  for  the  exercise  of  the  powers 

'  Riddle  v.  Proprietors,  etc.,  7  Mass.  or  other  unequivocal  acts  on  its  part, 

187  ;  Goshen  Turnpike  Co.  v.  Sears,  7  but  this  cannot  prevail  against  direct 

Conn.  86  ;  Shortz  v.  Unangst,  3  W.  &  proof.     Lyons  v.  O.  A.  &  M.  R.  Co., 

S.  45  ;  Bank  of  U.  S.  v.  Dandridge,  13  33  Md.  18;  Narragansett  Bank  v.  At- 

Wheat.  70.     The  mere  passage  of  an  lantic  Silk  Co.,  3  Mete.  883;  Dedhain 

act  of  incorporation  does  not  make  the  Bank  v.  Chickering  3  Pick.  335 ;  Pe- 

contract,  as  it  may  be  repealed   prior  nobscot  Broom  Co.  v.  Lamson,  16  Me. 

to  a  full  acceptance  by  the  corporation.  334. 

Mississippi   Society   v.    Musgrove,   44  ^Merchants'     Bank    v.     Stone,    38 

Miss.  830  ;  S.  C,  7  Am.  Rep.  733.  Mich.  779. 

^Crump   v.    U.   S.    Mining   Co.,    7  *  Rex  v.  Amery,  1  T.  R.  575;  Penob- 

Qratt.     353;      Cahill     v.     Kalamazoo  scot    Bank   v.    Lamson,  16   Me.    334; 

Mutual   Insurance  Co.,    3  Mich.    134  ;  Day  v.  Stetson,  8  Me.  365;  Curry  v. 

Bac.   Abr.,   tit.   Corp.      Acceptance  of  Railroad  Co.,  Penn.  St.  (1868)  ;   Lyoue 

an  act  of  a  legislature  maybe  inferred  v.  Orange,  etc.,  R.  Co.,  33  Md.  18. 
from  the  exercise  of   corporate  powers. 


32  Pkivate  Corporations. 

and  privileges  of  the  grant.'  The  exercise  of  a  power  granted  hy 
an  amendment  of  the  charter  of  a  corporation  is  evidence  of  an 
aceptance  of  the  amendment  by  the  corporation.^  And  when  a 
charter  or  amended  charter  is  once  accepted,  no  snbscquent  with- 
drawal of  the  corporators  therefrom  can  affect  the  obligations  im- 
posed thereby.'  And  one  who  deals  with  a  corporation  acting 
under  an  amended  charter,  and  m  its  amended  name,  cannot  com- 
plain that  the  amendment  has  not  been  properly  accepted."  A 
company,  also,  having  accepted  a  charter,  cannot  insist  that  any 
provision  therein  was  fraudulently  obtained,  but  it  is  bound  by 
all  of  its  provisions.^ 

Sec.  27.  Acceptance  under  general  laws.— Where  persons  pro- 
ceed to  incorporate  under  general  statutes  enacted  for  this  pur- 
pose, the  signing  of  the  preliminary  articles  of  association,  or  the 
certificate  required  by  the  statute,  and  a  compliance  generally 
with  the  requirements  of  the  law  would  undoubtedly  be  deemed 
an  acceptance  of  the  grant  and  the  conditions  of  it."  "Accept- 
ance of  a  charter,"  says  the  court,  in  a  Delaware  case,'  "  is  neces- 

'  Lyons    v.    Orange,    etc.,    R.    Co.,  exercising  the  privileges  granted,  it 

supra;  Alton,  etc.,   R.    Co.  v.  Dietz,  will  be  almost  conclusive  evidence  of 

50  111.  210;  S.  C,  1  With   Corp.  CcS.  acceptance."      Heath    v.    Silverthorn 

439;  1  Redf.  on  Rail.,  §  18,  p.   04  et  Co.,  39  Wis.  146;  State  v.  Sibley,  35 

seq.,  and  notes.  Minn.  387. 

^  Wetumpka,  etc.,  R.  Co.   v.  Bing  ^Busey  v.  Hooper,  35  Md.  15.     See, 

ham,  5  Ala.  658;  Palfrey  v.  Paulding,  also.  Basshor  v.  Dressel,  34  Md.  503. 

7  La.  Ann.  363;  Bangor,  etc.,  R.   Co.  ^Eppes  v.  Mississippi,  etc.,  R.  Co., 

V.  Smith,  47  Me.  34.  In  Hope,  etc.,  Ins.  35   Ala.    33.       And   a   majority  may 

Co.  V.  Beekman,  47  Mo.  93,  in    an  ac-  adopt,   an    amendment.       Sprague    v. 

tion  by  a  mutual  insurance  company  Illinois  lliv.  R.  Co.,  19  111,  174. 

agaiust  a  person  upon  a  premium  note  ^  Bushwick,   etc,   Co.  v.   Ebbets,  3 

given  prior  to  a  change  in  its  charter,  Edw.  Ch.  353. 

it  was  held  unnecessary  for  the  com-  ^Mokelumne,  etc.,  R.  Co.  v.  Wood- 
pany  to  prove  the  acceptance  of  the  bury,  14  Cal.  424;  Field  v.  Cooks,  16 
amendment  by  it,  and  that  its  assent  La.  Ann.  153;  Ashtabula, etc.,  R.  Co. 
thereto  would  be  inferred  from  acts  v.  Smith,  15  Ohio  St.  328  ;  Thompson 
and  omissions  inconsistent  with  any  v.  Candor,  60  111.244;  Hunt  v.  Kan- 
other  hypothesis.  See.also, Hope,  etc.,  sas,  etc.,  Bridge  Co.,  11  Kans.  412; 
Ins.  Co.  V.  Koeller,  47  Mo.  129.  "It  Lyons  v.  Orange,  etc.,  R.  Co.,  supra  ; 
is  true,"  says  the  court,  in  Talladega  Hope  Ins.  Co.  v.  Beekman,  47  Mo. 
Ina.  Co.  V.  Landers,  43  Ala.  115,  "that  93,  where  it  was  held  that  the  assent 
the  charter  of  a  corporation  must  be  of  the  corporation  to  amendments 
accepted  ;  but  in  cases  of  private  cor-  might  be  inferred  from  acts  or  omis- 
porations  created  for  individual  bene-  sions  inconsistent  with  any  other  hy- 
fit,  the  presumption  is  that  they  are  pothfsis.  See,  also,  Hope  Ins.  Co.  v. 
created  at  the  instance  and  request  of  Koeller,  id.  129. 

the  parties  to  be  benefited  thereby,  '  Logan  v.  McAllister,   3  Del.   Ch. 

and,    consequently,   are   accepted   by  176. 
them.     If,  therefore,  they  are  found 


How  Corporations  are  Created.  33 

sarj  to  bring  it  into  operation.  But  an  express  or  formal  decla- 
ration of  acceptance  is  not  required.  Organizing  and  acting 
under  a  charter  is  sufficient  evidence  of  acceptance."  ' 

"We  shall  hereafter  consider  the  nature  and  character  of  the 
accepted  charter  or  corporate  contract  of  a  corporation  instituted 
for  private  purposes,  and  illustrate  the  distinctions  between  them 
and  public  corporations. 

Sec.  2S.  The  term  "  constating  instruments."  —  It  will  be  apparent, 
from  what  has  been  said  in  relation  to  private  corporations  and 
the  modes  bj  which  tliey  may  be  created,  and  especially  of  the 
manner  in  which  they  are  usually  constituted  inthis  country,  that 
not  only  statutory  provisions,  but  various  instruments  in  writing 
are  required.  These  means  and  instruments  for  effecting  incor- 
poration may  be  numerous :  consisting  of  statutes,  articles  of  as- 
sociation, deeds  of  settlement,  by-laws  and  notices ;  some  of  which 
are  usually  required  to  be  recorded,  and  others  published.  The 
convenience  of  using  some  short  term,  to  express  all  of  these  fun- 
damental acts  and  instruments,  in  a  work  of  this  character,  will 
be  manifest.  We,  therefore,  adopt  for  this  purpose  the  term 
"constating  instruments." ° 

Sec.  29.  Organization  of  a  corporation  ;  how  proved.— The  life  of 
a  corporation  dates  from  the  period  of  its  organization,  and  not 

'  See,    also,     Goodin  v.   Evans,    18  its  exact  meaning  with   the   circum- 

Ohio  St.  150.  stances."     Brice's  Ultra  Vires,  38. 

^Ou  this  subject,  Mr.  Brice  says:  The  term  "constitution,"  observes 
"  It  may  here  be  observed,  that  the  Mr.  Redfield,  "  as  applied  to  corpora- 
expression  '  constating  instruments,'  tions,  is  susceptible  of  being  used  in 
will  very  generally  be  employed  in  very  different  senses.  It  may  imply 
this  work  to  signify  the  document  or  nothing  more  than  the  charter  or  for- 
collection  of  documents  which  fix  the  mal  grant  of  corporate  organization 
constitution  of  any  corporation.  These  and  powers  by  the  sovereignty,  or  it 
documents  are  very  various,  charters,  may  be  applied  to  certain  fundamental 
letters-patent,  statutes  of  the  founder,  principles,  declared  by  the  corporators 
acta  of  parliament,  by-laws,  deeds  of  themselves,  as  the  unalterable  basis 
settlement,  articles  of  association,  and  of  the  organization  of  the  body  ;  or  if 
not  unfrequeutly  they  will  be  very  not  wholly  unalterable,  not  to  be 
numerous  and  lengthy,  the  original  altered,  except  by  the  adoption  and 
muniments  having  been  added  to  or  concurrence  of  certain  formalities  not 
modified  by  many  subsequent  proceed-  likely  to  occur,  except  in  regard  to 
ings,  resolutions  and  the  like.  There-  changes  of  very  obvious  necessity  ;  or 
fore  it  will  be  far  more  convenient  to  the  term  may  be.  used  to  signify  the 
have  one  single  term  always  denoting  constituent  members,  or  different 
the  same  general  fact,  but  varying  in  bodies   of   which   the   corporation    is 

composed."    1  Redf.  on  Rail.,  §  17. 

5 


34  Pkivate  Cokpoeations. 

from  the  time  when  it  begins  to  do  business  as  such.'  In  other 
words,  a  corporation,  as  such,  is  put  on  foot,  and  imbued  with  cor- 
porate Hfe,  when  the  requisite  steps  have  been  taken  to  perfect 
its  organization  as  a  distinctive  body.  From  that  time  it  may 
sue  or  be  sued  in  its  corporate  name,  akhougli  no  business  has 
ever  been  done  by  it,  and  has  a  valid  existence  as  an  artificial  per- 
son, for  all  the  purposes  for  which  it  was  created,  within  the 
scope  of  the  powers  conferred  upon  it  by  law,  but  prior  to  that 
time  it  has  no  existence.  In  order  to  perfect  an  organization,  all 
the  requirements  of  the  charter,  or  of  the  statute  under  which  it 
is  organized,  should  be  complied  witli,  and  the  proper  evidence 
thereof  is  the  record  of  the  organization."  It  is  under  this  rule 
that  it  is  held  that  claims  for  money  expended  hefore  its  organi- 
zation cannot  be  enforced  against  it  as  a  debt  of  the  corporation 
after  it  is  organized.  Prior  to  its  organization  it  could  not  make 
any  contract,  because  it  had  no  existence  ; '  and  tliis  rule  applies 
where  the  statute  requires  that  the  articles  of  association  shall 
be  filed  in  a  certain  public  office  as  a  preliminary  step,  before 
entering  upon  the  transaction  of  business ;  but  in  such  case 
copies  of  the  articles  so  filed,  made  by  the  proper  officer,  are 
competent  evidence  of  its  authority  to  do  business  as  a  cor- 
poration.^ After  a  company  has  been  in  operation  for  several 
years  as  a  corporation,  without  any  question  as  to  the  regularity 
of  its  organization,  its  due  organization  will  be  presumed,^  and 
where  the  organization  is  defective  in  any  material  respect,  the 
legislature  has  power  to  cure  the  defect,  so  as  to  legalize  its  acts, 
ah  initio.'^  And  where  the  legislature,  subsequent  to  the  oi'gani- 
zation  of  a  corporation,  recognizes  it  as  such,  it  is  held  that  i's 
organization  is  thereby  validated.'     The  word    "organized"  or 

1  Hanna  v.  International  Petroleum  24  Me.  256  ;  Bank  of  the  United  States 

Co.,  23  Ohio  St.  622.  v.  Lyman,  20  Vt.  606. 

'•*  Bowyer  v.    Giles,    etc.,    Turnpike  ^  Illinois,  etc. ,  R.  R.  Co.  v.  Cook,  29 

Co.,  9    Gratt.    (Va.)   109;   Warner  v.  111.  237;  Goodrich  v.  Reynolds,  31  id. 

Daniels,  1  Woodb.  &  M.  (U.  S.  C.  C.)  490  ;  Kanawha  Coal  Co.  v.  Kanawha, 

90.  etc.,  Coal  Co.,  7  Blatchf .  391. 

^  Marchand   v.   Loan,   etc.,   Associa-  "^  Cayuga,  etc. ,  R.  R.  Co.  v.  Kyle,  64 

tion.  26  La.  Ann.  389.  N.  Y.  185.     An  irregularity  in  the  or- 

*  Buffalo,  etc.,  R.  R.  Co.  v.  Hatch,  ganization  of  a  company  cannot  be 
20  N.  y.  157;  Jones  v.  Dana,  24  Barb,  taken  advantage  of  by  one  dealing 
(N.  Y  )  395  ;  Chamberlin  v.  Hugue-  with  the  company.  Frost  v.  Frost- 
not  M'fg  Co.  118  Mass.  532.  burg  Coal  Co.,  24  How.  (U.   S.)  278. 

^  Chester   Glass   Co.    v.    Dewey,  16  The  directors  of  a  corporation  have  no 

Mass.  94  ;  Agricultural  Bank  v.  Burr,  power  to  issue  certificates  of  stock,  for 


How  Corporations  are  Created. 


35 


"organization  "  as  aj)plicable  to  corporations  ordinarily  means  the 
election  of  officers  constituting  the  body  complete  for  the  trans- 
action of  business'  and  tlie  performance  of  such  other  acts  or  con- 
ditions precedent  as  may  be  provided  by  law/  Even  where  the 
organization  of  a  corporation  is  defective,  if  it  was  organized  in 
good  faith,  it  may  be  sustained  as  a  de  facto  corporation  where 
the  question  as  to  its  regularity  is  only  raised  collaterally;'  and  the 
corporation  itself  is  estopped  from  setting  up  its  own  want  of  cor- 
porate capacity,  where  it  has  claimed  to  act  as  such,*  and  upon 


any  purpose,  for  a  less  price  than  the 
sum  fixed  by  the  charter  ;  shares  so 
issued  are  void  in  the  liands  of  the 
party  receivinj^  them.  Sturges  v. 
Stetson,  3  Phila.  (Penn.)  304.  And 
a  purcliaser  of  such  stock,  who  has 
paid  the  consideration,  is  entitled  to  a 
rescission  of  the  contract.  Fosdick  v. 
Sturges,  3  Phila.  (Peun.)  312.  The 
commissioners'  book    of  subscriptions 


\s  prima  facie  evidence  that  the  sub- 
scriptions were  genuine,  or  made  by 
persons  duly  authorized.  And  the 
fact  that  the  defendant  was  appoint(;d, 
by  the  stockholders,  one  of  its  mana- 
gers, and  acted  as  such,  is  prima  f<tcie 
evidence  of  an  admission,  on  his  part, 
of  the  existence  of  the  corporation. 
Rockville  and  Washington  Turnpike 
Road  V.  Van  Ness,  2  Cranch  (C.  C),  449. 


'  New  Haven,  etc.,  R.  R.  Co.  v.  Chap- 
man, 38  Conn.  56. 

"^  Where  a  corporation  has  gone  into 
operation  as  such,  and  rights  have 
been  acquired  under  it,  every  reason- 
able presumption  will  be  made  in 
favor  of  its  legal  existence.  Hagers- 
town  Turnpike  v.  Cruger,  5  Harr.  &  J. 
(Md.)  122.  But  if  a  body  acting  as  a 
corporation  has  in  fact  no  legal  exist- 
ence as  such,  it  will  be  treated  as  a 
partnership.  Hill  v.  Beach,  12  N.  J. 
Eq.  31. 

^Ossippee  Hosiery,  etc.,  M'f'g  Co.  v. 
Canney,  54  N.  H.  295  ;  Swartwout  v. 
Michigan,  etc.,  R.  R.  Co.,  24  Mich. 
389  ;  Aurora,  etc.,  R.  R.  Co.  v.  Miller, 
56  Ind.  88  ;  Thompson  v.  Candor,  60 
111.  244.  In  Walworth  v.  Brackett, 
98  Mass.  98,  three  persons  were 
named  in  an  act  as  corporators,  and 
one  of  them  called  a  meeting  of  the 
subscribers  to  the  capital  stock  for  the 
purpose  of  organizing  and  electing  the 
necessary  officers,  and  the  others  made 
no  objection  thereto,  and  never  made 
any  claim  to  the  exercise  of  the  corpo- 
rate powers.  It  was  held  that  although 
the  mode  of  organization  was  not  in  ac- 
cordance with  the  requirement  of  the 
statute,  yet  as  against  all  persons  but 
the  state,  the  organization  was  valid, 
and  that  after  the  corporation  was  so 
organized,  and  had  elected  its  officers 


and  carried  on  business  as  a  corpora- 
tion, it  was  too  late  to  deny  that  the 
corporation  ever  had  any  legal  exist- 
ence. Blair  v.  Rutherford ,  31  Tex. 
465;  Comm.  v.  Bakeman,  105  Mass. 
53.  In  Barrett  v.  Mead,  10  Allen,  337, 
it  was  held  that  proof  that  a  company 
had  attempted  to  form  an  organization 
under  the  statutes  of  another  state, 
and  had  transacted  business  as  a  cor- 
poration de  facto,  and  that  its  certifi- 
cates of  shares  contain  a  recital  that  it 
was  organized  under  the  general  laws 
of  that  state,  is  sufficient,  in  the  ab- 
sence of  any  thing  to  control  it,  to  au- 
thorize a  jury  to  find  that  the  company 
was  duly  incorporated,  in  a  case  in 
which  the  fact  is  only  collaterally  in 
issue.  In  Narragansett  Bank  v.  Atlan- 
tic Silk  Co.,  3  Mete.  (Mass.)  282,  it 
was  held  not  necessary  to  prove  that  a 
company  had  complied  with  the  re- 
quirements of  the  statute  in  its  organi- 
zation, but  that  it  was  generally  suf- 
ficient to  give  in  evidence  the  act  of 
incorporation  and  tJie  actual  itse  of  the 
powers  and  privileges  of  an  incorporated 
companij  under  the  name  designated. 
See,  also.  Farmers  &  Mechanics'  Bank 
V.  Jenks,  7  Mete.  (Mass.)  592. 

■*  Dooley  v.  Cheshire  Glass  Co.,  15 
Grav,  494;  Merrick  v.  Reynolds  En- 
gine &  G.  Co.,  101  Mass.  381  ;  Priest 
V.  Essex  Hat  M'f'g  Co.,  115  id.  380. 


36  Private  CoRPORA'noNS. 

the  other  hand  it  is  held  that  a  person  who  contracts  with  another 
as  a  corporation  is  estojjped  to  deny  the  legal  existence  of  such 
corporation.'  Prima  facie,  in  an  action  on  a  note  given  to  a 
foreign  corporation  by  their  corporate  name,  the  production  of 
the  note  is  sufficient  evidence  of  the  due  organization  of  the  cor- 
poration and  its  competency  as  such  to  do  business,  but  not  if  the 
fact  of  organization  is  denied  in  the  answer.''  Thus  in  an  action 
by  the  indorser  of  a  note,  payable  to  the  "  Continental  Insurance 
Company,"  it  was  held  sufficient  lyrima  facie  to  establish  the 
legal  existence  of  a  corporation  bearing  that  name,'  and  a  writ  in 
an  action  upon  a  bond  which  describes  the  plaintiffs  as  a  corpora- 
tion, the  execution  of  the  bond  being  proved,  was  held  to  afford 
'prima  facie  evidence  of  the  plaintiff's  incorporation.*  Where  an 
action  is  brought  by  a  corporation,  and  the  answer  denies  the  ex- 
istence of  such  a  corporation,  the  plaintiff  is  bound  to  prove  its 
corporate  existence  as  a  fact,*  and  it  seems  that,  where  the  decla- 
ration alleges  that  the  plaintiff  is  a  corporation,  and  the  answer 
contains  a  general  denial  of  each  and  every  allegation  in  the 
plaintiff's  declaration  or  complaint  contained,  that  the  plaintiff's 
incorporation  is  thereby  put  in  issue,'  but,  unless  put  in  issue  by 
the  answer  or  pleadings,  it  is  treated  as  admitted,  and  cannot 
be  questioned  upon  the  trial.'  The  proper  method  of  proving 
corporate  existence  is  by  the  production  of  the  act  of  incorpora- 
tion or  the  articles  of  association,  and  proving  the  election  of  offi- 
cers or  the  exercise   of  corporate  powers  thereunder,"  but,  where 

'  Worcester  Medical    Inst.  v.  Hard-  "^  Plymoutli  Christian  Society  v.  Ma- 

ing,  11  Gush.  285.  comber,  3  Mete.  (Mass.)  235. 

'^Williams  v.  Cheney,  3  Gray,   215.  ^  Chamberlain    v.    Huguenot    M'f'g 

3  Topping  V.  Bickfor'd,  4  Allen,  120.  Co.,  118  Mass.  533.  A  charter  and  user 
A  note  made  payable  at  "Hunger-  under  it  affords  presumptive  proof  in 
ford  National  Bank  "  was  held,  in  an  the  first  instance  of  the  legal  exist- 
action  by  tlie  "  Hungerford  National  ence  of  a  corporation.  People  v.  B^  ig- 
Bank"  thereon,  not  to  atford  conclu-  ler,  Hill  &  Denio,  133.  And  are  all  that 
sive  evidence  that  the  plaintiffs  are  a  a  corporation  is  called  upon  to  prove, 
corporation,  but  as  evidence  of  the  to  establish  its  existence,  in  a  litiga- 
fact  which  should  be  submitted  to  the  tion  with  individuals  dealing  with  it. 
jury.  Hungerford  National  Bank  v.  Jones  v.  Dana,  24  Barb.  ;i95  ;  Method- 
Van  Nostrand,  106  Mass.  559.  ist,   etc..   Church  v.  Pickett,  19  N.  Y. 

^  Williamsburffh  Ins.  Co.  v.  Froth-  482.      The    validity    of   its   corporate 

ingliam,  122  Mass.  391.  existence  can  only  be  tested  by  pro- 

5  Gott  V.  Adams' Ex.  Co.,  100  Mass.  ceedings    in    behalf    of    the     people. 

o20.  Whether  it  has  been  properly  organ- 

*Mosler   v.    Potter,    121    Mass.    89;  ized  or  not,  according  to  its  charter,  is 

Hebron  Church  v.  Smith,  121  id.  90,  n.  a  question  that  cannot  be  made  col- 


How  Corporations  are  Created. 


37 


this  cannot  be  conveniently  done,  proof  of  the  exercise  of  corpo- 
rate powers  by  the  alleged  corporation,  under  the  corporate  name, 
Ys, prima  facie  sufficient,'  and  especially  is  this  so  if  the  act  of  in- 
corporation or  a  certificate  of  association,  certified  by  the  proper 
officer,  is  produced.'  If  a  corporation  refuses  to  produce  its  books 
of  record  upon  notice  to  do  so,  parol  proof  of  its  organization  or 
election  of  officers  and  agents  is  admissible.^ 


laterally,  but  only  by  direct  proceed- 
ings against  the  corporation.  Wight 
V.  Shelby  Railroad  Co.,  IG  B.  Monr.  4. 

So  tlie  determination  of  the  board 
of  commissioners  appointed  by  the 
comptroller  to  make  examination  for 
that  purpose,  that  an  insurance  com- 
pany has  the  requisite  amount  of  capi- 
tal and  premium  notes,  is  conclusive 
as  to  the  existence  of  the  corporation, 
until  that  existence  is  impeached  by 
such  proceedings.  Jonea  v.  Dana,  24 
Barb.  395. 

The  act  of  incorporation  being  in 
the  case,  it  is  competent,  in  order  to 
prove  the  existence  of  the  corpora- 
tion, to  show  by  parol  that  the  cor- 
porators were  acting  under  their  char- 
ter and  enjoying  the  franchises 
thereby  granted  to  them.  Wilming- 
ton and  Manchester  Railroad  Co.  v. 
Saunders,  3  Jones'  L.  126. 


The  defendant,  whom  it  ia  attempted 
to  hold  liable  for  a  debt  of  a  cor- 
poration which  has  been  judicially  re- 
cognized as  duly  organized  under  the 
act  of  1811  and  has  acted  as  such  over 
twenty  years,  and  in  which  the  de- 
fendant held  stock  till  its  dissolution, 
will  not  be  heard  to  deny  the  legal  in- 
corporation of  the  company,  in  the 
action  against  him.  Mead  v.  Keeler, 
24  Barb.  20.  It  is  not  essential  that 
the  acceptance  of  a  charter  should  ap- 
pear on  the  records  of  a  corporation. 
It  may  be  inferred  from  acts  of  the  cor- 
porators, or  of  the  corporation.  Taylor 
V.  Newberne,  2  Jones'  Eq.  (N.  C.)  141. 

Evidence  that  it  is  reputed  to  be  a 
corporation  and  acts  as  such  has  been 
held  sufficient  even  in  a  case  where  a 
person  was  charged  with  issuing  coun- 
terfeit bills  on  a  reputed  bank.  State 
V.  Pindal,  5  Harr.  (Del.)  488. 


'  Hungerford  Bank  v.  Van  Nostrand, 
ante;  Merchants'  Bank  v.  Gleudon 
Co.,  120  Mass.  97  ;  Topping  v.  Bick- 
ford,  ante.  In  Anderson  v.  Kanawha 
Coal  Co.,  12  W.  Va.  526,  a  deed  of 
trust  executed  by  a  corporation,  in 
which  the  due  organization  of  the  cor- 
poratiou  was  recited,  was  held  ad- 
missible as  evidence  of  the  defend- 
ant's legal  existence  as  a  corporation. 

^  In  Merchants'  Bank  v.  Glendon  Co., 
ante,  the  plaintiff  brouirht  an  action 
describing  iUe]f  as  the  Merchants'  Na- 
tional Bank  of  Bausror,  organized  un- 
der the  laws  of  the  United  States,  and 
having  its  place  of  business  in  Bangor 
in  the  state  of  Maine.  Its  corporate 
existence  being  put  in  issue,  in  order 
to  prove  it,  it  produced  a  certificate  of 


the  comptroller  of  the  currency  that 
it  had  been  duly  organized,  and  the 
testimony  of  a  book-keeper  of  a  bank 
in  Boston,  that  the  Merchants'  Na- 
tional Bank  of  Bangor  did  a  banking 
business  under  that  name,  and  that  he 
had  been  iu  their  banking-house  in 
Bangor,  and  was  well  acquainted  with 
the  cashier,  and  that  his  own  bank 
was  in  the  habit  of  receiving  remit- 
tances from  the  Merchants'  National 
Bank  of  Bangor ;  and  this  was  held 
sufficient  to  establish  the  existence  of 
the  plaintiff  as  a  de  facto  corporation. 
See,  also,  to  the  same  effect,  Washing- 
ton Co.  Bank  v  Lee,  112  Mass.  521. 

^Thayer  v.  Middlesex  Ins.  Co.,  10 
Pick.  326;  Narragansett  Bank  v.  At- 
lantic Silk  Co.,  3  Mete.  (Mass.)  282. 


38  Pkivate  Cokporations. 


CHAPTER  III. 

PRIVATE    CORPORATIONS NATURE   AND   CHARACTER   OF. 

Sec.  30.  Distinction  between  public  and  private  corporations. 

Sec.  31.  Legislative  control  of  public  corporations. 

Sec.  32.  Private  corporations  —  doctrine  in  reference  to  legislative  control 

over. 

Sec.  33.  Immunity  does  not  exempt  property  from  legislative  control. 

Sec  34.  Power  of  the  legislature  to  regulate  the  charges  of  railroads. 

Sec.  35.  Ground  on  which  legislative  power  is  predicated. 

Sec.  36.  Reason  for  the  exercise  of  such  power. 

Sec.  37.  Legislative  control  over  rate  of  charges  by  railroad  companies. 

Sec.  38.  Subsequent  grants  do  not  impair  the  contract  —  construction  of 

grants. 

Sec.  39.  Reservation  of  power  in  the  legislature. 

Sec.  40.  Right  to  resume  based  upon  misuse  or  abuse  of  its  franchise. 

Sec.  41.  The  power  to  resume  cannot  be  exhausted. 

Sec.  42.  General  statutes  reserving  the  power. 

Sec.  43.  Amendments  of  charters. 

Sec.  44.  Repeal  of  charter. 

Sec.  45.  General  implied  powers  of. 

Sec.  46.  Powers  conferred  or  limited  by  statute. 

Sec.  47.  Corporate  powers  limited  to  the  object  of  the  grant. 

Sec.  48.  Distinctions  between  corporate  and  copartnership  associations. 

Sec.  30.      Distinction  between  public  and  private  corporations We 

have  already  referred  to  some  of  tLe  characteristic  differences 
between  public  and  private  corporations ;  but  the  character  of 
this  treatise  demands  a  fuller  consideration  of  the  marked  dis- 
tinction between  them,  and  of  the  character  of  the  grants  creating 
them;  for  important  interests  frequently  depend  on  this  dis- 
tinction. We  have  said  that  public  corporations  were  those 
instituted  for  public  and  political  purposes  only,  and  in  which 
the  citizens  of  the  district  or  territory  are  supposed  to  have  a 
common  interest.  The  grant  of  such  corporate  privileges  is 
generally  made,  and  such  corporations  instituted,  without  the 
consent  of  the  corporators  or  members.  Public  corporations  may 
be  imposed  upon  a  people,  nolens  volens  /  and  they  do  not  par- 


Natuke  and  Chakacter  of. 


39 


take  of  the  nature  of  a  contract  between  the  state,  and  tlie  parties 
becoming  members  of  it,  by  the  mere  creation  of  tlie  corpoi'ation. 
They  are  members  solely  and  only  by  virtue  of  their  residence 
within  the  territorial  limits  of  tlie  locality,  that  is  constituted  the 
public  or  municipal  corporation  by  the  sovereign  authority.^  All 
private  corporations,  however,  are,  in  a  certain  sense,  of  public 
interest.  In  fact,  the  conferring  of  private  and  particular  powers 
and  franchises  upon  a  society  of  persons,  and  giving  them  privi- 
leges not  commonly  enjoyed  without  such  grant,  and  thereby 
surrendering  to  the  corporate  body  authority  which  otherwise 
must  remain  in  the  sovereignty  of  the  state,  can  only  be  justified 
on  the  ground  of  the  public  benefit  to  be  derived  from  the  grant, 
and  that  the  state  in  this  way  will  be  fully  indemnified  for  the 
surrender  or  transfer  of  its  supreme  rights,  in  respect  to  the 
authority  conferred/'' 

Seo.  31.      Legislative  controi  of  public  corporations. —  We  have  said 
that  public  corporations  are  such  as  are  established  for  public  and 


1  "  The  rule  which  applies  to  private 
corporations,  that  the  incorporating  act 
is  ineffectual  to  constitute  a  corporate 
body  until  it  is  assented  to  or  accepted 
by  the  corporators,  had  no  application 
to  statutes  creating  municipal  corpora- 
tions. *  *  *  All  who  live  within 
the  limits  of  the  incorporated  district 
are  bound  by  them,  and  can  only  with- 
draw from  the  corporation  by  re- 
moval."    1  Dill,  on  Corp.,  i^  23. 

^  Providence  Bank  v.  13illings,  4 
Pet.  (U.  S.)514;  Charles  River  Bridge 
V.  Warren  Bridge,  11  id.  544;  Rich- 
mond, etc.,  R.  Co.  v.  Louisa.,  etc.,  R. 
Co..  13  How.  (U.  S.)  71;  Bradley  v. 
New  York,  etc  ,  R.  Co.,  21  Conn.  294  ; 
Chenango  Bridge  Co.  v.  Binghamton 
Bridge  Co.,  27  N.  Y.  87;  State  v. 
Krebs,  64  N.  C.  604  ;  Pennsylvania  R. 
Co.  v.  Canal  Com.,  21  Penn.  St.  22  ; 
Mills  V.  Williams,  11  Ired.  558.  In 
this  case  the  court,  by  Parsons,  J., 
say:  "  The  purpose  in  making  all  cor- 
porations is  the  accomplishment  of 
some  public  good .  Hence,  the  division 
into  public  and  private  has  a  tendency 
to  confuse  and  lead  to  error  in  investi- 
gation ;  for  unless  the  public  are  to  bo 
benefited  it  is  no  more  lawful  to  con- 


fer exclusive  rights  and  privileges 
upon  an  artificial  body  than  upon  a 
private  citizen.  The  substantial  dis- 
tinction is  this  ;  Some  corporations  are 
created  by  the  mere  will  of  the  legis- 
lature, there  being  no  other  party  in- 
terested or  concerned.  To  this  body 
a  portion  of  the  power  of  the  legisla- 
ture is  delegated,  to  be  exercised  for 
the  public  good,  and  subject  at  all 
times  to  be  modified,  changed  or  an- 
nulled. Other  corporations  are  the 
result  of  contract.  The  legislature  is 
not  the  only  party  interested  ;  for  al- 
though it  has  a  public  purpose  to  be 
accomplished,  it  chooses  to  do  it  by  the 
instrumentality  of  a  second  party. 
These  two  make  a  contract.  The  ex- 
ception of  benefit  to  the  public  is  the 
moving  consideration  on  one  side;  that 
of  expected  remuneration  for  the  out- 
lay is  the  consideration  on  the  other. 
It  is  a  contract,  and  ,  therefore,  cannot 
be  modified,  changed  or  annulled, 
without  the  consent  of  both  parties. 
Counties  are  an  instance  of  the  former, 
railroad  and  turnpike  companies  of 
the  latter,  class  of  corporations.''  Penn. 
R.  Co.  V.  Canal  Com.,  31  Penn.  St.  22. 


40  Private  Corpokations. 

municipal  purposes,  or  sucli  as  are  constituted  for  civil  and  local 
government.  Incorporations  of  this  character  constitute  no  con- 
tract between  the  state  and  the  corporation.  The  powers  and 
franchise  thereby  conferred  are  always  subject  to  the  right  of  the 
authority  conferring  them,  to  resume  or  modify  and  control  them 
at  pleasure.  The  power  of  the  legislature  over  such  corporations 
is  only  restrained  in  certain  cases  by  constitutional  limitations. 
It  may  change  or  abolish  them,  as  it  may  deem  the  public  interest 
requires.' 

And  it  may  be  affirmed  as  a  principle,  based  upon  the  soundest 
public  policy,  that  where  public  or  municipal  corporations  are 
created,  the  special  powers  conferred  upon  them  for  local  govern- 
ment are  not  vested  rights  as  against  the  state,  but  may  be 
changed  at  pleasure  by  the  legislature.  "  Otherwise,"  in  the 
language  of  Justice  McKean,  "  there  would  be  numberless  petty 
governments  existing  within  the  state  and  forming  part  of  it,  but 
independent  of  the  control  of  sovereign  power."  '^  And  such 
powers  may  be  abolished,  qualified,  changed  or  limited,  either  by 
a  special  act  for  that  pur|)ose,  or  by  general  provisions  relating  to 
all  such  corporations.'  On  this  subject  the  supreme  court  of 
Louisiana  say :  "  The  government  of  cities  and  towns,  like  that 
of  the  police  jury  of  parishes,  forms  one  of  the  subdivisions  of  in- 
ternal administration  of  the  state,  and  is  absolutely  under  the 
control  of  the  legislature.  The  laws  which  establish  and  regulate 
municipal  corporations  are  not  contracts,  but  ordinary  acts  of 
legislation,  and  the  powers  they  confer  are  nothing  more  than 
mandates  of  the  sovereign  power ;  and  those  laws  may  be  repealed 
or  altered  at  the  will  of  the  legislature,  except  so  far  as  the  repeal 

'Allen  V.  McKeen,  1   Sumner,   276  liable   for   corporate   debts,   but    the 

(opinion   by    Story,   J.)  ;    People   v.  property  of   the   members   of   public 

Morris,  13  Wend.  325,  in  which  Nel-  corporations  was  liable  to  be  taken  to 

SON,  J.,  said  :  "  It  is  an  unsound  and  satisfy  a  judgment  against  the  corpo- 

even  an  absurd  proposition  that  politi-  rate  body.     Adams  v.  Wicasset  Bank, 

cal  power  conferred  by  the  legislature  1  Me.  364;  Brewer  v.    New  Glouces- 

can  become  a  vested  right  as  against  ter,  14  Mass.  216;  Marcy  v.  Clark,  17 

the  government,  in  any  individual  or  id.  333;  Comm.  v.  Blue  Hill  Turnpike 

body  of  men ."  Co.,  5  id.  420 ;  Atwater  v,  Woodbridge, 

A  marked  distinction  between  pub-  6  Conn.  223. 

lie  and  private   corporations  at  com-  'State  Bank  v.  Knoop,  16  How.  (U. 

mon  law  was  the  difference  in  the  in-  S.)  .369. 

dividual  liability  of  the  corporators.  'Id.     See,  also,  Sloan  v.   State,  8 

In  private  corporations  they  were  not  Blackf .  (Ind.)  361. 


KaTURE    and    CnARACTEE   OF. 


41 


or  change  may  affect  tlie  rights  of  third  persons  acquired  under 
them."  ' 

As  public  corporations  are  not  strictly  embraced  within  the 
scope  of  this  treatise,  we  have  only  alluded  to  them  for  the  pur- 
pose of  pointing  out  some  of  the  fundamental  distinctions  between 
them  and  private  ones. 

Sec.  32.  Private  corporations  —  doctrine  in  reference  to  legislative 
control  over. —  The  doctrine,  as  to  tlie  right  of  the  legislature  of 
the  state  to  affect  the  corporate  rights  of  public  corporations,  has 
no  application  at  common  law  to  private  corporations.  The  ac- 
ceptance of  the  charter  or  act  of  incorporation  for  private  purposes 
constitutes  a  contract,  which  thereby  becomes  irrevocable  between 
the  parties  thereto,  viz.:  the  state  and  the  corporation.  There 
is  no  necessity  for  private  parties,  intended  to  be  benefited  by 
legislative  acts  of  incorporation,  to  accept  the  same.  They  cannot 
be  compelled  to  accept  an  offer  of  corporate  privileges.     But, 


'  Police  Jury  v.  Shreveport,  5  La. 
Ann.  661.  See,  also,  State  Bank  v. 
Navigation  Co.,  Sid.  294;  Reynolds  v. 
Baldwin,  1  id.  163;  Haynes  v.Munici- 
palitv,  5  id.  760 ;  Board  v.  Munici- 
pality, 6  id.  21  ;  East  Hartford  v.  Hart- 
ford Bridge  Co. ,  10  How.  (U.  S.)511; 
Trustees  v.  Tatnian,  13  111.  30,  in  which 
WooDBURr,  J.,  remarks  in  reference 
to  municipal  corporations  :  "They  are 
allowed  privileges  or  property  only 
for  public  purposes.  The  members 
are  not  shareholders  nor  joint  partners 
in  any  corporate  estate  which  they  can 
sell  or  devise  to  ottiers,  or  whicli  can 
be  attached  or  levied  upon  for  their 
debts.  Hence,  generally,  the  doings 
between  them  aud  the  legislature  are 
in  the  nature  of  legislation  rather  than 
a  compact, and  subject  to  all  the  legis- 
lative conditions  named,  and  therefore 
to  be  considered  as  not  violated  by 
subsequent  legislative  changes."  See, 
also,  Ten  Eyck  v.  Canal  Co..  18  N.  J.  L. 
200;  Hanson  v.  Vernon,  27  Iowa,  28  ; 
Regents,  etc.,  v.  Williams,  9  Gill  &  J. 
(Md.)  865  ;  Norris  v.  Trustees,  etc.,  7 
id.  7  ;  Patterson  v.  Society,  etc.,  24 
N.  J.  L.  385  ;  Baltimore  v.  Board  of 
Police,  15  Md.  376  ;  Penobscot  Boom 
Corporation  v.  Lamson,   16  Me.  334  ; 

6 


Yarmouth  v.  North  Yarmouth,  34  id. 
411  ;  North  Yarmouth  v.  Skilliuga,  45 
id.  133;  Qirard  v.  Philadelphia,  7  Wall. 
1.  As  to  the  distinction  between  pub- 
lic and  private  corporations,  see 
People  V.  Wren.  5  111.  273  ;  Holliday 
V.  People,  10  111.  316;  Richland 
County  V.  Lawrence  County,  12  111.  8; 
Gutzweller  V.  People,  14  id.  145  ;  State 
V.  St.  Louis  County  Court,  34  Mo.  564; 
Llovd  V.  Mayor,  etc.,  of  New  York,  5 
N.Y.  369;  Lowber  v.  Mavor,  7  Abb. 
Pr.  248  ;  Aurora  v.  West,  9  Ind.  74  ; 
Plymouth  v.  Jackson,  15  Penn.  St.  44. 
Public  corporations  are  such  as  are 
created  for  political  purposes,  but  a 
corporation  is  not  public  merely  be- 
cause its  object  is  of  a  public  charac- 
ter. Tinsman  v.  Bel.  Del.  R.  R.  Co. 
26  N.  J.  L.  148  ;  Marietta  v.  Fearing, 
4  Ohio,  427  ;  State  v.  Mayor,  etc.,  24 
Ala.  701  ;  Governor  v.  ^IcEwen,  5, 
Humph.  241 ;  Grogan  v.  San  Francisco, 
18  Cal.  590  ;  Darlington  v.  Mavor,  etc., 
31  N.  Y.  164;  Saving  Fund  "Society, 
etc.,  V.  Philadelphia,  31  Penn.  St. 
175  ;  Philadelphia  V.  Field,  58  id.  320  ; 
Erie  V.  Canal  Co.,  59  id.  174;  Dun- 
more's  Appeal,  52  id.  374  ;  Blandiug 
V.  Burr,  13  Cal.  343. 


42  Pkivate  Cokpokations. 

when  once  accepted,  the  rights  of  the  corporation  under  the  same 
cannot  be  prejudiced  by  any  subsequent  legishition,  unless  the 
rio-ht  so  to  do  has  been  reserved  by  the  creating  charter  or  act,  or 
is  reserved  by  some  general  law  in  existence  when  the  charter  was 
granted,  which  is  applicable  to  all  corporations  formed  after  its 
passage,'  in  which  case  the  power  to  amend  or  repeal  exists,  al- 
thou'di  the  charter  contains  no  words  in  express  terms  so  declar- 
ino-.'^  But  this  is  subject  to  the  restriction  that  no  such  amend- 
ment can  be  made  which  defeats  or  substantially  impairs  the  object 
of  the  grant  or  any  vested  rights  under  it." 

The  contract  thus  constituted  comes  within  the  meaning  of  the 
federal  constitution,  inhibiting  the  passage  of  any  law  impairing 
the  obligation  of  contracts.  And  unless  there  is  a  reservation  of 
the  right  to  resume  or  amend  a  charter  or  act,  contained  in  it,  or 
in  some  general  law,  or  in  the  constitution  of  the  state,  thus  mak- 
iu"-  it  a  part  of  the  terms  of  the  contract- between  the  state  and  the 
corj^orators,  it  comes  within  the  constitutional  provision,  which 
secures  contracts  from  being  impaired  by  subsecpient  legislation/ 
The  charter,  although  a  law,  is,  in  such  cases,  something  more  than 
a  law ;  it  is  also  a  contract  between  the  government  and  the  cor- 
poration, and  the  legislature  cannot  alter,  rej)eal,  or  in  any  manner 
impair,  the  rights  or  privileges  conferred  without  the  consent  of 
the  corporation."     This  rule  extends  even  to  the  curtailment  of 

1  State  V.  PersoD,  32  N.  J.  L.  134  ;  wealth  v.  Ciillen,  13  Penn.  St.  138  ; 
affirmed,  id.  56(5  ;  State  v.  Miller,  29  Dartmouth  College  v.  Woodward,  4 
id.  369  ;  State  v.  Douglass,  34  id.  83.  Wheat.  (U.  S.)  518.     The  charter  of  a 

2  Id.  private  corporation  is  something  more 

3  Inland  Fishery  Comm'rs  v.  Holyoke  than  a  law,  in  that  it  contains  stipula- 
Water  Power  Co.,  104  Mass.  446  ;  Hoi-  tious  which  are  terms  of  contract  be- 
yoke  Co.  v.  Lyman,  15  Wall.  500;  tween  the  state  as  one  party  and  the 
Thornton  v.  Marginal  Freight  Rail-  corporation  as  the  other,  and  is  as 
■way,  123  Mass.  32  ;  Worcester  v.  N.  much  removed  from  the  modifying 
&  W.  R.  R.  Co.,  109  id.  103.  influence  of  the  legislature    as  would 

■1  Mechanics'  Bank  v.  Debolt,  1  Ohio  be    contracts    between     two     private 

St.  591 ;  State  v.  Southern,  etc.,  R.  Co.,  parties.     Flint  v.  Woodhull,  25  Mich. 

24  Tex.  80;  Const.,  art.  1,§  10.  99.       Allen    v.     Buchanan,    9    Phila. 

^  Young    V.    Harrison,    6    Ga.    1.30;  283;  Mowrey  v.   Indianapolis,  etc.,  R. 

Maysville  Turnpike  Co.  v.  How,  14  B.  Co.,  4  Biss.  (U.  S.  C.  C.)  78.     Where  a 

Monr.  429  ;  Commercial  Bank  v.  State,  corporation    was    established    by    the 

14  Miss.  599;  New   Orleans,   etc.,   R.  concurrent  action  of  ^(oo  states,  it  was 

Co.  V.  Harris,  27    id.   517  ;  Backus   v.  held    to    be   not   only    a    contract  be- 

Lebanon,  11   N.  H.    19  ;    Zabriskie  v.  tween   the    states  and    the    company, 

Hackensack,  etc.,  R.  Co.,  18  N.  J.  Eq.  but  also  between  the  two  states,  and, 

178;  Bank  of  State  v.  Bank   of  Cape  therefore,  not  subject  to  interpretation 

Fear,  13  Ired.  (S.  C.  L.)  75  ;  Common-  by  the  local  usages  of  either,  and  that 


Nature  and  Chakactee  of.  43 

the  powers  of  the  state  in  reference  to  the  exercise  of  what 
are  termed  its  police  powers,  which  enables  it  to  prohibit  all 
things  hurtful  to  the  peace,  welfare,  or  comfort  of  society,  and 
even  in  this  respect  the  state  is  subject  to  constitutional  limita- 
tions, and  when  applied  to  corporations  they  must  not  be  in  con- 
flict with  any  of  the  provisions  of  the  charter.*  So,  too,  while  the 
state  has  the  power  to  impose  taxes  upon  property,  yet  it  is 
within  the  province  of  the  legislature  to  exempt  property  from 
taxation,  or  to  stipulate  that  a  particular  rate  shall  be  imposed 
upon  certain  property,  and  if,  in  granting  a  charter  to  a  corpora- 
tion, it  provides  that  it  shall  pay  a  certain  per  cent  upon  each 
share  of  its  stock  in  lieu,  of  all  other  taxes,  the  state  has  no  power 
by  a  subsequent  law  to  impose  additional  taxation  upon  the  stock 
of  the  company/  In  the  case  of  Dartmouth  College  v.  Woorhoard, 
this  question  was  fully  considered  by  the  supreme  court  of  the 
United  States,  after  the  most  elaborate  arguments  by  eminent 
counsel/  Chief- Justice  Marshall,  upon  this  question,  remarks: 
"  The  objects  for  which  a  corporation  is  created  are  universally 
such  as  the  government  wishes  to  promote.  They  are  deemed 
beneficial  to  the  country,  and  this  benefit  constitutes  the  con- 
sideration, and,  in  most  cases,  the  sole  consideration  of  the  grant, 
*  *  *  If  the  advantages  to  the  public  constitute  a  full  con- 
sideration for  the  faculty  it  gives,  there  can  be  no  reason  for 
exacting  a  further  compensation,  by  claiming  a  right  to  exercise 
over  this  artificial  being  a  power  which  changes  its  nature,  and 
touches  the  fund,  for  the  security  and  application  of  which  it  was 
created.  There  can  be  no  reason  for  implying  in  a  charter  given 
for  a  valuable  consideration,  a  power  (to  change  or  amend  it) 
which  is  not  only  not  expressed,  but  is  in  direct  contradiction  to 


the  same  constructioa  must  be  made  State  v.  Mayor  of  Newark,  35  N.  J.  L. 

in  both.     Cleveland,  etc.,  R.  R.  Co.  v.  157;  Mobile,  etc.,  R.  R.    Co.   v.  Mose- 

Speer,    56    Penn.   St.  325.     Upon   the  ley,  53  Miss.  127 ;  Berthin  v.  Crescent 

general    proposition    see   Hamilton   v.  City,  etc.,  Slaughter-House  Co. ,  28  La. 

Keith,  5  Bush,  458 ;  Sala  v.  New  Or-  Ann.  210  ;  St.  Louis  v.  Manufacturers' 

leans,    2   Woods    (U.   S.  C.  C),    188;  Sa v.  Bank,  49  Mo. 574. 
Farrington  v.  Tennessee,  95  U.  S.  G79  ; 

'  Lake  View  V.  Rose  Hill  Cemetery,  679;   Scotland  County  v.  Missouri  & 

70  111.  191.  N.  R.  Co..  65  Mo.  123. 

«  Farrington  v.  Tennessee,  95  U.  S.  M  Wheat.  518. 


44  Private  Corporations. 

its  express  stipulations.  *  *  *  -pj^jg  jg  plainly  a  contract  to 
which  the  donors,  the  trustees  and  the  crown  (to  whose  rights  and 
obligations  New  Hampshire  succeeds)  were  the  original  parties. 
It  is  a  contract  made  upon  a  valuable  consideration.  It  is  a  con- 
tract for  the  security  and  disposition  of  property.  It  is  a  contract 
on  the  faith  of  which  real  and  personal  estate  has  been  conveyed 
to  the  corporation.  *  *  *  The  opinion  of  the  court,  after 
mature  deliberation,  is,  that  this  [the  charter]  is  a  contract,  the 
obligation  of  which  cannot  be  impaired  [by  legislative  acts]  with- 
out violating  the  constitution  of  the  United  States." 

It  may  be  affirmed,  under  the  doctrine  of  irrevocable  contract, 
as  established  in  the  case  last  cited,  that,  in  all  cases  of  corporate 
(jra)xU^  that  are  not  solely  for  the  purpose  of  furnishir\,g  ma- 
chinery for  the  government^  hut  for  'private  purposes  and  ob- 
jects^ if  accepted^  they  constitute  contracts  hetuoeen  the  state  and 
the  corporators  /  the  consideration  of  the  grant  received  by  the 
state  being  the  general  public  beneiit  to  be  derived  incidentally 
from  the  prosecution  of  the  objects  of  the  corporation,  and  the 
duties  which  it  assumes  in  accepting  of  the  grant ;  and  the  cor- 
porate powers  and  privileges  can  no  more  he  resumed  or  im- 
paired^ without  the  consent  of  the  corporators^  than  any  grant 
of  property  or  other  valuable  thing^  unless^  as  we  have  suggested, 
such  right  is  reserved  in  the  charter  or  act  creating  it^  or  in 
some  general  statute^  or  in  the  constitution  of  the  state.^  But 
where  the  right  to  alter,  amend,  or  repeal,  is  reserved  in  the 
charter,  or  by  a  general  law  in  existence  when  the  charter  was 
granted,  the  legislature  may  alter,  amend,  or  repeal  the  charter  at 
its  jDleasure,  without  restriction,  and  summarily,  and  the  courts 

'Id.     See,  also,  Trustees,  etc.,  v.  In-  Mich.  285;  Bank  of  State  v.  Bank  of 

diaiia,  14  How.   (U.  S.)  268 ;  Planters'  Cape  Fear,  13  Ired.  75  ;  Mills  v.  Wil- 

Baiik  V.  Sharp,  6  id.  301;  Piqua  Bank  liains,  11  id.  558;  Hawthorne  v.  Calef, 

V.    Kuoop,    16   id.    369  ;    Biu^hamton  2  Wall.  10;  Wales  v.  Stetson,  2  Mass. 

BridgB  Case,   3    Wail.    51;    Norris   v.  143;    State    v.    Tombeckbee    Bank,   3 

Trustees,  etc. ,  7  G.  &  J.  7;  Grammar  Stew.  30;  Central   Bride^e    v.    Lowell, 

School  V.  Burt,  11  Vt.  632  ;  People  v.  15  Gray,  106;    Bank  of  Old  Dominion 

Manhattan  Co  ,  9  Wend.  351;  Common-  v.  McVeio^h,  20  Gratt.  457;  Mowrey  v. 

wealth    V.   CuUen,  13  Penn.   St.    133;  Indianapolis,  etc.,   R.  Co.,  4  Bi.-'S.  78; 

Commercial   Bank,  etc.,  v.   State,    14  Citv   of  Covington   v.  Covington,  etc.. 

Miss.  599;  Backus   v.  Lebanon,  11  N.  Bridge  Co.,  10  Bush  (Ky.),  69;  Allen 

H.    19;    Edwards    v.   Jagers,   19    Ind.  v.  Buchanan,  9  Phil.  (Penn.) 281  ;  State 

407 ;    State    v.    Noyes,    47    Me.    189 ;  v.  Accommodation  Bank,  26  La.  Ann. 

BruflFett  v.  G.  W.  R.  Co.,  25  111.  353  ;  288. 
People   V.    Jackson,    etc.,   R.    Co.,    9 


Nature  and  Character  of.  45 

have  no  power  to  review  its  action,  except  where  the  power  is 
exercised  so  wantonly  and  carelessly  as  to  violate  the  principles 
of  natural  justice.^  A  charter,  as  previously  stated,  is  a  contract 
between  the  state  and  the  corporation,  and  the  corporation  takes 
the  grant  subject  to  the  limitations  which  are  contained  therein,  or 
in  general  laws  relating  thereto,  in  force  at  the  time  it  was 
granted.  If  no  power  of  repeal  is  reserved,  none  can  be  exer- 
cised; but  when  a  charter  itself  or  a  general  statute  provides  that 
the  charter  is  subject  to  repeal  by  the  legislature  at  its  pleasure, 
the  legislature  may  exercise  this  power  in  a  reasonable  manner, 
but  is  not  justified  in  the  unjust  and  despotic  exercise  of  the 
power.  The  theory  of  our  government  is  opposed  to  the  deposit 
of  unlimited  power  anywhere ;  the  executive,  the  legislative,  and 
the  judicial  branches  of  these  governments  are  all  of  limited  and 
defined  power.  But  it  is  always  to  be  presumed  that  the  legis- 
lature has  exercised  its  great  powers  for  adequate  cause,  and  it  is 
only  when  this  presumption  is  overcome  by  proof  that  it  has 
exercised  it  wantonly  and  carelessly,  or  despotically  and  unjustly, 
that  the  courts  will  interfere.''  A  power  to  repeal  a  charter  can- 
not be  implied,  and  unless  expressly  reserved  cannot  be  exercised. 
Thus,  a  reservation  of  a  power  "to  alter,  limit,  restrain,  or  annul 
the  powers  conferred,"  does  not  confer  upon  the  legislature  the 
right  of  absolute  repeal  of  the  charter,'  nor  does  the  right  to  re- 
peal a  charter  if  the  corporation  '■'' abuses  or  misuses  its  fran- 
chises "  justify  a  repeal  unless  such  causes  really  exist,  and  the 
courts  have  a  right  to  pass  upon  this  question  in  order  to  deter- 
mine the  validity  of  a  repealing  act.^ 

bEC.  33.  Immunity  does  not  exempt  property  from  regulation,  or  pro- 
hibit a  change  of  remedies.— But  even  in  case  there  is  no  reservation 
of  the  right  to  resume,  change,  or  abridge  the  powers  conferred 
on  a  private  corporation,  the  legislature  still  possesses  the  power 
to  regulate  the  sale  of  its  property  and  prescribe  the  methods  and 
extent  of  its  legal  remedies,  the  same  as  it  might  those  of  a  natu- 

'  Lotlirop  V.    Stedman,  13  Blatchf.  ^  Allen  v.  McKeeu,  1  Sura.  276. 

134  ;  Lotbrop  v.  Stedman,  42  Conn.  583.  •* Coram,  v.  Pittsburgh,  etc.,  K.  11.  Co., 

'■^Loan    Association    v.    Topeka,    20  58  Penu.  St.  46;  Erie  &  N.  E.  R.   R. 

Wall.  663;  Lotbrop  v.  Stedman,  ante.  Co.  v.  Casey,  26  id.  287. 


46  Pkivate  Corporations. 

ral  person.'  They  Jiave  immunity  from  injury  to  tlieir  absolute 
vested  rii^hts,  but  no  such  incidental  injuries  as  may  flow  from  a 
change  of  remedies ;  *  and  like  a  natural  person  they  are  subject 
to  those  regulations  which  a  state  may  reasonably  prescribe  for 
the  safety  or  good  government  of  the  community.'  Thus,  a  cor- 
poration may  be  compelled  to  fence  its  railroad  track ;  *  and  in 
Massachusetts  it  has  been  held  that  the  legislature  might  prohibit 
the  sale  of  malt  liquors  by  statute/  as  a  proper  police  regulation, 
and  that  the  prohibition  extended  to  and  affected  the  privileges  of 
a  corporation  in  that  respect  as  well  as  natural  persons,  although 
such  corporation  was  instituted  for  the  purpose  of  brewing  malt 
liquors,  and  the  legislature  possessed  no  power  to  resume  or  re- 
peal the  charter.'  And,  even  in  the  absence  of  any  reserved 
powers,  the  legislature  may  provide  a  remedy  more  effectually  to 
compel  a  corporation  to  perform  its  duties,  and  prescribe  the  man- 
ner in  which,  the  time  when,  and  the  court  where,  such  remedy 
may  be  enforced.' 

Sec.  3-i.  Power  of  the  legislature  to  regulate  the  charges  of  railroads. — 
The  question  whether  the  legislature  can  regulate  and  control  the 
rates  of  fare  and  freights  of  railroad  companies  has  recently  been 
the  subject  of  general  interest  and  controversy  as  well  as  of  judi 
cial  investigation ;  and  it  has  been  determined  by  the  supreme 
court  of  the  United  States,  that  such  regulation  may  be  made, 
unless  the  railroad  company  is  protected  therefrom  by  a  special 
provision  of  its  charter  or  by  the  general  statutes,  under  which  it 
is  organized.  The  court  has  determined  that  a  railroad  company 
can  only  charge  a  reasonable  fare  or  freight  as  a  common  carrier, 

^Bank  of  Republic  v.  Hamilton,  21  441.     So,  its  powers  may  bp  enlarged. 

111.  5^.  Gilford  v.  N.  J.  R.  Co.,  10  N.  J.  Eq. 

•2  Reapers'  Bank  v.  Willard,  24  111.  171 . 

433.  ^  Stat.  Mass.  1869,  chap.  415. 

^Galena,  etc.,  R.  Co.  v.  Loomis,  13  ^  Comm.  v.  Liquors,  llo  Mass.  153. 
111.  543  ;  Coffin  v.  Rich,  45  Me.  507  ;  '  Go  wen  v.  Penobscot  R.  Co.,  44  Me. 
State  V.  Noyes,  47  id.  189.  See,  also,  140.  See,  also,  Cummiuo;s  v  Maxwell, 
Ex  parte  N.  E.  &  S.  W.  R.  Co.,  37  45  id.  190;  Taggart  v.  Western,  etc., 
Ala.  G79.  The  general  power  of  the  R.  Co.,  24  Md.  5(J3.  And  the  charter  is 
legislature  to  legislate  for  the  protec-  not  impaired  by  an  act  of  the  legisla- 
tion of  the  life,  health  and  safety  of  ture  providing  for  the  redress  of  inju- 
the  inhabitants  of  a  state  cannot  be  ries  occasioned  by  the  negligence  or 
the  subject  of  an  irrevocable  grant  by  misconduct  of  railroad  or  other  corpo- 
it.     Dingman  v.  People,  51  111.  277.  rations.   Board,  etc.,  v.  Scearce,  2  Duv, 

*  Gorman  v.  Pacific  R.  Co.,  26  Mo.  (Ky.)  576. 


Nature  and  Citaracteu  of.  47 

which  in  tlie  absence  of  legislative  determination  rnnsthe  fixed  hy 
the  courts ;  and  that  the  legislature  has  the  authority  to  fix  the 
maximum  rates  of  charges  for 'the  same,  in  the  absence  of  any  ex- 
press provision  limiting  the  power,  either  contained  in  the  general 
law  or  charter  of  incorporation  of  such  company.  It  is  claimed 
that  this  doctrine  is  entirely  consistent  with  the  inviolability  of 
the  contract  of  the  state  with  the  company  incorporated  ;  and 
that,  in  the  absence  of  any  reserved  power  in  the  legislature,  it 
would  have  a  riirht  to  reirulate  and  fix  the  maximum  ciiarfjes  for 
transportation,  the  same  as  though  the  carrier  was  a  natural  per- 
son. Thus,  the  Burlington  and  Missouri  Railroad  Company  was 
organized  under  the  general  incorporation  law  of  Iowa,  and  sub- 
sequently the  plaintiff,  the  Chicago,  Burlington  and  Quincy  Rail- 
road Company,  succeeded  to  the  rights  of  the  former,  and  power 
was  conferred  upon  the  said  company  to  contract  in  reference  to 
its  business,  the  same  as  a  private  individual,  and  to  establish  bv- 
laws  and  make  all  rules  and  regulations  deemed  expedient  in  rela- 
tion to  its  affairs,  but  subject  to  such  rules  and  regulations  as  the 
general  assembly  of  Iowa  might  from  time  to  time  enact  and 
provide.'  In  a  recent  case  against  said  company  it  was  held  by 
the  supreme  court  of  the  United  States,  that  railroad  companies 
are  common  carriers  for  hire  ;  that  they  are  given  extraordinary 
powers  in  order  the  better  to  serve  the  public  in  that  capacity  ; 
that  they  are  engaged  in  a  public  employment  affecting  the  pub- 
lic interest,  and  are  therefore  subject  to  legislative  control  ;  that 
in  the  transaction  of  business  they  have  the  same  rights  and  are 
subject  to  the  same  control  as  private  individuals  under  the  same 
circumstances ;  that  it  would  be  their  duty  to  carry  when  called 
upon  so  to  do,  and  that  they  can  charge  only  a  reasonable  sum 
for  carriage ;  that  in   the  absence   of  any  legislative    regulation 

*  Peik  V.  Chicago,  etc.,  R.  E.  Co.,  general  laws  passed  for  the  peace, 
94  U.  S.  164  ;  Chicago,  etc.,  K.  K.  Co.  good  order,  health,  comfort  and  wel- 
V.  Att'y^Geu'l,  9  West.  L.  J.  347.  But  fare  of  society.  Sloan  v.  Pacific  R. 
the  legislature  has  no  power  to  regu-  R.  R.  Co.,  61  Mo.  24.  Upon  the  general 
late  the  tolls  of  railroad  companies  question  upholding  the  right  of  the 
under  its  police  powers,  where  the  legislature  to  regulate  tolls  of  rail- 
power  is  not  in  some  way  reserved  to  roads  in  certain  cases.  Cln.,  11.  &  D. 
it.  Att'y-Gen'l  v.  Chicago,  etc.,  R.  R.  R.  Co.  v.  Cole,  29  Ohio  St.  12o ;  Iron 
Co.,  35  Wis.  425.  Nor  has  it  such  R.  R.  Co.  v.  Lawrence  Furnace  Co.,  id. 
power  under  its  power  to  regulate  the  208;  Camblos  v.  Philadelphia,  etc., 
exercise   of   a   railroad   franchise   by  R.  R.  Co.,  Brewst.  (Penn.)  563. 


48  Pkivatk  Corporations. 

upon  the  subject  the  courts  must  decide  for  them  as  they  do  for 
private  persons,  when  controversies  arise  on  this  subject,  what  is  a 
reasonable  charge ;  that  when  the  legislature  prescribes  a  maxi- 
mum charge  for  fare  or  freight  it  operates  upon  the  corporation  as 
it  would  upon  an  individual  engaged  in  a  similar  business ;  that 
it  is  within  the  power  of  the  company  to  call  upon  the  legislature 
to  fix  j)ermanently  the  limit  of  charges  of  carriage,  and  make  it  a 
part  of  the  charter,  and  if  it  is  refused,  to  abstain  from  accept- 
ing the  grant  or  engaging  in  the  business ;  that  if  fixed  by  the 
legislature  at  the  time  of  the  grant  or  acceptance  of  tlie  act,  it 
miglit  have  presented  a  contract  in  that  respect,  with  which  the 
legislature  could  not  interfere ;  but  that,  as  this  was  not  done  in 
this  case,  the  company  invested  its  capital,  relying  upon  the  good 
faith  of  the  people  and  the  wisdom  of  legislators,  against  any 
wrono;  in  the  form  of  leo-islative  regulation.* 

Seo.  35.  Ground  on  VT^hich  legislative  power  is  predicated.  —  Al- 
though there  seems  to  have  been  a  pi'ovision  in  the  charter  of  the 
original  railroad  company  to  the  rights  and  privileges  of  which 
the  plaintiff  succeeded,  reserving  a  right  in  the  legislature  to  make 
rules  and  regulations  in  relation  to  the  company,  still  the  supreme 
court  seems  to  rest  its  opinion  upon  the  ground  of  the  power  of 
the  legislature  to  regulate  the  charges,  and  to  determine  what  is 
reasonable  in  that  respect,  or  fix  the  maximum  of  charges  of  fare 
and  freight,  independent  of  any  reserved  right  so  to  do,  continued 
in  the  express  statutory  or  constitutional  law ;  that  such  corpora- 
tions stand  the  same  as  natural  persons  in  this  respect ;  and  that 
there  is  a  right  in  the  legislatue  to  determine  what  are  reasonable 
charges  for  individuals,  in  all  those  occupations  and  employments, 
in  which  persons  are  engaged  affecting  the  j)ublic  interest,  as  in 
the  case  of  public  ferries,  common  carriers,  hackmen,  bakers, 
millers,  wharfingers,  innkeepers,  and  warehousemen.  The  decision 
in  this  case  is,  in  fact,  based  upon  the  same  reasons,  as  a  decision 
made  at  the  same  term  of  the  court  in  relation  to  the  right  of  the 
legislature  to  regulate  by  statute  the  charges  of  the  o^vners  of 
warehouses,  in  which  grain  is  stored  in  bulk,  and  "  in  which  the 

'Chicago,  etc.,  R.  Co.  v.  Iowa,  94  U.  S.  155. 


Nattjre  and  Character  of.  49 

grain  of  different  owners  is  mixed  together,  or  in  which  grain  is 
stored  in  such  a  manner  that  the  identity  of  different  lots  or  par- 
cels cannot  be  accurately  preserved,"  in  Chicago  and  other  places, 
and  to  fix  the  maximum  charges  for  the  same.'  In  the  case  last 
referred  to,  it  was  claimed,  that  such  a  statute  was  repugnant  to 
that  part  of  the  constitution  of  the  United  States,  which  confers 
upon  congress  the  power  to  regulate  commerce  with  foreign  nations 
and  among  the  several  states ;  ^  and  to  that  part  of  the  constitu- 
tion, which  provides  that  no  preference  shall  be  given  by  any 
regulation  of  commerce  or  revenue,  to  the  ports  of  one  state  over 
another ;  ^  and  to  that  part  of  the  amendment  of  the  ,constitution, 
which  ordains  that  no  state  shall  deprive  any  person  of  life,  hb- 
erty,  or  property,  without  due  process  of  law ;  nor  deny  to  any 
person  within  its  jurisdiction  the  equal  protection  of  the  laws.* 
After  able  arguments  by  comisel,  and  a  full  consideration  of  the 
case  by  the  court,  it  was  held  that  a  law  of  the  state,  regulating 
warehousing,  and  the  inspection  of  grain,  and  fixing  the  maxi- 
mum of  charges  for  the  storage  of  grain  in  warehouses,  was  con- 
stitutional, and  not  repugnant  to  that  part  of  the  fourteenth 
amendment  of  the  constitution,  which  ordains  that  no  state  "  shall 
deprive  any  person  of  life,  liberty,  or  property,  without  due  pro- 
cess of  law,  or  deny  to  any  person  within  its  jurisdiction  the  equal 
protection  of  the  laws."  The  court  says  :  "Looking  then  to  the 
common  law,  from  whence  came  the  right  which  the  constitution 
protects,  we  find  that  when  private  property  is  affected  with  a 
public  interest,  it  ceases  to  be  juris  ^rivati  only."  This  was 
said  by  Lord  Hale  more  than  two  hundred  years  ago,  and  has 
been  accepted  without  objection  as  an  essential  element  of  the  law 
of  property  ever  since.  Property  does  become  clothed  with  a 
public  interest  when  used  in  a  manner  to  make  it  of  public  con- 
sequence and  affect  the  community  at  large.  When,  therefoi'e,  one 
devotes  his  property  to  a  use  in  which  the  public  has  an  interest, 
he  in  effect  grants  to  the  public  an  interest  in  that  use,  and  must  sub- 
mit to  be  controlled  by  the  public  for  the  common  good  and  to  the 
extent  of  the  interest  thus  created.     He  may  withdraw  his  grant  by 

1  Munn  V.  Illinois,  94  U.  S.  113  ;  18        « Id.,  art.  1,  §  2. 
Alb.  Law  J.  180.  *  Const.  U.S.,  XlVth  Amend. 

«Const.  U.  S.,  art.  1,  §8. 

7 


60  Private  Corpokations. 

discontinuing  the  use,  but  so  long  as  lie  maintains  the  use,  lie  must 
submit  to  tlie  control.  Thus,  as  to  ferries.  Lord  Hale  says^  "  the  king 
has '  a  right  of  franchise  or  privilege,  that  no  man  may  set  up  a  com- 
mon ferry  for  all  passengers,  without  a  prescription  time  out  of 
mind,  or  a  charter  from  the  king.  He  may  make  a  ferry  for  his  own 
use  or  the  use  of  his  family,  but  not  for  the  common  use  of  all 
the  king's  subjects  passing  that  way  ;  because  it  doth  not  in  con- 
sequence tend  to  a  common  charge,  and  is  becoming  a  thing  of 
public  interest  and  use,  and  every  man  for  his  passage  pays  a  toll, 
which  is  a  common  charge,  and  every  ferry  ought  to  be  under  a 
public  regulation,  viz.:  that  it  give  attendance  at  due  times,  keep 
a  boat  in  due  order,  and  take  but  reasonable  toll ;  for  if  he  fail  in 
these  he  is  finable.'  So,  if  one  owns  the  soil  and  landing  places 
on  both  banks  of  a  stream,  he  cannot  use  them  for  the  purpose 
of  a  public  ferry,  except  upon  such  terms  and  conditions  as  the 
body  politic  may  from  time  to  time  impose,  and  this,  because  the 
common  good  requires  that  all  public  ways  shall  be  under  the 
control  of  the  public  authorities.  The  privilege  or  prerogative 
of  the  king,  who  in  this  connection  only  represents  and  gives 
another  name  to  the  body  politic,  is  not  primarily  for  his  profit, 
but  for  the  protection  of  the  people  and  the  promotion  of  the 
general  welfare.  And  again,  as  to  wharves  and  wharfingers, 
Lord  Hale  says  :  '  A  man  for  his  own  private  advantage  may,  in 
a  port  or  town,  set  up  a  wharf  or  crane,  and  may  take  what  rates 
he  and  his  customers  can  agree  for  cranage,  wharfage,  housellage, 
or  pesage ;  for  he  doth  no  more  than  is  lawful  for  any  man  to 
do,  viz.:  make  the  most  of  his  own,  *  ^  ^  If  the  king  or 
subject  have  a  public  wharf,  unto  which  all  persons  that  come 
to  tliat  port  must  come  and  unlade  or  lade  their  goods  as  for  the 
purpose,  because  they  are  the  wharves  only  licensed  by  the  queen, 
■*  *  *  or  because  there  is  no  other  wharf  in  that  port,  as  it 
may  fall  out  where  a  port  is  newly  erected ;  in  that  case,  there 
cannot  be  taken  arbitrary  and  excessive  duties  for  cranage,  wharf- 
age, pesage,  etc.,  neither  can  they  be  enhanced  to  an  immoderate 
rate,  but  the  duties  must  be  reasonable  and  moderate,  tliongh 
settled  by  the  king's  license  or  charter.  For  now  the  wharf  and 
crane  and  other  conveniences  are  affected  with  a  public  interest, 

'  Be  Jure  Maris,  1  Harg.  Law  Tracts,  6. 


Nature  and  Character  of.  51 

and  they  cease  to  be  juris  privati  only ;  as  if  a  man  set  ont  a 
street  on  his  own  Land,  it  is  no  longer  a  bare  private  interest,  but 
is  affected  by  a  public  interest.'  This  statement  of  the  law  by 
Lord  Hale  was  cited  with  approbation  and  acted  upon  by  Lord 
Kenton,  at  the  beginning  of  the  present  century,  in  Bolt  v, 
Stennett,  8  T.  E.  G06." 

Sec.   36.      Reason  for  the  exercise  of  such  power. —  It  is  evident  that 

the  general  reasoning,  as  well  as  the  decisions,  wliich  would  sub- 
ject wharfingers  to  legislative  control,  on  the  ground  of  the  public 
character  of  their  employment,  would  be  equally  aj^plicable  to 
warehousemen,  innkeepers,  bakers,  millers,  cartmen  and  common 
carriers,  generally.  Upon  this  question  Lord  EllenboRough 
once  observed:  "There  is  no  doubt  that  the  general  principle  is 
favored  both  in  law  and  justice,  that  every  man  may  fix  what 
price  he  pleases  upon  his  own  property  or  the  use  of  it ;  but  if, 
for  a  particular  purpose,  the  public  have  a  right  to  resort  to  his 
premises  and  make  use  of  them,  and  he  lias  a  monopoly  in  them 
for  that  purpose,  if  he  will  take  the  benefit  of  that  monopoly,  he 
must,  as  an  equivalent,  perforin  the  duty  attached  to  it  on  reason- 
able terms.  The  question  then  is,  whether,  circumstanced  as  this 
company  is,  by  the  combination  of  the  warehousing  act  with  tlie 
act  by  which  they  were  originally  constituted,  and  with  the  actual 
existing  state  of  things  in  the  port  of  London,  they  alone  having 
the  warehousing  of  these  wines,  be  not,  according  to  the  doctrine 
of  Lord  Hale,  obliged  to  limit  themselves  to  a  reasonable  com- 
pensation for  such  warehousing."  "  The  general  principle  which 
allows  legislation  in  these  cases  on  the  ground  of  the  public  nature 
of  the  property  or  business  in  which  the  person  is  engaged,  would 
be  particularly  applicable  to  common  carriers ;  and  especially  to 
that  class  of  them  which  operates  our  raih-oads.  Their  business 
is  particularly  "  affected  with  a  public  interest."  Their  property 
is  employed  in  a  manner  that  directly  affects  the  body  of  the  peo- 
ple. The  corporate  franchise  is  granted,  and  extraordinary  powers 
conferred  on  such  corporations,  in  order  that  they  may  the  better 
serve  the  public  in  the  capacity  of  common  carriers  ;  they  are 

'  Alluut  V.  Inglis,  12  East,  527.  See,  Ala.  (N.  S.)  140,  where  the  right  to 
also,  opinion  of  Le  Blanc,  J.,  in  the  regulate  the  weight  and  price  of  bread 
some  case,  p.  541  ;  Mobile  v.  Yuille,  3     was  sustained. 


r)9 


Private  Corporations. 


certainly  engaged  in  a  public  employment  wliich  affects  the  public 
interest,  and  ai"e  within  the  reasoning  of  those  class  of  cases, 
where  the  right  of  legislative  control  and  regulation  has  uni- 
formly been  recognized.' 


'  See  Eu^.  Stat.  W.  &  M.,  chap.  12, 
§  24;  3  Stat,  at  Large  (Great  Brit- 
aiu),  481;  New  Jersey  Nav.  Co.  v. 
Mercbauts'  Bank,  6  How.  (U.  S.)  382; 
where  it  was  held  that  coiumou  car- 
riers exercise  a  sort  of  public  office, 
and  have  duties  to  perform  in  which 
the  public  is  interested. 

The  opinion  of  the  learned  chief- 
justice  in  Munn  v.  The  People,  already 
referred  to,  is  so  clear  and  satisfactory 
on  this  question,  and  illustrates  the 
application  of  the  principle  on  which 
the  right  of  legislative  control  is  based 
so  well,  in  cases  of  warehousemen  as 
well  as  in  cases  of  common  carriers, 
that  I  insert  the  concluding  portion  of 
it.  He  observes:  "  Enough  has  already 
been  said  to  show  that  when  private 
property  is  devoted  to  a  public  use  it 
is  subject  to  public  regulation.  It 
remains  only  to  ascertain  whether  the 
warehouses  of  these  plaintiifs  in  error 
and  the  business  which  is  carried  on 
there  come  within  the  operation  of 
this  principle.  For  this  purpose  we 
accept  as  true  the  statements  of  fact 
contained  in  the  elaborate  brief  of  one 
of  the  counsel  of  the  plaintiflfs  in  error. 
From  these  it  appears  that  the  great 
producing  region  of  the  west  and 
north-west  sends  its  grain  by  water  and 
rail  to  Chicago,  where  the  greater  part 
of  it  is  shipped  by  vessels  for  trans- 
portation to  the  seaboard  by  the  great 
lakes,  and  some  of  it  is  forwarded  by 
railway  to  the  eastern  ports  *  *  * 
Vessels,  to  some  extent,  are  loaded  in 
the  Chicago  harbor,  and  sailed  through 
the  St.  Lawrence  directly  to  Europe. 
*  *  *  The  quantity  [of  grain]  re- 
ceived in  Chicago  has  made  it  the 
greatest  grain  market  in  the  world. 
This  business  has  created  a  demand 
for  means  by  which  the  immense 
quantity  of  grain  can  be  handled  or 
stored,  and  these  have  been  found  in 
grain  warehouses,  which  are  commonly 
called  elevators,  because  the  grain  is 
elevated  from  the  boat  or  car  by  ma- 
chinery operated  by  steam,  into  bins 
prepared  for  its  reception,  and  elevated 
from  the  bins  by  like  process  into  the 
vessel  or  car  which  is  to  carry  it  on 


*  *  *  In  this  way  the  largest  traf- 
fic between  the  citizens  north  and 
west  of  Chicago  and  the  citizens  of  the 
country  lying  on  the  Atlantic  coast 
north  of  Washington  is  in  grain  which 
passes  through  the  elevators  of  Chi- 
cago. In  this  way  trade  in  grain  is 
carried  on  by  the  inhabitants  of  seven 
or  eight  of  the  great  states  of  the 
west,  with  four  or  five  states  lying  on 
the  sea  shore,  and  forms  the  largest 
part  of  the  inter-state  commerce  in 
these  states.  The  grain  warehouses, 
or  elevators,  in  Chicago,  are  immense 
structures,  holding  from  300,000  to 
1,000,000  bushels  at  one  time,  accord- 
ing to,  size.  They  are  divided  into 
bins  of  large  capacity  and  great 
strength.  *  *  *  They  are  located 
with  the  river  harbor  on  one  side  and 
the  railway  tracks  on  the  other,  and 
the  grain  is  run  through  them  from 
car  to  vessel,  or  boat  or  car,  as  may  be 
demanded  in  the  course  of  business. 
It  has  been  found  impossible  to  pre- 
serve each  owner's  grain  separate,  and 
this  has  given  rise  to  a  system  of  in- 
spection and  grading,  by  which  the 
grain  of  different  owners  is  mixed, 
and  receipts  issued  for  the  number  of 
bushels,  which  are  negotiable  and  re- 
deemable in  like  kind  upon  demand. 
This  mode  of  conducting  business  was 
inaugurated  more  than  twenty  years 
ago,  and  has  grown  to  immense  pro- 
portions. The  railways  have  found  it 
impracticable  to  own  such  elevators, 
and  public  policy  forbids  the  transac- 
tion of  such  business  by  the  common 
carrier;  the  ownership  has,  therefore, 
been  by  private  individuals,  who  have 
embarked  their  capital  and  devoted 
their  industry  to  such  business  as  a 
private  pursuit.  In  this  connection  it 
must  also  be  borne  in  mind  that,  al- 
though in  1874  there  was  in  Chicago 
fourteen  warehouses  adapted  to  this 
particular  business,  and  owned  by 
about  thirty  persons,  nine  business 
firms  controlled  them,  and  that  the 
prices  charged  and  received  for  stor- 
age were  such  '  as  have  been  from  year 
to  year  agreed  upon  and  established 
by   the   different   elevators   or   ware- 


Nature  and  Chabacter  of. 


53 


Sec.  37.  Legislative  control  over  rate  of  charges  by  railroad  com- 
panies.—It  is  evident  that  the  legislature  has  the  right  to  regulate 
the  prices  of  railroad  companies,  and  especially  to  fix  the  maxi- 
mum rates  which   they   may  charge  for  fare  and   freight,  even 

be  made  with  their  tracks,  so  that  any- 
public  warehouse,  etc.,  might  be 
reached  by  the  cars  on  tlieir  railroads. 
This  indicates  very  clearly  that  during 
tlie  twenty  years  in  which  this  pecu- 
liar business  had  been  assuming  its 
present  immense  proportions  some- 
thing had  occurred  which  led  the 
whole  body  of  the  people  to  suppose 
that  remedies,  such  as  are  usually  em- 
ployed to  prevent  abuse  by  virtual 
monopolies,  might  not  be  inappropri- 
ate here.  For  our  purposes  we  must 
assume  that,  if  a  state  of  facts  could 
exist  that  would  justify  such  legisla- 
tion, it  actually  did  exist  when  the 
statute  now  under  consideration  was 
passed.  For  us  the  question  is  one  of 
power,  not  of  expediency.  If  no  state 
of  circumstances  could  exist  to  justify 
such  a  statute,  then  we  must  declare 
this  one  void,  because  in  excess  of  the 
legislative  power  of  the  state.  But 
if  it  could,  we  must  presume  it  did. 
Of  the  propriety  of  legislative  inter- 
ference within  the  scope  of  legislative 
power,  the  legislature  is  the  exclusive 
judge.  Neither  is  it  a  matter  of  any 
moment  that  no  precedent  can  be 
found  for  a  statute  precisely  like  this. 
It  is  conceded  that  the  business  is 
one  of  recent  origin,  that  its  growth 
has  been  rapid,  and  that  it  is  already 
of  great  importance.  And  it  must  also 
be  conceded  that  it  ia  a  business  in 
which  the  whole  public  has  a  direct 
and  positive  interest.  It  presents, 
therefore,  a  case  for  the  application  of 
a  long-known  and  established  princi- 
ple in  social  science,  and  this  statute 
simply  extends  the  law  so  as  to  meet 
this  new  development  of  commercial 
])rogress.  There  is  no  attempt  to  com- 
pel these  owners  to  grant  the  public 
an  interest  in  their  property,  but  to 
declare  their  obligations,  if  they  use  it, 
in  this  particular  manner.  It  matters 
not  in  this  case  that  these  plaintiffs  in 
error  had  built  their  warehouses  and 
established  their  business  before  the 
regulations  complained  of  were 
adopted.  What  they  did  was  from 
the  beginning  subject  to  the  power  of 
the  body  politic  to  require  them  to 
conform  to  such  regulations  as  might 


houses  in  the  city  of  Chicago,  and 
which  rates  have  been  annually  pub- 
lished in  one  or  more  newspapers 
printed  in  said  city,  in  the  month  of 
January  in  each  year  then  next  ensu- 
ing such  publication.'  Thus  it  is  ap- 
parent that  all  the  elevating  facilities 
through  which  these  vast  productions 
'  of  seven  or  eight  great  states  of  the 
west'  must  pass  on  the  way  'to  four 
or  five  of  the  states  on  the  sea-shore,' 
may  be  a  virtual  monopoly.  Under 
such  circumstances  it  is  difficult  to  see 
why,  if  the  carrier,  or  the  miller,  or 
the  ferryman,  or  the  innkeeper,  or  the 
wharfinger,  or  the  baker,  or  the  cart- 
man,  or  the  hackney-coachman,  pur- 
sues a  public  employment  and  exer- 
cises '  a  sort  of  public  office,'  these 
plaintiffs  in  error  do  not.  They  stand, 
to  use  the  language  of  their  counsel, 
in  the  very  'gateway  of  commerce,' 
and  take  toll  from  all  who  pass.  Their 
business  most  certainly  '  tends  to  a 
common  charge,  and  is  become  a  thing 
of  public  interest  and  use.'  Every 
busliel  of  grain  for  its  passage  '  pays 
a  toll  which  is  a  common  charge,'  and 
therefore,  according  to  Lord  Hale, 
every  such  warehouseman  '  ought  to 
be  under  public  regulation,  viz.,  that 
he  *  *  take  but  reasonable  toll.' 
Certainly,  if  any  business  can  be 
clothed  with  a  public  interest,  and 
cease  to  be  juris  privati  only,  this  has 
been.  It  may  not  be  made  so  by  the 
constitution  of  Illinois  or  this  statute, 
but  it  is  by  the  facts.  We  also  are 
not  permitted  to  overlook  the  fact 
that,  for  some  reason,  the  people  of 
Illinois,  when  they  revised  their  con- 
stitution in  1870,  saw  fit  to  make  it 
the  duty  of  the  general  assembly  to 
pass  laws  '  for  the  protection  of  the 
producers,  shippers,  and  receivers  of 
grain  and  produce '  (art.  13,  §  7),  and  by 
section  5  of  the  same  article,  to  require 
all  railroad  companies  receiving  and 
transporting  grain  in  bulk  or  other- 
wise to  deliver  the  same  at  any  ele- 
vator to  which  it  may  be  consigned, 
that  could  be  reached  by  any  track 
that  was  or  could  be  used  by  such 
company,  and  that  all  railroad  com- 
panies should  permit  connections  to 


54 


Pkivate  Corporations. 


when  the  riglit  to  regulate  and  control  tliem,  or  to  amend  or  repeal 
tlieir  charters,  is  not  contahied  in  the  act  or  general  statutes  undei' 
which  they  are  instituted  or  created.     The  doctrine  is  that  the 


be  established  by  the  proper  authori- 
ties for  the  common  good.  They 
entered  upon  their  business  and  pro- 
vided themselves  with  the  means  to 
carry  it  on,  subject  to  this  condition. 
If  they  did  not  wish  to  submit  them- 
selves to  such  interference,  they 
should  not  have  clothed  the  public 
with  an  interest  in  their  concerns.  The 
same  principle  applies  to  them  that 
does  to  the  proprietor  of  a  hackney 
carriage,  and,  as  to  him,  it  has  never 
been  supposed  that  he  was  exempt 
from  regulating  statutes  and  ordi- 
nances, because  he  had  purchased  his 
horses  and  carriage  and  established 
his  business  before  the  statute  or 
ordinance  was  adopted.  It  is  insisted, 
however,  that  the  owner  of  property 
is  entitled  to  reasonable  compensation 
for  its  use,  evei:i  though  it  be  clothed 
with  a  public  interest,  and  that  what 
is  reasonable  is  a  judicial  and  not  a 
legislative  question.  It  has  already 
been  shown  the  practice  has  been 
otherwise.  In  countries  where  the 
common  law  prevails,  it  has  been  cus- 
tomary, from  time  immemorial,  for  the 
legislature  to  declare  what  shall  be  a 
reasonable  compensation  under  such 
circumstances,  or  perhaps,  more  prop- 
erly speaking,  to  fix  a  maximum,  be- 
yond which  any  charge  made  would 
be  unreasonable.  Undoubtedly,  in 
mere  private  contracts  relating  to  mat- 
ters in  which  the  public  has  no  inter- 
est, what  is  reasonable  must  be  ascer- 
tained judicially.  But  this  is  because 
the  legislature  has  no  control  over 
such  a  contract.  So,  too,  in  matters 
which  do  affect  the  public  interest, 
and  as  to  which  legislative  control 
may  be  exercised,  if  there  are  no  statu- 
tory regulations  upon  the  subject,  the 
courts  must  determine  what  is  reason- 
able. The  controlling  fact  is  the 
power  to  regujate  at  all.  If  that 
exists,  the  right  to  establish  the  maxi- 
mum of  charge,  as  one  of  the  means 
of  regulation  is  implied.  In  fact,  the 
common-law  rule,  which  requires  the 
charge  to  be  reasonable,  is  itself  a 
regulation  as  to  price.  Without  it  the 
owner  could  make  his  rates  at  will, 
and  compel  the  public  to  yield  to  his 
terms  or  forego  the  use.     But  a  mere 


common-law  regulation  of  trade  or 
business  may  be  changed  by  statute. 
A  person  has  no  property,  no  vested 
interest  in  any  rule  of  the  common 
law.  This  is  only  one  of  the  forms  of 
municipal  law,  and  is  no  more  sacred 
than  any  other.  Rights  of  property, 
which  have  been  created  by  the  com- 
mon law,  cannot  be  taken  away  with- 
out due  process  ;  but  the  law  itself,  aa 
a  rule  of  conduct,  may  be  changed  at 
the  will,  or  even  the  whim,  of  the  leg- 
islature, unless  prevented  by  consti- 
tutional limitations.  Indeed,  the  great 
office  of  statutes  is  to  remedy  defects 
in  the  common  law  as  they  are  de- 
veloped, and  to  adapt  it  to  the  changes 
of  time  and  circumstances.  To  limit 
the  rate  of  charge  for  services  rendered 
in  a  public  employment,  or  for  the  use 
of  property  in  which  the  public  has 
an  interest,  is  only  changing  a  regula- 
tion which  existed  before.  It  estab- 
lishes no  new  principle  in  law,  but 
only  gives  a  new  effect  to  an  old  one. 
We  know  that  this  is  a  power  which 
may  be  abused,  but  this  is  no  argument 
against  its  existence.  For  protection 
against  abuses  by  legislatures,  the 
people  must  resort  to  the  polls,  not  to 
the  courts.  After  what  has  already 
been  said,  it  is  unnecessary  to  refer  at 
length  to  the  effect  of  other  provisions 
of  the  fourteenth  amendment,  which 
is  relied  upon,  viz.:  That  no  state 
shall  '  deny,  to  any  person  within  its 
jurisdiction, the  equal  protection  of  the 
laws.'  Certainly  it  caunot  be  claimed 
that  this  prevents  the  state  from 
regulating  the  fares  of  hackmen,  or 
the  charges  of  draymen,  in  Chicago, 
unless  it  does  the  same  thing  in  every 
other  place  within  its  jurisdiction. 
But,  as  has  been  seen,  the  power  to 
regulate  the  business  of  warehouses 
depends  upon  the  same  principle  as  the 
power  to  regulate  hackmen  and  dray- 
men, and  what  cannot  be  done  in  the 
one  case  cannot,  in  this  particular,  be 
done  in  the  other.  We  come  now  to 
consider  the  eifect  upon  this  statute  of 
the  power  of  congress  to  regulate  com- 
merce. It  was  very  properly  said,  in 
the  case  of  the  State  Tax  on  Railway 
Gross  Receipts,  15  Wall.  293,  that '  it 
is   not  every  thing  that   affects  com- 


Nature  and  Ciiaractee  of.  55 

legislature  creating  tliem,  or  by  or  under  whose  acts  they  are  cre- 
ated, may  regulate  and  fix  the  inaxiniuni  or  reasonable  charges 
which  they  may  receive,  the  same  as  though  they  were  private 
persons;  and  that  such  regulation  is  not  any  violation  of  the 
corporate  contract,  or  any  infringement  of  the  constitutional 
rights  of  the  corporation,  whose  charges  are  thus  fixed  or  regu- 
lated. 

The  right  of  the  legislature  to  regulate  the  charges  of  a  j)rivate 
person  engaged  in  an  employment  of  general  public  interest  or 
concern  seems  to  be  settled  by  a  uniform  current  of  decisions, 
and  there  would  seem  to  be  no  reason,  based  upon  principle  or 
any  sound  public  policy,  against  the  right  of  the  legislature  to  pro- 
vide for  and  regulate  the  rates  of  fare  and  freight  of  incorporated 
companies,  organized  and  instituted  for  the  purpose  of  carrying 
persons  or  property.  In  fact,  the  reason  for  the  application  of 
the  doctrine  we  have  referred  to  would  be  stronger  in  that  case 
than  in  case  of  mere  private  and  individual  concerns,  whose  busi- 
ness is  less  extensive,  such  as  draymen,  hackney  coachmen,  etc.; 
as  railroad  corporations  have,  by  virtue  of  the  corporate  fran- 
chises conferred  upon  them,  although  of  a  private  character,  the 
right  to  condemn  and  appropriate  private  property  for  their  pri- 
vate purposes,  on  the  condition  that  they  make  compensation  for 
the  same  to  the  owner.' 

merce  tliat  amounts  to  a  regulation  rectly  operate  upon  commerce  outside 
within  tlie  meaning  of  the  coustitu-  its  immediate  jurisdiction.  We  do  not 
tion.'  The  warehouses  of  these  plaint-  say  that  a  case  may  not  arise  in  which 
ifFs  in  error  are  situated,  and  their  it  will  be  found  that  a  state,  under  the 
business  carried  on  exclusively,  within  form  of  regulating  its  own  affairs,  has 
the  limits  of  the  state  of  Illinois,  encroached  upon  the  exclusive  domain 
They  are  used  as  instruments  by  those  of  congress,  in  respect  to  inter-state 
engaged  in  state,  as  well  as  by  those  commerce  ;  but  we  do  say,  that  upon 
engaged  in  inter-state  commerce ;  but  the  facts  as  they  are  presented  to  us 
they  are  no  more  necessarily  a  part  of  in  this  record,  that  has  not  been  done, 
commerce  itself,  than  the  dray  or  cart.  The  remaining  objection,  to-wit,  that 
by  which,  but  for  them,  grain  would  the  statute  in  its  present  form  is  re- 
be  transferred  from  one  railroad  sta-  pugnant  to  section  9,  article  1  of  the 
tion  to  another.  Incidentally,  they  may  constitution  of  the  United  States,  be- 
become  connected  with  inter-state  com-  cause  it  gives  preference  to  tlie  ports 
merce,  but  not  necessarily  so.  Their  of  one  state  over  those  of  another, 
regulation  is  a  thing  of  domestic  con-  may  be  disposed  of  by  a  single  remark, 
cern,  and  certainly  until  congress  acts  that  this  provision  operates  only  as  a 
in  reference  to  their  inter-state  rela-  limitation  of  the  powers  of  congress, 
tions,  the  state  may  exercise  all  the  and  in  no  respect  affects  the  states  in 
powers  of  the  government  over  them,  the  regulation  of  their  domestic  af- 
even  though  in  so  doing  it  may  indi-  fairs." 

'  See  post,  chap.  17. 


66  Private  Corporations. 

Seo.  38.      Subsequent  grants  —  exclusive  privileges  —  construction   of 
charters.— The  granting  of  franchises  to  a  private  corporation  does 
not  ordinarily  prevent  future  grants  of  the  same  character  to 
others.     The  general  doctrine  is,  that  if  a  grant  is  accepted,  it  be- 
comes a  contract  between  the  state  and  the  corporators ;  yet  the 
courts,  in  the  construction  of  such  contracts,  will  not,  by  implica- 
tion, extend  the  powers  of  corporations  beyond  the  express  pro- 
visions of  the  grant,  or  such  as  are  necessarily  implied,  in  order  to 
carry  out  those  expressly  conferred.    Thus,  the  grant  of  authority 
by  a  legislature  to  a  turnpike  corporation,  to  construct  a  road 
between  two  places,  and  collect  tolls  thereon,  would  not  preclude 
the  same  legislature  from  conferring  similar  powers  upon  other 
companies,  for  different  routes  between  the  same  places.     This 
doctrine  is  illustrated  by  the  opinion  of  the  supreme  court  of  the 
United  States  in  a  leading  case.^  In  this  case  a  charter  of  the  legisla- 
ture of  Massachusetts  conferred  upon  certain  persons  authority  to 
construct  a  bridge  over  Charles  river,  thereby  connecting  Boston  and 
Charlestown,  with  the  right  to  collect  tolls,  but  without  j)ro visions 
conferring  special  powers,  or  restricting  future  legislative  action,  and 
such  bridge  was  built  by  said  corporation,  and  the  legislature  subse- 
quently incorporated  another  company  to  build  the  Warren  bridge 
across  the  same  river,  and  near  the  former  one,  and  said  latter 
company  were  proceeding  to  build  such  bridge,  when  the  former 
filed  a  bill  for  an  injunction,  and  also  for  general  relief,  on  the 
ground  that  the  second  charter  impaired  the  obligations  of  the 
former  charter,  but  it  was  dismissed.'^     And  this  decision  was  af- 
firmed in  the  supreme  court  of  the  United  States.     Chief-Justice 
Taney  in  this  case,  referring  to  the  charter  of  the  proprietors  of 
the  Charles  River  bridge,  and  the  rules  of  construction  of  such 
charters,  observes  :   "  This  act  of  incorporation  is  in  the  usual  form, 
and  the  privileges  are  such  as  are  commonly  given  to  corpora- 
tions of  that  kind.     It  confers  on  them  the  ordinary  faculties  of  a 
corporation,  for  the  purpose  of  building  the  bridge,  and  establishes 
certain  rates  of  toll  which  the  company  are  authorized  to  take. 
This  is  the  whole  grant.     There  is  no  exclusive  privilege  given 
to  them  over  the  waters  of  Charles  river,  above  or  below  their 
bridge.     No  right  to  erect  another  bridge  themselves,  or  prevent 

1  Charles   River   Bridge  v,  Warren        '■'  7  Pick.  344. 
Bridge,  11  Pet.  420. 


Natuke  and  Character  of.  57 

other  persons  from  erecting  one.  No  engagement  from  the  state 
that  another  shall  not  be  erected,  and  no  undertaking  not  to  sanc- 
tion competition,  nor  to  make  improvements  that  may  diminish 
the  amount  of  its  income.  Upon  all  of  tliese  subjects  the  charter 
is  silent.  No  words  are  used  from  which  an  intention  to  grant 
any  of  those  rights  can  be  inferred.  If  the  plaintiff  is  entitled  to 
them  it  must  be  implied  simply  from  the  nature  of  the  grant,  and 
cannot  be  inferred  from  the  words  by  which  the  grant  is  made. 
The  relative  position  of  the  Warren  bridge  has  already  been  de- 
scribed. It  does  not  inten-upt  the  passage  over  the  Charles  River 
bridge,  nor  make  the  way  to  it  or  from  it  less  convenient.  None 
of  the  faculties  or  franchises  granted  to  that  corporation  have 
been  revoked  by  the  legislature,  and  its  right  to  take  the  tolls 
granted  by  the  charter  remains  unaltered.  In  short,  all  the  fran- 
chises and  rights  of  property  enumerated  in  the  charter,  and  there 
mentioned  to  have  been  granted  to  it,  remain  unimpaired.  But 
its  income  is  destroyed  by  the  Warren  bridge,  which,  being  free, 
draws  off  the  passengers  and  property  which  would  otherwise  have 
gone  over  it,  and  renders  their  franchises  of  no  value.  This  is  the 
gist  of  the  complaint.  For  it  is  not  pretended  that  the  erection  of 
the  Warren  bridge  would  have  done  them  any  injury,  or  in  any  de- 
gree affected  their  right  of  property,  if  it  had  not  diminished  the 
amount  of  their  tolls.  In  order,  then,  to  entitle  themselves  to  re- 
lief, it  is  necessary  to  show  that  the  legislature  contracted  not  to 
do  the  act  of  which  they  complain,  and  that  they  impaired,  or  in 
other  words,  violated  that  contract,  by  the  erection  of  the  Warren 
bridge.  The  inquiry  is,  does  the  charter  contain  such  a  contract 
on  the  part  of  the  state  ?  Is  there  such  a  stipulation  to  be  found 
in  that  instrument  ?  *  *  *  If  a  contract  on  that  subject  can 
be  gathered  from  the  charter  it  must  be  by  implication,  and  can- 
not be  found  in  the  words  used.  Can  such  an  agreement  be  im- 
phed  ?  In  such  charters  no  rights  are  taken  from  the  public  or 
given  to  the  corporation,  beyond  those  which  the  words  of  the 
charter,  by  their  natural  and  proper  construction,  purport  to  con- 
vey." ' 

'  It  is  further  observed  by  the  travel;  the  later  ones  interfering  mater- 
learned  justice  in  this  case,  as  fol-  ially  with  the  profits  of  the  first.  These 
lows  ;  "  Turnpike  roads  have  been  corporations  have,  in  some  instances, 
made  in  succession  on  the  same  line  of  been  utterly  ruined  by  the  introducing 


68 


Pkivatpj  Corporations. 


]jiit  this  doctrine  does  not  obtain  wliere  tlie  charter  expressly 
provides  for  exclusive  privileges,  and  confers  franchises  of  an 
extraordinary  character.  And  a  railroad  corporation,  npon  which 
have  been  conferred  such  exclusive  and  extraordinary  privileges 
and  franchises,  may  maintain  an  action  in  equity,  for  any  disturb- 
ance of  them/  Thus,  where  it  was  provided  in  the  charter  of 
such  a  corporation,  "  that  no  other  railroad  than  the  one  hereby 
granted  shall,  within  thirty  years  from  and  after  the  passing  of 
this  act,  be  authorized  to  be  made,  leading  from  Boston,  Charles- 
town  or  Cambridge  to  Lowell,"  it  was  held  that  this  constituted  a 
contract  by  the  state  with  the  Boston  and  Lowell  Bailroad  Cor- 
poration, and  that  no  other  railroad  from  Boston,  Charlestown  or 
Cambridge  to  Lowell  could  be  lawfully  incorporated  within  thirty 
years,  and  that  such  a  condition  was  binding  upon  subsequent 
lesrislatures  of  that  state.'' 


of  newer  and  better  modes  of  transpor- 
tation and  traveling.  In  some  cases 
railroads  have  rendered  the  turnpike 
roads  on  the  same  line  of  travel  so 
useless,  that  the  franchise  of  the  turn- 
pike corporation  is  not  worth  preserv- 
ing. Yet  in  none  of  these  cases  have 
the  corporations  supposed  that  their 
privileges  were  invaded  or  any  con- 
tract violated  ou  the  part  of  the  state. 
Among  the  multitude  of  cases  which 
have  occurred  and  been  daily  occur- 
ring for  the  last  forty  or  fifty  years, 
this  is  the  first  instance  in  which  such 
an  implied  contract  has  beea  contended 
for,  and  this  court  called  upon  to  infer 
it  from  an  ordinary  act  of  incorpora- 

'  When  the  charter  contains  a  grant 
of  exclusive  privileges  it  will  be  con- 
strued strictly  and  with  reference  to 
the  particular  objects  of  the  grant. 
Mnhawk  Bridge  Co.  v.  U.  &  S.  R.  R. 
Co.,  6  Paige's  Ch.  554  ;  Cayuga  Bridge 
Co  V.  Magee,  3  id.  116.  But  the  pub- 
lic faith  as  pledged  in  the  charter  will 
be  upheld  at  all  hazard  and  regardless 
of  consequences  to  others.  The  En- 
field Toll  Bridge  Co.  v.  Hartford  & 
New  Haven  R.  R.  Co.,  17  Conn.  41. 
In  this  case,  id.  454,  the  court,  upon 
a  further  hearing,  held  that  the  fran- 
chise of  the  plaintiff  being  in  the  na- 
ture of  real  estate  might  be  taken 
under  the  right  of  eminent  domain  for 
public  purposes  and  upon  proper  as- 


tion,  containing  nothing  more  than 
the  usual  stipulations  and  provisions 
to  be  found  in  every  such  law.  The 
absence  of  any  such  controversy,  when 
there  must  have  been  so  many  occa- 
sions to  give  rise  to  it,  proves  that 
neither  states,  nor  individuals,  nor 
corporations,  ever  imagmed  that  such 
a  contract  could  be  implied  from  such 
charters.  It  shows  that  the  men 
who  voted  for  those  laws  never  imag- 
ined that  they  were  forming  such  a 
contract ;  and  if  we  maintain  that 
they  have  made  it,  we  must  create  it 
by  a  legal  fiction,  in  opposition  to  the 
truth  of  the  fact,  and  the  obvious  in- 
tention of  the  party." 

sessment  and  payment  of  the  damages 
thereto  by  such  taking.  See,  also, 
Bradley  v.  N.  Y.  &  N.  H.  R.  R.  Co., 
21  Conn.  299;  Clark  v.  Saybrook,  id. 
316  ;  Salem  &  H.  Turnpike  Co.  v, 
Lyme,  18  id.  457. 

^  Boston  &  Lowell  R.  Co.  v.  Salem  & 
Lowell  R.  Co.,  2  Gray,  1.  In  this  case 
the  supreme  court,  per  Shaw,  C.  J. , 
say  :  '*  In  construing  this  act  of  incor- 
poration, we  are  to  bear  in  mind  the 
time  and  circumstances  under  which 
it  was  made,  but  more  especially  to 
take  into  consideration  every  part  and 
clause  of  the  act.  and  deduce  from  it 
the  true  meaning  and  intent  of  the 
parties.  The  act,  like  every  act  and 
charter  of  the  same  kind,  is  a  contract 


Nature  and  Ciiakacter  of. 


59 


Sec.  39.  Reservation  of  power  in  the  legislature.— The  inviola- 
bility of  the  contract  secured  by  incorporation,  and  the  disa- 
bihty  of  the  state,  through  its  legislature,  to  resume  or  in  any 


between  the  government  on  the  one 
part,  and  the  undertakers,  accepting 
the  act  of  incorporation,  on  the  other  ; 
and  therefore  what  they  both  intended, 
by  the  terms  used,  if  we  can  ascertain 
it,  forms  tlie  true  construction  of  such 
contract.  *  *  *  The  question  is, 
does  his  provision  confer  any  exclu- 
sive right,  interest,  franchise  or  bene- 
fit on  this  corporation  '?  It  is  found  in 
the  same  act  ;  the  whole  is  presented 
at  once  to  the  consideration  of  the 
corporators,  to  be  accepted  or  rejected 
as  a  whole  ;  and  this  would,  of  course, 
constitute  a  consideration  in  their 
minds,  in  determining  whether  to  ac- 
cept or  reject  the  charter.  If  it  adds 
any  thing  to  the  value  and  benefit  of 
the  franchise,  such  enhanced  value  is 
part  of  the  price  which  tlie  public 
propose  to  pay,  and  which  the  under- 
takers expect  to  receive,  as  their  com- 
pensation for  furnishing  such  public 
improvement. 

"  This  is  a  stipulation  of  some  sort, 
a  contract,  by  one  of  the  contracting 
parties,  to  and  with  the  other ;  in 
order  to  put  a  just  construction  upon 
it,  we  must  consider  the  character  and 
relations  of  the  contracting  parties, 
the  subject-matter  of  the  stipulation, 
and  its  legal  effect  upon  their  respect- 
ive rights.  It  was  made  by  the  govern- 
ment, in  its  sovereign  capacity,  with 
subjects,  who  were  encouraged  by  it 
to  advance  their  property  for  the  bene- 
fit of  the  public.  It  was  certainly  a 
stipulation  on  the  part  of  the  govern- 
ment regulating  its  own  conduct,  and 
putting  a  restraint  upon  its  own  power 
to  authorize  any  other  railroad  to  be 
built,  with  a  right  to  levy  a  toll,  and 
of  course,  no  other  such  road  could 
lawfully  be  made.  It  was,  therefore, 
equivalent  to  a  covenant  for  quiet  en- 
joyment against  its  own  acts,  and  those 
of  persons  claiming  under  it.  This  is, 
in  fact,  all  that  the  government  could 
stipulate.  It  could  not  covenant  with 
the  corporation  for  quiet  enjoyment 
against  strangers  and  intruders, 
against  the  unauthorized  and  illegal 
disturbance  of  their  rights  by  third 
parties;    against    these,    they    would 


have  their  remedy  in  the  general  laws 
of  the  land." 

The  same  doctrine  was  also  held  in 
The  Biughamton  Bridge  Case,  3 
Wall.  51.  Davis,  J.,  in  the  opinion 
in  this  case,  observes: 

"The  constitution  of  the  United 
States  declares  that  no  state  shall  pass 
any  law  impairing  the  obligation  of  con- 
tracts ;  and  the  twenty-fifth  section  of 
the  judiciary  act  provides  that  the  final 
judgment  or  decree  of  the  highest 
court  of  the  state,  in  which  a  decision 
in  a  suit  can  be  had,  may  be  examined 
and  reviewed  in  this  court,  if  there 
was  drawn  in  question  in  the  suit  the 
validity  of  a  statute  of  the  state,  on 
the  ground  of  its  being  repugnant  to 
the  constitution  of  the  United  States, 
and  the  decision  was  in  favor  of  its 
validity. 

"  The  plaintiffs  in  error  brought  a 
suit  in  equity  in  the  supreme  court  in 
New  York,  alleging  that  they  were 
created  a  corporation  by  the  legislature 
of  that  state,  on  the  1st  of  April,  1808,  to 
erect  and  maintain  a  bridge  across  the 
Chenango  river,  at  Binghamton,  with 
perpetual  succession,  the  right  to  take 
tolls,  and  a  covenant  that  no  other 
bridge  should  be  built  within  a  dis- 
tance of  two  miles  either  way  from 
their  bridge  ;  which  was  a  grant  in 
the  nature  of  a  contract  that  cannot  be 
impaired.  The  complaint  of  the  bill 
is,  that  notwithstanding  the  Chenango 
Bridge  Company  have  faithfully  kept 
their  contract  with  the  state,  and  main- 
tained for  a  period  of  nearly  fifty  years 
a  safe  and  suitable  bridge  for  the  ac- 
commodation of  the  public,  the  legis- 
lature of  New  York,  on  the  5tli  of 
April,  1855,  in  plain  violation  of  the 
contract  of  the  state  with  them,  au- 
thorized the  defendants  to  build  a 
bridge  across  the  Chenango  river 
within  the  prescribed  limits,  and  that 
the  bridge  is  built  and  open  for  travel. 

"  The  bill  seeks  to  obtain  a  perpetual 
injunction  against  the  Binghamton 
Bridge  Company  from  using  or  allow- 
ing to  be  used  the  bridge  thus  built, 
on  the  sole  ground  that  the  statute  of 
the  state  which  authorizes  it  is  repug- 


60 


Private  Corporations. 


way  modify  or  control  tlie  powers  tlnis  conferred,  although  tliey 
may  have  been  the  result  of  unwise,  hasty,  or  corrupt  legisla- 
tion, has  created  apprehensions  of  danger  from  the  power  that 


nant  to  that  provision  of  the  constitu- 
tion of  the  United  States  which  says 
that  no  state  shall  pass  any  law  im- 
pairing the  obligation  of  contracts. 
Such  proceedings  were  had  in  the  in- 
ferior courts  of  New  York,  that  the 
case  finally  reached  and  was  heard  in 
the  court  of  appeals,  which  is  the 
highest  court  of  law  or  equity  of  the 
state  in  which  a  decision  of  the  suit 
could  be  had.  And  that  court  held 
that  the  act  by  virtue  of  which  the 
Binghamton  bridge  was  built  was  a 
valid  act,  and  rendered  a  final"  decree 
dismissing  the  bill.  Every  thing, 
therefore,  concurs  to  bring  into  exer- 
cise the  appellate  power  of  this  court 
over  cases  decided  in  a  state  court  and 
to  support  the  writ  of  error,  which 
seeks  to  re-examine  and  correct  the 
final  judgment  of  the  court  of  appeals 
in  New  York. 

"  The  questions  presented  by  this 
record  are  of  importance,  and  have  re- 
ceived deliberate  consideration. 

"  It  is  said  that  the  revising  power  of 
this  court,  over  state  adjudications  is 
viewed  with  jealousy.  If  so,  we  say, 
in  the  words  of  Chief-Justice  Mar- 
shall, '  tl^at  the  course  of  a  judicial 
department  is  marked  out  by  law.  As 
this  court  has  never  grasped  at  un- 
granted  jurisdiction,  so  it  never  will, 
we  trust,  shrink  from  tha*  which  is 
conferred  upon  it.'  The  constitutional 
right  of  one  legislature  to  grant  cor- 
porate privileges  and  franchises,  so  as 
to  bind  and  conclude  a  succeeding  one, 
has  been  denied.  We  have  supposed, 
if  any  thing  was  settled  by  an  un- 
broken course  of  decisions  in  the 
federal  and  state  courts,  it  was,  that 
an  act  of  incorporation  was  a  contract 
between  the  state  and  the  stock- 
holders. All  courts,  at  this  day,  are 
estopped  from  questioning  the  doc- 
trine. The  security  of  property  rests 
upon  it,  and  every  successful  enter- 
prise is  undertaken,  in  the  unshaken 
belief  that  it  will  never  be  forsaken. 

"  A  departure  from  it  noio  would  in- 
volve dangers  to  society  that  cannot 
be  foreseen,  would  shock  the  sense  of 
justice   of   the   country,   unhinge   its 


business  interests,  and  weaken,  if  not 
destroy,  that  respect  which  has  always 
been  felt  for  the  judicial  department 
of  the  government.  An  attempt,  even 
to  reatlirm  it,  could  only  tend  to  lessen 
its  force  and  obligation.  It  received 
its  ablest  exposition  in  the  case  of  Dart- 
mouth College  V.  Woodward,  4  Wheat. 
518,  which  case  has  ever  since  been 
considered  a  landmark  by  the  profes- 
sion, and  no  court  has  since  disre- 
garded the  doctrine,  that  the  charters 
of  private  corporations  are  contracts, 
protected  from  invasion  by  the  consti- 
tution of  the  United  States.  And  it 
has  since  so  often  received  the  solemn 
sanction  of  this  court,  that  it  would 
unnecessarily  lengthen  this  opinion  to 
refer  to'  the  cases,  or  even  enumerate 
them. 

"  The  principle  is  supported  by  rea- 
son as  well  as  authority.  It  was  well 
remarked  by  the  chief-justice,  in  the 
Dartmouth  College  case,  '  that  the  ob- 
jects for  which  a  corporation  is  created 
are  universally  such  as  the  govern- 
ment wishes  to  promote.  They  are 
deemed  beneficial  to  the  country,  and 
this  benefit  constitutes  the  considera- 
tion, and  in  most  cases  the  sole  consid- 
eration for  the  grant.'  The  purposes 
to  be  attained  are  generally  beyond  the 
ability  of  individual  enterprise  and 
can  only  be  accomplished  through  the 
aid  of  associated  wealth.  This  will 
not  be  risked  unless  privileges  are 
given  and  securities  furnished  in  an 
act  of  incorporation.  The  wants  of 
the  public  are  often  so  imperative,  that 
a  duty  is  imposed  on  government  to 
provide  for  them  ;  and  as  experience 
has  proved  that  a  state  should  not 
directly  attempt  to  do  this,  it  is  neces- 
sary to  confer  on  others  the  faculty  of 
doing  what  the  sovereign  power  is  un- 
willing to  undertake.  The  legislature, 
therefore,  says  to  public  spii'ited  citi- 
zens: '  If  you  will  embark,  with  your 
time,  money,  and  skill,  in  an  enterprise 
which  will  accommodate  the  public  ne- 
cessities, we  will  grant  to  you,  for  a 
limited  period,  or  in  perp^-tuity,  privi- 
leges that  will  justify  the  expenditure 
of  your  money,  and  the  employment  of 


Mature  and  Chakacter  of. 


61 


may  thus  be  created  ;  '  and  to  guard  against  and  protect  the 
government  and  the  interest  of  the  people  therefrom,  provisions 
are  now  usually  found  in  the  constitutions  of  various  states  of 
the  Union,  preventing  the  creation  of  corporations,  except  subject 
to  the  right  of  the  legislature  to  repeal  or  amend  the  same ;  and 
not  unfrequently  the  special  or  general  law  creating  them,  con- 
tains a  clause,  reserving  the  right  of  the  legislature  to  control  such 
corporation  and  amend,  alter,  abridge,  regulate  or  withdraw  the 


your  time  and  skill.'  Such  a  grant  ia 
a  contract,  with  mutual  considerations, 
and  justice  and  good  policy  alike  re- 
quire that  the  protection  of  the  law 
should  be  assured  to  it. 

"  It  is  argued,  as  a  reason  why  courts 
should  not  be  rigid  in  enforcing  the 
contracts  made  by  states,  that  legisla- 
tive bodies  are  often  overreached  by 
designing  men,  and  dispose  of  fran- 
chises with  great  recklessness. 

"  If  the  knowledge  that  a  contract 
made  by  a  state  with  individuals  is 
equally  protected  from  invasion  as  a 
contract  made  between  natural  per- 
sons, does  not  awaken  watchfulness 
and  care  on  the  part  of  law-makers,  it 
is  difficult  to  perceive  what  would. 
The  corrective  to  improvident  legisla- 
tion is  not  in  th6  courts,  but  is  to  be 
found  elsewhere. 

"  A  great  deal  of  the  argument  at 
the  bar  was  devoted  to  the  considera- 
tion of  the  proper  rule  of  construction 
to  be  adopted  in  the  interpretation  of 
legislative  contracts.  In  this  there  is 
no  difficulty.  All  contracts  are  to  be 
construed  to  accomplish  the  intention 
of  the  parties;  and  in  determining 
their  different  provisions,  a  liberal  and 
fair  construction  will  be  given  to  the 
words,  either  singly  or  in  connection 
with  the  subject-matter.  It  is  nor,  the 
duty  of  a  court,  by  legal  subtlety,  to 
overthrow  a  contract,  but  rather  to  up- 
hold it  and  give  it  effect ;  and  no 
strained  or  artificial  rule  of  construc- 
tion is  to  be  applied  to  any  part  of  it. 
If  there  is  no  ambiguity,  and  the  mean- 
ing of  the  parties  can  be  clearly  ascer- 
tained, effect  is  to  be  given  to  the  in- 

'  Of  the  power  of  the  legislature  to 
preclude  itself  from  exercising  in 
future  any  of  the  essential  attributes 
of  sovereignty,  see  construction  of 
the   New   York   constitution   in   con- 


strument  used,  whether  it  is  a  legisla- 
tive grant  or  not.  In  the  case  of  the 
Charles  River  Bridge,  11  Peters,  544, 
the  rules  of  construction  known  to  the 
English  common  law  were  adopted 
and  applied  in  the  interpretation  of 
legislative  grants,  and  the  principle 
was  recognized,  that  charters  are  to  be 
construed  most  favorably  to  the  state, 
and  that  in  grants  by  the  public 
nothing  passes  by  implication.  This 
court  has  repeatedly  since  reasserted 
the  same  doctrine  ;  and  the  decisions 
in  the  several  states  are  nearly  all  the 
same  way.  The  principle  is  this  :  that 
all  rights  which  are  asserted  against 
the  state  must  be  clearly  defined,  and 
not  raised  by  inference  or  presumption; 
and  if  the  charter  is  silent  about  a 
power,  it  does  not  exist.  If,  on  a  fair 
reading  of  the  instrument,  reasonable 
doubts  arise  as  to  the  proper  interpre- 
tation to  be  given  to  it,  those  doubts 
are  to  be  solved  in  favor  of  the  state  ; 
and  where  it  is  susceptible  of  two 
meanings,  the  one  restricting  and  the 
other  extending  the  powers  of  the 
corporation,  that  construction  is  to  be 
adopted  which  works  the  least  harm 
to  tlie  state.  But  if  there  is  no  ambi- 
guity in  the  charter,  and  the  powers 
conferred  are  plainly  marked,  and 
their  limits  can  be  readily  ascertained, 
then  it  is  the  duty  of  the  court  to  sus- 
tain and  uphold  it,  and  to  carry  out 
the  true  meaning  and  intention  of  the 
parties  to  it.  Any  other  rule  of  con- 
struction would  defeat  all  legislative 
grants,  and  overthrow  all  other  con- 
tracts . " 


nection  with  an  act  of  the  legislature 
relating  to  railways  in  streets,  in  the 
New  York  court  of  appeals,  in  the  case 
of  Matter  of  the  Gilbert  Elevated 
Railroad  Co.,  70  N.  Y.  361. 


62  Private  Corpokations. 

rights,  privileges  and  powers  conferred.'  In  such  cases  the  legis- 
lature could  alter,  change,  set  aside,  abridge  or  regulate  the  cor- 
porate powers  and  franchises  without  any  violation  of  the  contract 
or  of  constitutional  rights.'' 

If  the  corporate  rights  are  conferred  subject  to  the  reserved 
right  of  the  legislature  to  modify  or  repeal  them,  the  rights  of 
powers  conferred  are  mere  privileges,  subject  to  be  withdrawn  at 
any  time  at  the  wiU  of  the  legislature ;  ^  and  the  right  may  be 
exercised  in  any  manner  and  to  any  extent  that  may  be  deemed 
proper.  If  the  corporation  is  a  railroad  company,  it  may,  under 
a  general  reservation,  make  changes  in  the  level,  grade  and  con- 
nections of  the  road,  direct  the  construction  of  new  connecting 
tracks,  and  provide  in  what  manner,  and  under  whose  supervision 
the  work  shall  be  done  and  how  paid  for."  And  in  such  cases,  not 
only  the  original  corporators,  but  the  subsequent  stockholders 
and  bondholders,  whose  bonds  are  secured  by  mortgages,  will  be 
held  to  have  acquired  their  respective  rights,  with  knowledge  of 
and.  subject  to  the  reserved  right  of  the  legislature  to  alter  or 
resume  the  powers  and  franchises  conferred  upon  the  corpora- 
tion.^ 

'  Code  Iowa,  §  1090;  Const.  Iowa,  art.  capacity.     Yeaton  v.  Bank  of  the  Old 

8,  §   12;  New  York  Const.,  art.  8,  §  1 ;  Dominion,  21  Gratt.  (Va.)  593.     See, 

2  R.  S.  497,  §  8,  5th  ed.     If  the  power  also,  as   to  power  to  alter  or  amend, 

to  revoke  corporate  charters   is    oon-  Commissioners,      etc.,      v.       Holyoke 

tained  in  the  constitution,  it  need  not  Water  Power  Co.,  104  Mass.  446. 

be  contained  in  the  charter.   Delaware,  Under  a  reserved  authority  in  the 

etc.R.  Co.  V.   Tharp,  5  Hfrr.  (Del.)  legislature  contained  in  constitutions, 

454.  general  or  special  laws,  or  in  the  char- 

*  West  Wisconsin  R,  Co.  v.  Super-  ters  of  corporations,  tlie  question  has 
visors,  etc.,  35  Wis.  257.  Bat  cousti-  been  presented,  whether  the  legisla- 
tutional  or  statutory  provisions  could  ture  can  authorize  a  change  of  the 
not  have  a  retroactive  effect.  Id.;  objects  and  purposes  for  which  the 
Hamilton  v.  Keith,  5  Bush  (Ky.),  458;  corporation  was  created,  without  the 
GrilBn  V.  The  Kentucky  Co.,  3  id.  592.  unanimous   concurrence    of     all    the 

^  State  V.  Commissioners,  37  N.   J.  stockholders.      In  New  York,  Massa- 

L.  228.  chusetts,  Illinois  and  Missouri,   from 

■^Fitchburg,  etc.,  R.  Co.  v.  Grand  the  current  of  decisions, it  would  appear 
Junction,  etc.,  R.  Co.,  4  Allen,  198.  that  in  the  exercise  of  the  reserved 
See,  also,  Hyatt  v.  McMahon,  25  right  of  the  legislature,  it  may  author- 
Barb.  457.  ize  the  corporation  to  engage  in  a  new 

*  West  Wisconsin  R.  Co.  v.  Super-  enterprise,  or  extend  the  objects  and 
visors,  etc.,  35  Wis.  257.  But  it  can-  purposes  of  the  old  one,  without  the 
not  compel  the  corporators  to  accept  assent  or  concurrence  of  all  the  mem- 
of  an  amendment,  though  it  may  de-  bers,  and  even  against  the  protest  of  a 
stroy  the  corporation.  If  the  original  minority  of  them.  See  Northern  R. 
powers  are  changed  or  modified,  they  Co.  v.  Miller.  10  Barb.  260  ;  White  v. 
must  accept  the  same  as  modified  or  Syracuse,  etc.,  R.  Co.,  14  id.  559;  Sche- 
cease  to  transact  business  in  a  corporate  nectady,     etc.,      Plankroad      Co.    v- 


Natdke  ajstd  Character  of. 


63 


Sec.  40.  Right  to  resume  based  upon  misuse  or  abuse  of  its  franchise.  - 
Where  a  charter  provides,  that  if  the  corporation  sliall  at  any 
time  misuse  or  abuse  its  franchises,  the  legislature  may  revoke 
the  grant,  it  has  been  recently  held,  that  the  power  of  revocation 
is  thereby  made  conditional,  upon  some  misuse  or  abuse,  and  that 
this  fact  must  be  proved  upon  some  inquiry,  giving  the  corpora- 
tion an  o]5portunity  to  be  heard  in  defense,  before  the  charter  can 
be  revoked.^ 

Sec.  41.  The  power  to  resume  cannot  be  exhausted A  reserva- 
tion of  the  right  to  resume,  repeal,  or  alter  a  corjiorate  charter,  or 
grant,  has  none  of  the  characteristics  of  a  mere  power,  which  when 
once  exercised  is  exhausted  ;  but  its  effect  is  upon  the  legislative 
grant  itself  to  prevent  it  from  becoming,  what  it  would  become 
without  the  limitation,  namely,  an  irrevocable  contract  between 
the  state  and  the  corporation.^ 

Sec.  42.  General  statutes  reserving  power.  —  A  statute  which  in 
general  terms  provides,  that  the  legislature  may  resume  or  amend 


Thatcher,  11  N.  Y.  103 ;  Buffalo,  etc., 
R.  Co.  V.  Dudley,  14  id.  336;  Durfee 
V.  Old  Colony  R.  Co.,  5  Allen,  330; 
Bauet  V.  Alton,  etc.,  R.  Co.,  18  111. 
504 ;  Pacific  R.  Co.  v.  Hughes,  33  Mo. 
291.  But  a  contrary  doctrine  seems 
to  prevail  in  Wisconsin,  New  Jersey 
and  Maine  ;  and  it  is  there  held  that, 
while  the  legislature  may,  under  the 
reserved  right,  grant  the  power  to 
embark  in  new  enterprises,  not  con- 
templated in  the  original  corporation, 

'  Baltimore  v.  Pittsburgh,  etc.,  R. 
Co.,  3  Pittsb.  20.  The  court  suggests 
in  this  case,  that  the  proper  mode  for 
the  legislature  to  proceed,  in  such  a 
case,  would  be  to  pass  a  resolution 
directing  the  attorney-general  to  in- 
stitute the  proper  proceedings  in  the 
courts  to  ascertain  the  facts  ;  and  that 
if  in  such  proceeding  the  charge  be 
found  true,  the  charter  should  be  re- 
voked. See,  also,  Commonwealth  v. 
Pittsburgh,  etc.,  R.  Co.,r)8  Penn  St. 
26,  where  it  was  held,  that  the  legis- 
lature was  not  the  final  judge  of  the 
sufficiency  of  the  causes  for  a  repeal 
of  a  charter,  based  upon  a  charge  of 
misuse  or  abuse  of  the  same.  See, 
also,  Crease  V.  Babcock,  23  Pick.  334; 


the  corporation  cannot  be  compelled 
to  use  the  franchise  thus  conferred , 
nor  can  the  majority  of  the  corporators 
carry  out  the  powers  thus  conferred, 
against  the  wiU  of  any  member.  Ke- 
nosha, etc.,  R.  Co.  V.  Marsh,  17  Wis. 
13;  Zabriskie  v.  Hackensack,  etc.,  R. 
Co.,  18  N.  J  Eq.  178  ;  Oldtown,  etc., 
R.  Co.  V.  Veazie,  39  Me.  571.  See, 
also,  Delaware,  etc.,  R.  Co.  v.  Tharp, 
1  Houst.  (Del.)  149  ;  5  id.  454. 


Commonwealth  v.  Essex  Co.,  13 Gray, 
239  ;  State  v.  Curran,  12  Ark.  331  ; 
Delaware  R.  Co.  v.  Tharp,  5  Harr. 
(Del.)  474,  But  in  Miners'  Bank  v. 
United  States,  1  Greene  (la.),  553,  it 
was  held,  in  a  similar  case,  that  the 
legislature  was  the  proper  judge  as  to 
the  fact  of  misuse  and  abuse,  and  of 
the  right  to  resume  the  powers  con- 
ferred, on  their  own  judgment  of  the 
facts  ;  and  that  their  act  and  motives, 
or  the  suflaciency  of  the  evidence  on 
which  they  acted,  could  not  he  collat- 
erally questioned  in  the  courts.  See, 
also,  post,  chap.  20. 

*  State  V.  Commissioners,  etc.,  37  N. 
J.  L.  328. 


64:  Private  Coepokations. 

charters,  or  control  corporations,  will  authorize  the  legislature  to 
exercise  this  power,  though  tlie  corporate  act  under  which  a  cor- 
poration is  created  contains  no  express  limitations  of  its  power, 
nor  any  provision  in  relation  to  such  reserved  powers.  And  a 
charter  granted  after  the  passage  of  a  general  act  subjecting  all 
charters  thereafter  granted  to  amendment  or  changes,  in  the  dis- 
cretion of  the  legislature,  is  subject  to  alteration  although  the 
charter  or  act  creating  it  does  not  expressly  refer  to  the  act  con- 
taining the  reserved  power.^ 

Sec.  43.  Amendments  of  charters.  —  If  there  is  a  reserved  risfht 
to  resume  the  charter  or  amend  tlie  provisions  of  the  statutes  un- 
der wliich  cor]3orations  are  instituted,  and  the  legislature  by  virtue 
of  such  authority  amends  the  charter  or  statutes,  the  corporation 
has  a  discretion  whether  to  accept  or  not  the  grant  as  amended  ; 
and  the  granting  of  new  franchises  to  an  existing  corporation  is 
inoperative  until  accepted."  If  the  corporation  accepts  of  such 
an  act,  it  must  do  so  in  an  unqualified  manner ;  there  cannot  be 
a  partial  acceptance  of  the  requirements  and  conditions  of  statutes 
granting  corporate  privileges.^ 

Where  the  defendants,  who  Avere  a  corporation,  had  received  a 
charter,  subject  to  the  right  of  amendment  or  repeal,  which  gave 
them  authority  to  construct  and  use  a  railroad  terminating  in  the 
city  of  New  Haven,  and  provided  that  the  construction  of  that 
part  of  the  road  within  the  limits  of  the  city  should  be  subject  to 

'  Bangor,  etc.,  R.  Co.  v.  Smith,  47  also,  State  v.  Mayor,  etc.,  35  N.  J.  L. 

Me.  34;  State  v.  Person,  33  N.  J.  L.  157. 

134.     See,    also,    Oliver   Lee   &  Co.'s        ^Id.     See,  also,  a/if^,  §  31.     Where 

Bank,  21  N.  Y.  9;    Commonwealth   v.  there  is  a  general  power  of  repeal  of 

Fayette  R.  Co.,  55  Penn.  St.  452.  corporate    charters,   contained    in    the 

^  Yeaton  v.  Bank  of  the  Old  Domin-  constitution  of  a  state,  and  there  is 
ion,  21  Gratt.  (Va.)  593;  Commission-  also  a  power  reserved  to  the  legisla- 
ers,  etc.,  V.  Holyoke  Water  Power  Co.,  ture,  contained  in  the  act  creating  the 
104  Mass.  446;  Lyons  v.  Orange,  etc.,  corporation,  the  power  contained  in 
R.  Co.,  32  Md.  18  ;  Kenton  County  v.  the  constitution  is  sufficient  authority 
Bank  Lick  Townp.  Co.,  10  Bush,  529.  for  the  exercise  of  this  power  aa  well 
And  a  right  reserved  by  the  legisla-  as  the  act  of  incorporation,  and  a  re- 
ture  in  an  original  act  of  incorpora-  troactive  statute  aifecting  corporations 
tion,  to  alter  a  charter,  was  held  to  created  under  an  act  providing  there- 
confer  power  to  impose  a  tax  on  the  for,  is  constitutional.  Oliver  Lee  & 
capital  stock  of  the  company,  notwith-  Co.'s  Bank,  21  N.  Y.  9.  A  change  of 
standing  a  supplemental  act,  that  the  the  constitution  cannot  affect  a  vested 
"capital  stock  and  dividends"  of  that  right.  Id.  See,  also,  Reciprocity  Bank, 
kind  of  corporations  should  not  be  tax-  29  Barb.  369;  S.  C,  17  How.  (N.  Y.) 
able.  Union  Improvement  Co.  v.  Com-  Pr.  383  ;  Commonwealth  v.  Erie,  etc., 
monwealth,  69   Penn.    St.  140.     See,  R.  Co.,  27  Penn.  St.  339. 


Nature  and  Chara.cter  of.  65 

such  regulations  as  the  common  council  of  the  citj  should  pre- 
scribe, and  they  constructed  their  road  and  built  bridges  within 
and  to  the  acceptance  of  the  city,  and  an  act  was  subsequently- 
passed  by  the  legislature  authorizing  the  common  council  of  the 
city  to  order  the  bridges  Mddened  in  such  a  manner  as  the  public 
convenience  might  require,  and  to  enforce  such  order,  it  was  held 
that  the  act  was  not  unconstitutional,  as  impairing  the  obligation 
of  the  contract  of  the  state  with  the  company,  or  as  taking  their 
property  without  compensation.^  And  where  the  legislature  en- 
larged the  powers  of  a  corporation  with  the  assent  of  the  stock- 
holders, it  was  held  that  no  one  stockholder,  by  refusing  his  as- 
sent, could  hinder  the  exercise  of  the  enlarged  powers.'' 

Sec.  44.  Repeal  of  charter.—  Although  a  state  enactment  ex- 
empting a  corporation  from  taxation,  if  absolute,  may  be  opera- 
tive as  a  contract,  so  that  it  cannot  be  abrogated  by  subsequent 
legislation,  yet  where,  instead  of  being  absolute,  the  charter  is 
accepted,  subject  to  the  general  law  of  the  state,  that  all  corpo- 
rate charters  shall  be  subject  to  amendment  or  repeal  by  the  legis- 
lature, a  subsequent  legislature  may  revoke  it.^  So,  a  state  legis- 
lature has  power  to  pass  a  law  affecting  the  interests  of  a  corpora- 
tion, under  a  general  power  reserved  by  a  law  antedating  the  char- 
ter, i^roviding  the  charter  is  subject  to  amendment  ori-epeal;  and 
the  objection  in  sucli  a  case,  that  tlie  subsequent  legislation 
amending  the  charter  impairs  the  obligation  of  the  contract,  will 
not  avail.* 

Sec.  45.  General  implied  powers  of  corporations. —  The  creation 
of  a  corporation  under  a  special  or  a  general  statute  would  carry 
with  it,  by  implication,  all  the  common-law  incidents  and  powers 
of  a  corporation,  unless  there  was  some  limitation  contained  in  the 
law  at  the  time.  These  common-law  incidents  and  powers,  as  we 
have  before  observed,  are  the  right  of  perpetual  succession,  to  sue 

'English  V.  New  Haven,  etc.,  R.  Co.,  v.  Accommodation  Bank,  etc.,  26  La. 

33  Conn.  240  ;  Buffalo,  etc.,  R.  Co.  v.  Ann.  288. 

Dudley,  14  N.  Y.  836.   See,  also,  Peo-  ^Tomlinson  v.  Jessup.  15  Wall.  454. 

pie  V.  Grand,  etc.,  Plank  R.   Co.,  10  See,    also,   Tomlinson    v.  Branch,  id. 

Mich.  400.  460. 

^Currv  V.  Scott,   54  Penn.   St.  370.  ''Tomlinson  v.  Branch,  supra,-  Mil- 

If  the  alterations  be  fundamental,  the  ler  v.  State,  15  Wall.  478  ;  Holyoke  v. 

acceptance  must  be  unanimous.   State  Lyman,  id.  500, 

9 


66  Private  C(?rporations. 

and  be  sued,  to  grant  and  receive  in  the  corporate  name,  to  pur- 
cliase  and  hold  real  and  personal  property,  to  have  a  common  seal, 
and  to  make  bv-laws.^ 

Sec.  46.  Powers  conferred  or  limited  by  statutes. —  The  powers 
and  privileges  of  corporate  bodies  are,  however,  usually  limited 
and  controlled  by  the  creative  statutes.''^  These  may  extend,  or 
limit  and  restrain,  the  corporate  common-law  powers  and  privi- 
leges. The  legislative  authority  in  this  respect  is  restrained  only 
by  constitutional  provisions.  The  charter  or  statute  is  the  funda- 
mental law  of  the  corporate  existence ;  and  usually  specifies  the 
powers  which  it  is  intended  to  confer,  the  mode  of  exercising, 
resuming,  or  amending  or  modifying  the  same.  The  acceptance 
of  a  grant  of  corporate  powers  is,  of  course,  an  acceptance  of  all 
the  requirements  and  conditions  of  it,  and  there  can  be,  as  'we 
have  noticed,  no  qualified  or  conditional  acceptance  of  it,  or  of 
any  amendment  of  the  same.^ 

The  powers  and  franchise  conferred  by  the  grant  of  corporate 
privileges,  Avhether  at  common  law  or  under  the  statutes,  are  of 
three  kinds,  namely  :  tliose  granted  in  express  words  ;  those  nec- 
essarily implied  in,  or  incident  to,  the  powers  expressly  granted, 
and  those  essential  to  tlio  objects  and  purposes  of  the  grant.* 

In  this  respect  the  same  rules  of  construction  would  be  appli- 
cable to  a  municij^al  as  to  a  private  corporation.      ]^o  powers  can 


'  1  Bl.  Com.  475;  Kyd  on  Corp.  13,  else  of  the  corporate  powers  granted. 

69,    70.      See,    also,  Penobscot  Boom  Head  v.  Providence  Ins.  Co.,  2  Cranch, 

Corp.  V.  Lamson,  16  Me.  24.     So,  at  127;  Dartmouth  College  v. Woodward, 

common  law,  corporations  could  take  4  Wheat.   63G  ;    Beaty   v.    Knowler,  4 

property  by  all  the   usual  methods  of  Pet.    152;     Smith    v.     Eureka    Flour 

acquiring  it.     Sherwood  v.  American  Mills,  6  Cal.  1 ;    Winter   v.  Muscogee 

Bible  Society,   4  Abb.  Ct.  App.  Dec.  R.  Co.,   11    Ga.    438;  Louisiana  State 

227.  Bank  v.  Orleans  Nev.  Co.,  3  La.  Ann, 

^  Perrine  v.  Chesapeake,  etc..  Canal  294;  Baltimore  v.  Baltimore,  etc.,  R. 

Co.,  9  How.  182.     See,  also,  Haynes  v.  Co.,  21  Md.  50  ;   Whitman  Mining  Co. 

Covington,  21  Miss.  408.  v.  Baker,  3  Nev.  386  ;  Downing:  v.  Mt. 

3  Farmers'  Loan  &  Trust  Co.  v.   Car-  Washington    R.    Co.,  40  N.    H.    230 ; 

roll,  5  Barb.  Ch.  613  ;  The  Bush  wick,  Strauss  v.  Eagle  Ins.   Co.,  5  Ohio  St. 

etc.,  Co.   V.  Ebbetts,   3  Edw.    (N.    Y.)  59  ;  White's  Bank  v.  Toledo  Ins.  Co., 

353.    See,  also,  Penobscot  Boom  Corp.  12  id.  601;  Madison,    etc.,  R.   Co.   v. 

V.  Lamson,  16  Me.  234.     The  Miners'  Watertown,  etc.,  P.  R.  Co.,  5  Wis.  173. 

Ditch  Do.  V.  Zellerbach.  37  Cal.  543.  Middle  Bridge  v.  Brooks,  13  Me.  391 ; 

*  1   Dill,  on  Corp.,  g  55.     A  corpora-  Merriam  v.  Sloody's  Executors,  25  la. 

tion    has   no   power'  except    what   is  163  ;     Nicholson     Pavement     Co.     v. 

given  by  its  incorporating  act,  either  Painter,  35  Cal.  699. 
expressly  or  as  incidental  to  the  exer- 


Nature  ajstd  Chakacter  of.  67 

be  exercised  except  such  as  are  conferred,  and  in  case  of  reason- 
able doubt  it  must  be  decided  against  the  corporation.  If  a 
power  is  exercised  which  is  not  autliorized,  it  is  idtra  mres  and 
void.  But  we  will  consider  this  subject  hereafter.  On  the  sub- 
ject of  corporate  powers  and  rights,  and  the  rules  of  construction 
of  corporate  charters,  Mr.  Justice  CnuRcu  very  forcibly  and 
accurately  observes:  "In  this  country  all  corporations,  whether 
public  or  private,  derive  their  power§  from  the  legislative  grant, 
and  can  do  no  act  for  which  authority  is  not  expressly  given  or 
may  not  be  reasonably  inferred.  But  if  we  were  to  say  that  they 
can  do  nothing,  for  which  a  warrant  could  not  be  found  in  the 
language  of  their  charters,  we  should  deny  them  in  some  cases 
the  power  of  self-preservation,  as  well  as  many  of  the  means 
necessary  to  effect  the  essential  objects  of  their  incorporation. 
And,  therefore,  it  has  long  been  an  established  principle  in  the  law 
of  corporations,  that  they  may  exercise  all  the  powers  within  the 
fair  intent  and  purpose  of  their  creation,  which  are  reasonable  and 
proper  to  give  effect  to  the  powers  expressly  granted.  In  doing 
this,  they  must  have  a  choice  of  means  adapted  to  ends,  and  are 
not  confined  to  any  one  mode  of  operation."  ^  But  the  jjowers 
must  be  germane  to  the  purposes  of  its  creation ;  "^  and  in  con- 
struing grants,  the  settled  rule  of  the  courts  is,  that  only  such 
powers  and  rights  can  be  exercised  under  them  as  are  clearly  com- 
prehended within  the  words  of  the  act,  or  derived  therefrom  by 
necessary  implication,  the  objects  of  the  grant  being  considered 
in  construing  it.  But  any  doubts  arising  in  the  construction  of 
public  grants  are  in  favor  of  the  public'     » 

Sec.  4:7.  The  corporate  powers  limited  to  the  objects  of  the  grant. — 
In  construing  corporate  grants,  it  is  uniformly  held,  that  the  cor- 
porate powers  are  restricted  by  the  nature  and  objects  of  the  insti- 
tution, and  will  not  in  this  respect  extend  beyond  the  letter  or 

'  Bridgeport    v.    Railroad     Co.,    15  herself  to  that  extent   of  the   power 

(Jonu.  475.  that  belongs  to  her,  it  is  so  easy  to 

2  Mayor  v.  Yuille,  3  Ala.  137;  Harris  say  so,  that  we  will  never  believe  it  to 

V.  Intendaut,  28  id. '577  ;  Intendant   v.  be  meant  when  it  is  not  said.    *     *     * 

Chandler,  6  id.  899.  In  tlie  construction  of  a  charter  to  be 

^Minturn  v.  Larue,  23  How.  (U.  S.)  in  doubt  is  to  be  resolved  ;   and  every 

435.     The  supreme  court  of  Pennsyl-  resolution   which  springs  from  doubt 

vania  say:  "  When  a  state  means    to  is  against  the  corporation."    Pennsyl- 

clothe  a  corporate  body  with  a  portion  vania    R.  Co.  v.  Canal  Coms.,  21  Penn. 

of  her  own  sovereignty,  and  to  disarm  St.  22. 


68 


Pkivate  Corporations. 


spirit  of  the  grant  or  statute.  They  can  lawfully  exercise  no 
powers  except  such  as  are  exjpressly  conferred^  or  such  as  are  nec- 
essary to  the  performance  of  corporate  duties,  in  the  accomplish- 
nnent  of  the  purposes  and  objects  for  lohich  thehody  was  incorpo- 
rated. An  attempt  to  exercise  powers  beyond  tliis  would  be 
tdtra  vires  and  void.^ 

"Tliis   principle,"  observes  Chief-Justice  Shaw,   "is  derived 
from  the  nature  of  corjoo'rations,   the  mode  in  whicli  they  are 


'  Vandall  v.  San  Francisco  Dock  Co., 
40  Cal.  83.  They  can  exercise  only 
such  powers  as  are  expressly  confer- 
red upon  them,  or  such  as  are  fairly 
implied  to  enable  them  to  fully  carry 
out  the  purposes  for  which  they  were 
incorporated.  Weckler  v.  First  Na- 
tional Bank,  43  Md.  581;  Matthews  v. 
Skinner,  63  Mo.  339;  Bellmeyer  v. 
Independent  Dist.  of  Marshaltown,  44 
Iowa,  164.  They  have  none  of  the 
elements  of  sovereignty  and  cannot  go 
beyond  the  powers  conferred  upon 
them  by  law.  St.  Louis  v.  Weber, 
44 Mo.  547.  And  where  extraordinary 
powers  are  conferred,  which  contra- 
vene established  rights,  they  will  be 
construed  strictly.  Greenwich  v. 
Easton,  etc  ,  R.  R.  Co.,  24  N.  J.  Eq. 
217.  But  as  previously  stated,  a  corpo- 
ration chartered  for  a  specific  purpose 
takes,  by  implication,  all  the  incidental 
powers  necessary  for  the  consum- 
mation of  such  purpose,  even  though 
the  charter  prohibits  it  from  exercis- 
ing any  powers,  except  such  as  are 
essential  to  its  corporate  existence. 
Morris,  etc.,  R.  R.  Co.  v^  Sussex  R. 
R.  Co.,  20  N.  J.  Eq.  542.  But  it  can  do 
no  act  expressly  prohibited  by  the  char- 
ter, although  otherwise  it  might  have 
been  fairly  within  its  incidental  pow- 
ers. Farmers,  etc.,  Bank  v.  Harrison, 
57  Mo.  503.  Thus,  a  corporation  author- 
ized to  receive  deposits,  may  issue 
certificates  of  deposit,  even  though 
prohibited  from  issuing  bills,  bonds, 
notes,  or  other  securities  to  circulate  as 
money,  because  the  purposes  of  the 
corporation  being  to  receive  deposits, 
it  will  be  presumed  that  the  legisla- 
ture did  not  intend  to  prohibit  it  from 
giving  to  a  depositor  such  necessary 
evidence  of  its  liability  for  a  deposit, 
even  though  it  be  used  to  circulate  as 
money.  Talladega  Ins.  Co.  v.  Landers, 


43  Ala.  115.  In  Vandall  v.  South  San 
Francisco  Dock  Co.,  40  Cal.  83,  the 
powers  enumerated  in  the  certificate 
of  incorporation  of  a  dock  company 
were  to  buy,  improve,  or  dispose  of 
real  estate,  etc.,  and  it  was  held  that 
the  term  improve  must  be  construed 
in  its  most  liberal  sense  as  including 
the  performance  of  any  act,  whether 
on  or  off  the  land,  the  direct  and  proxi- 
mate effect  of  which  icould  be  to  enhance 
its  value  in  the  market.  So  in  Dorsey, 
etc.,  R.  R.  Co.  V.  Marsh,  6  Fisher's 
Pat.  Cas.  (U.  S.)  387,  it  was  held  that 
a  power  to  purchase  property  enables 
a  corporation  to  purchase  and  hold  a 
patent,  the  ownership  of  which  is  ap- 
propriate to  enable  it  to  execute  the 
corporate  purpose.  For  instances  of 
other  incidental  powers  see  The  Ca- 
mauche,  8  Wall.  (U.  S.)  448 ;  New 
England  Car  Spring  Co.  v.  Union  In- 
dia-rubber Co.,  4  Blatchf.  1  ;  Miner's 
Ditch  Co.  V.  Zellerbach,  37  Cal,  543  ; 
Central  Gold  Mining  Co.  v.  Piatt,  3 
Daly  (N.  Y.  C.  P.),  263.  In  a  Penn- 
sylvania case  this  right  to  exercise 
incidental  powers  was  well  illustrated 
in  a  case  where  a  company  owning  a 
large  body  of  unimproved  lands  was 
held  to  have  power  to  build  saw-mills 
and  a  hotel  to  accommodate  persons 
having  business  at  the  location  of  the 
company,  under  a  clause  in  the  charter 
authorizing  it  "  to  aid  in  the  develop- 
ment of  minerals  and  other  materials, 
and  to  promote  the  clearing  and  set- 
tlement of  the  countrv."  Watt's  Ap- 
peal, 78  Penn.  St.  370.  See,  also. 
White  V.  Lester,  4  Abb.  App.  Dec. 
(N.  Y.)  585 ;  Dupee  v.  Boston  Water 
Power  Co..  114  Mass.  37;  Hahn  v. 
Purdell,3  Bush,  189;  West  v.  Madison 
Co.  Ag.  Board,  82  111.  205 ;  Kitchen  v. 
Cape  Girardeau,  etc.,  R.  Co.,  59 Mo. 514. 


Nature  and  Character  of.  69 

oi'gaiiized,  and  in  wliicli  their  affairs  must  be  conducted.  In 
aggregate  corporations,  as  a  general  rule,  the  act  and  will  of  the 
majority  is  deemed  in  law  the  act  and  will  of  the  whole —  as  the 
act  of  the  corporate  body.  The  consequence  is,  that  a  minority 
must  be  bound  not  onl}^  without  but  against  their  consent.  Such 
an  obligation  may  extend  to  every  onerous  duty,  to  pay  money  to 
an  unlimited  amount,  to  perform  services,  to  surrender  lands,  and 
the  like.  It  is  obvious,  therefore,  that  if  this  liability  were  to  ex- 
tend to  unlimited  and  indefinite  objects,  the  citizen,  by  being  a 
member  of  a  corporation,  might  be  deprived  of  his  most  valuable 
personal  rights  and  liberties.  The  security  against  tliis  danger  is 
a  steady  adherence  to  the  principle  stated,  viz.,  that  corporations 
can  only  exercise  powers  over  their  respective  members,  for  the 
accomplishment  of  limited  and  defined  objects.  And  if  this  prin- 
ciple is  important,  as  a  general  rule  of  social  right  and  municipal 
law,  it  is  of  the  highest  importance  in  those  states  where  corpora- 
tions have  been  extended  and  multiplied,  so  as  to  embrace  almost 
every  object  of  human  concern."  ^ 

According  to  the  principles  of  the  law  relating  to  the  powers  of 
corporations,  it  is  evident  that  if  a  corporation  is  instituted  for 
purposes  of  insurance,  it  could  not  properly  engage  in  banking, 
but  must  be  confined  to  the  business  for  which  it  was  incorpo- 
rated ;  and  it  has  been  held  that  notes  discounted,  and  securities 
for  money  loaned  by  an  insurance  company,  in  violation  of  stat- 
utes restraining  such  action,  were  void.'*  The  same  doctrine  was 
held  in  a  case  where  a  library  association  attempted  to  exercise 
the  business  of  banking.^  So,  power  to  acquire  lands  for  a  right 
of  way  does  not  authorize  a  railroad  company  to  acquire  lands 
for  speculative  purposes,*  nor  does  the  grant  of  a  right  "  to  grant, 
bargain,  sell,  buy  or  receive  all  kinds  of  property,  real,  personal 

'  Spaulding  v.  Lowell,  23  Pick.  71.  11   Ohio,  96.     See,  also,  Knowles,  les- 

See,  also,  Stetson  V.  Kempton,  13  Aiass.  see,  v.  Beatty,  1  McLean  (C.  C),   43; 

372;  Willard  V.  Newburyport,  12  Pick.  People  v.  Utica   Ins.   Co,   15   Johns. 

227;  Keyes  v.  Westford,   17  id.  273;  358;    Korn   v.    Mutual    Ins.    Soc,    6 

Cooley  V.  Granville,  10  Cush.  57.  And  Cranch,  192;  New  York  Fire  Ins.  Co. 

the  law  creating  a  corporation  will  be  v.  Ely,  2  Cow.  678;  Bank  of  Utica  v. 

an  index  to  the   objects   for  which  it  Sniedes,   3    id.    662;  Perrine  v.  Chesa- 

was  created  and  the  powers  with  which  peake,   etc..  Canal  Co.,  9  How.  (U.  S.) 

it  was  endowed.  Aurora  v.  West,  9  172;  Trustees  v.  Peaslee,  15  N.  H.  317. 
Ind.  74.  *  Pacific  R.  R.  Co.  v.  Seely,  45  Mo. 

^  Utica  Ins.  Co.  v.  Scott,  19  Johns.  1.  212. 

^  State  V.  Washington  Library  Co. , 


70  Pkivate  Corporations. 

or  mixed,  or  to  hold  the  same  iii  trust  or  otherwise  *  *  *  * 
and  to  advance  moneys  *  *  *  ^-  upon  any  property,  real  or 
personal,  on  such  terms  or  commissions  as  may  be  established  or 
approved,  by  the  directors,"  necessarily  authorize  the  corporation 
to  transact  a  banking  business.^  In  a  word,  a  corporation  takes 
no  powers  by  implication,  except  such  as  are  fairly  incident  to  the 
objects  and  purposes  of  the  grant.''  No  power  can  be  implied  in 
favor  of  a  corporation  to  do  an  act  in  opposition  to  the  general 
law,  or  which  is  prohibited  by  it.  Thus  where  the  charter  of  a 
company  authorized  it  to  dispose  of  property  "  in  any  manner  they 
deem  best,"  it  was  held  that  this  did  not  authorize  it  to  dispose  of 
its  property  by  lottery,  lotteries  being  prohibited  by  statute.^  ISTor 
does  authority  given  by  a  charter  to  carry  on  a  certain  business 
authorize  it  to  carry  it  on  in  a  way  that  would  lead  to  injurious 
results  to  others,  or  materially  afiect  their  health,  their  comfort  or 
their  property." 

"We  shall  hereafter  consider  the  powers  of  corporations  in  con- 
nection with  corporate  meetings,  and  the  management  of  corpo- 
rate business ;  the  power  to  sue  and  be  sued,  to  use  a  corporate 
seal,  to  contract,  and  to  make  by-laws. 

Sec.  48.   Distinction  between  corporate  and  copartnership  associations. 

—  There  are  some  points  of  resemblance  as  well  as  marked,  differ- 
ences between  corporate  and  mere  partnership  associations,  which 
it  may  be  Avell  here  to  notice.  The  leading  principles  of  the  com- 
mon law  relating  to  both  corporations  and  partnerships  are  bor- 
rowed from  the  Roman  law.  This  is  the  inexhaustible  fountain 
of  various  and  valuable  learning  —  the  concentrated  wisdom  of 
eminent  jurists,  adapted  to  the  convenience,  the  wants  and  the 
policy  of  a  commercial  people  in  all  ages.^ 

The  points  of  resemblance  which  may  be  noticed  are :  (1)  each 
may  be  composed  of  many  members  associated  together  for  some 
specific  object ;  (2)  the  members  may  consist  not  only  of  natural 
persons,  but  of  other  corporations  or  partnerships ;  (3)  the  capital 

1  New  York  Trust,  etc.,  Co.  v.  Hel-  ^gaijcQck  y.  New  Jersey  Stock  Yard 

mer,  12  Hun  (N.  Y.),  85.  Co.,  20  N.  J.  Eq.  296. 

■''  Peruvian  R.  R.  Co.  v.  Thames,  etc.,  *  Story    on    Part.,  chap.  1;  2  Kent's 

Ins.  Co.,  L.  R.,  2  Ch.  App.  617.  Com.,  §  33,  p.  269;  IBrown's  Civ.  and 

3 State  V.  Krebs,  64  N.  C.  604.  Adm.  L.  142;  Wood's  lus.  Civ.  I..  134. 


Natdke  and  Chauacteb  of.  71 

of  each  may  consist  of  a  joint  stock,  wliicli  may  be  divided  mider 
by-laws  or  fuiidameutal  articles  of  agreement  into  shares,  and 
transferred  by  assignment  or  delivery ;  (4)  each  may  have  a  com- 
mon name ;  (5)  the  liability  of  partners,  like  that  of  corporators, 
is  frequently,  as  we  have  observed,  limited  by  statute  to  a  certain 
amount,  as  the  amount  of  the  stock  subscribed  or  owned  by  them  ; 
(6)  each  usually  acts  by  its  agents,  and  may  sue  and  be  sued  by 
the  corporate  and  partnership  name.  On  the  other  hand,  there 
are,  at  least  at  common  law,  some  marked  distinctions  between 
them.  The  members  of  a  partnership  are  each  agents  for  the 
partnership,  and  by  their  simple  act  may  bind  the  firm,  as  any 
other  agent  may,  within  the  scope  of  his  authority,  bind  his  prin- 
cipal. Each  member  is  personally  liable  to  the  creditors  of  the 
firm.  But  as  a  general  rule  corporators  are  not  personally  hable 
to  the  creditors  of  the  corporation,  although  they  may  be  required 
to  fulfill  their  obligations  to  it.^  ISTor  is  there  any  general  au- 
thority for  corporators  to  act  as  agents  for  the  corporation.^  In  the 
case  of  partnerships  each  partner  h  the  accredited  agent  of  the 
other,  and  may  bind  them  as  such  agent  to  the  extent  of  their 
property,  but  the  personal  responsibility  of  stockholders  is  incon- 
sistent with  a  body  corporate  at  common  law.^  It  very  often 
happens,  however,  that  the  charter  imposes  liability  upon  stock- 
holders in  certain  instances,  and  in  some  instances  the  statute  pro- 
vides that  the  stockholders  shall,  under  certain  circumstances,  be 

'  The  stockholders  of  a  company  in-  iently.  The  persons  in  question  must 
corporated  under  general  laws  are  not  be  constituted  a  corporation  by  means 
partners  even  between  themselves,  of  a  legislative  act  or  charter,  or  they 
Baker  v.  Backus,  33  111.  79.  And  must  enter  into  a  partnership  by  virtue 
where  the  statute  contains  no  provis-  of  a  contract.  In  either  case  their  re- 
ion  making  the  corporators  Individ u-  lations  will  be  determined,  partly  by 
ally  liable,  they  are  not  so  liable,  the  express  provisions  of  the  charter 
Shaw  V.  Boylau,  16  Ind.  384.  And  or  contract,  and  partly  by  the  implied 
such  liability  cannot  be  imposed  by  a  conditions  tacitly  annexed  by  law  to 
by-law.  Trustees,  etc.,  v.  Flint,  3  each  of  these  relations.  Thus,  while 
Mete.  (.Mass.)  539:  Hopkins  v.  White-  corporations  and  partnerships  both 
sides,  i  Head,  31;  Coburn  V.  Wheelock,  agree  in  being  relations  voluntarily 
34  N.  Y.  440.  assumed  by  the  members,  and  also  in 

2  Ruby  V.  Portland,  15  Me.  306  having  for' their  object  the  association 

3  "  When  two  or  more  persons  desire  of  several  individuals  for  the  purpose 
to  unite  their  means  for  the  purpo.'5e  of  co-operation  in  business,  yet  they 
of  carrying  on  some  enterprise  or  differ  so  materially  in  their  mode  of 
business  which  neither  might  be  able  creation,  and  in  many  other  respects, 
to  accomplish  by  himself  alone,  there  that  they  require  a  separate  considera- 
are  but  two  ways  of  doing  it  conven-  tion."    Walker  on  Am.  Law,  p.  223. 


72  Pkivate  Ooepoeations. 

responsible  for  the  debts  of  the  corporation,  but,  except  where 
the  statute  so  provides,  liability  does  not  attach  to  the  stockholders. 
In  other  words,  no  liability  attaches  to  stockholders  for  the  debts 
of  a  corporation  beyond  that  imposed  by  statute. 


Perpetual  Succession.  73 


CHAPTER   IV. 


pekeptual   succession. 


Sec.  49.     The  doctrine  of  immortality. 

Sec.  50.     The  advantages  of  perpetual  succession. 

Sec.  49.  The  doctrine  of  immortality.  —  The  capacity  of  perpetual 
succession  is  the  distinctive  feature  of,  and  among  the  most  import- 
ant incidents  connected  with  private  corporations.  This  is  some- 
times expressed  by  the  term  "immortality,"  which,  however,  is  not 
strictly  correct,  as  applicable  to  corporations,  as  perpetual  succes- 
sion only  means  that  they  may  continue,  and  rights  and  interests 
therein  be  transferred  in  succession,  for  an  indefinite  time,  or  so 
long  as  the  corporation  legally  exists.  But  private  corporations  in 
this  country  are  usually  limited  as  to  the  period  of  their  continu- 
ance by  the  statutes  under  which  they  are  constituted,  and  they 
may  also  be  terminated  for  various  causes,  before  the  period  thus 
limited.  They  may,  for  instance,  be  dissolved  for  the  want  of 
members,  for  nonuser,  or  for  misuser  of  their  franchises.^  By 
virtue  of  this  capacity  of  succession  a  corporation  continues  the 
same  legal  person  and  identity,  from  the  time  of  its  creation  until 
the  time  of  its  dissolution,  notwithstanding  changes  in  its  mem- 
bers by  death  or  otherwise,  "  so  that  it  is  unnecessary  to  make 
grants  to  them  and  their  successors,  or  to  declare  their  obligations 
binding  on  their  successors." "'' 

Sec.  50.  The  advantages  of  perpetual  succession.  —  Perpetual  suc- 
cession, as  we  have  seen,  is  that  continuous  existence  which  enables 
a  corporation  to  manage  its  affairs  and  hold  property,  without  the 

i2Kydon   Corp.    445;  Wilcox   on  of  California  College,  38  Cal.  166.  For 

Corp.  326  ;  1  Bl.  Com.   485;  3  Kent's  instances  in  which  corporations  may 

Com.  305;  Boston  Glass  M'fg  Co.  v.  be   dissolved,  also   for  the   necessary 

Langdon,  24  Pick.  52;  Mclntyre  Poor  steps  to  secure  the  same,  see  chapter 

School  V.  Zanesville  Canal  Co.,  11  Ohio,  on  Dissolution,  etc.,  post. 

203.      So   they    may   surrender   their  '^  1  Wile,  on  Corp.  16. 
franchises.     People  v.  President,  etc., 

10 


74  Pkivate  Corpokations. 

necessity  of  perpetual  conveyances  for  tlie  purpose  of  transmit- 
tin<^  it.  By  reason  of  this  quality  this  ideal  and  artificial  person 
remains,  in  its  legal  identity  and  personality,  the  same,  though 
fre(pient  changes  may  be  made  of  its  members ;  and  although  all 
of  its  members  may  be  changed  and  new  ones  substituted  for  the 
old,  it  still  legally  I'emains  one  person.  In  reference  to  the  ad- 
vantages thus  possessed  by  a  corporation,  Blackstone  observes : 
"  To  show  the  advantages  of  these  incorporations,  let  us  consider 
the  case  of  a  college  in  either  of  our  universities,  founded  ad 
studendum  et  orandutn,  for  the  encouragement  and  support  of 
religion  and  learning.  If  this  was  a  mere  voluntary  assembly 
the  individuals  which  compose  it  might  indeed  read,  pray,  study, 
and  perform  scholastic  exercises  together,  so  long  as  they  'could 
agree  to  do  so  ;  but  they  could  neither  frame  nor  receive  any  laws 
or  rules  of  their  conduct,  none,  at  least,  which  could  have  any 
binding  force,  for  want  of  coercive  power  to  create  a  sufficient 
obligation.  Neither  could  they  be  capable  of  retaining  any  privi- 
leges or  immunities,  for  if  such  privileges  be  attacked,  which  of 
all  this  uncontrolled  assembly  has  the  ability  to  defend  them  ? 
And  when  they  are  dispersed  by  death  or  otherwise,  how  shall 
they  transfer  these  advantages  to  another  set  of  students  equally 
unconnected  as  themselves  ?  So  also  with  regard  to  holding  es- 
tates or  other  property,  if  land  be  granted  for  purposes  of  religion 
or  learning  to  twenty  individuals  not  incorporated,  there  is  no 
legal  way  of  continuing  the  property  to  any  other  persons  for  the 
same  purposes  but  by  endless  conveyances  from  one  to  the  other 
as  often  as  the  hands  are  changed.  But  when  they  are  consoli- 
dated and  united  into  a  corporation,  they  and  their  successors  are 
considered  as  one  person  in  law.  As  one  person  they  have  one 
will,  which  is  collected  from  the  sense  of  the  majority  of  the  in- 
dividuals. This  one  will  may  establish  rules  and  orders  for  the 
I'egulation  of  the  whole,  which  are  a  sort  of  municipal  laws  for 
this  little  republic ;  or  rules  and  statutes  may  be  prescribed  to 
it  at  its  creation,  which  are  then  in  the  place  of  natural  laws.  The 
privileges  and  immunities,  the  estates  and  possessions  of  the  corpo- 
ration, when  once  vested  in  them,  will  be  forever  vested,  without 
any  new  conveyance  to  new  successions,  for  all  the  individual 
members  that  have  existed  from  the  foundation  to  the  present 


Perpetual  Succession.  75 

time,  or  that  shall  ever  hereafter  exist,  are  but  one  person  in  law, 
a  person  that  never  dies,  in  like  manner  as  the  river  Thames  is 
still  the  same  river,  though  the  parts  which  compose  it  are  changing 
every  instant."^  The  members  of  the  corporation  may  change,  but 
it  remains  the  same  legal  person,  whether  the  corporation  is  ])ub- 
lic  or  private  It  continues  the  same  body  politic  from  its  crea- 
tion to  its  dissolution,  unaltered  by  the  revolutions  of  ages  or  the 
successive  changes  of  its  members ;  therefore  it  is  unnecessary  to 
make  grants  to  it  and  its  successors,  or  to  declare  its  obligations 
binding  on  its  successors,^  If  a  conveyance  of  land  is  made  to 
an  association  of  individuals  not  incorporated,  their  successors 
could  not  enjoy  the  land  without  a  conveyance  from  each  of  the 
members  composing  it,  and  if  numerous  changes  should  be  made 
in  the  members  of  the  association,  as  many  conveyances  would  be 
required.  On  the  other  hand,  if  the  persons  were  incorporated 
so  that  in  law.  they  would  constitute  but  one  person,  a  conveyance 
of  land  to  them  in  their  corporate  capacity  and  name  would  vest 
the  title  in  the  corporation,  and  it  could  thus  be  enjoyed  by  it  so 
long  as  it  had  a  legal  being,  or  until  it  should  make  a  conveyance 
of  the  same  in  its  corporate  name. 

The  advantages  of  this  perpetual  continuance  and  succession  in 
the  ^•arious  undertakings  of  mankind  at  the  present  day  will  be 
manifest.  In  enterprises  of  great  magnitude,  where  the  associated 
^\■ealth  of  many  persons  may  be  requii-ed,  it  enables  the  persons 
thus  associated  as  one  body  to  apply  the  capital  thus  pledged  to 
the  objects  of  the  association ;  to  hold  real  or  personal  property, 
and  convey  the  same  without  the  inconvenience  of  frequent  con 
veyances  by  each  member,  or  of  perpetual  conveyances,  at  each 
change  of  membership ;  "  and  its  youth  and  vigor  are  perpetuated 
by  a  succession  of  fresh  managers,  while  its  finances  can  neither 
become  legally  diverted  from  its  business,  nor  be  withdrawn  for 
personal  gratification  or  necessity.''  ^ 

'  1  Bl.  Com.  467,  468.  Justice  Marshall,  in  relation  to  the 
"^  1  Wile,  on  Corp.  16;  Grant  on  Corp.  properties  of  corporations,  observes  : 
5;  Qloyer  on  Corp.  8  ;  7  Vin.  Abr.  358;  "Among  the  most  important  are  im- 
1  Bl.  Com.  468.  mortality,  properties  by  which  a  per- 
^  Dartmouth  College  v.  Woodward,  4  petual  succession  of  persons  are  con- 
Wheat.  636;  ante,  g  1.  In  Dartmouth  sidered  the  same,  and  may  act  as  a 
College   V.    Woodward,  supra.  Chief-  single  individual.     They  enable  a  cor- 


76  Private  Corporations. 

This  right  of  perpetual  succession  is  incident  to  every  corpora- 
tion ;  and  they  may  take,  hold,  and  transmit  real  or  personal  prop- 
erty, limited  in  that  respect  only,  by  the  constitution  or  the  act 
creating  it.  We  shall  hereafter  more  fully  consider  the  power  to 
acquire  and  hold  property  and  the  limitations  on  this  power. 

poration  to  manage  its  own  affairs  and  in  succession,  with  these  qualities  and 

to  hold  property  without  the  perplex-  capacities,  that  corporations   were  in- 

ing  intricacy,  the  hazardous  and  end-  vented  and  are  in  use.  By  these  means 

less    necessity    of    perpetual    convey-  a  perpetual  succession  of  individuals 

ances,  for  the  purpose  of  transmitting  are  capable  of  acting  for  the  promotiou 

it  from  hand  to  hand.     It  is  chieliy  for  of  the  particular  object  like  one  im- 

the  purpose  of  clothing  bodies  of  men,  mortal  being." 


Members  —  Stockuolders  and  Stock.  77 


CHAPTEK  V. 

MEMBERS.       STOCKHOLDERS  AND   STOCK. 

Sec.  51.  Composition  of  private  corporations. 

Sec.  53.  The  government  may  constitute  a  member. 

Sec.  53.  Admission  and  election  of  members  and  officers. 

Sec.  54.  Disfranchisement  and  expulsion  of  members. 

Sec.  55.  Quasi  corporations. 

Sec.  56,  Membership  under  general  statutes. 

Sec.  56a.  Certificates  of  stock,  nature  of,  etc. 

Sec.  57.  Management  by  directors. 

Sec.  58.  Shareholders  are  members  —  right  to  vote. 

Sec.  59.  Transfer  books  of  company. 

Sec.  60.  Executor  of  stockholder,  rights  of. 

Sec.  61.  Right  to  vote  by  proxy  or  attorney. 

Sec.  63.  Matters  that  stockholders  are  presumed  to  know. 

Sec.  63.  Personal  liabilities  of,  under  statutes. 

Sec.  64.  Cause  of  action,  accrues  when. 

Seo.  65.  Intentional  deceit  as  to  organization,  etc. 

Sec.  66.  General  liabilities  of,  on  subscription  to  stock. 

Sec.  67.  Conditions  provided  by  the  constating  instruments. 

Sec.  68.  Special  disabilities  created  by  charter. 

Sec.  69.  Condition  must  be  complied  with. 

Sec.  70.  Conditional  subscriptions. 

Sec.  71.  Company  may  accept  payment  in  labor,  etc. 

Sec.  73.  The  condition  may  be  waived. 

Sec.  73.  When  the  condition  is  void. 

Sec.  74.  Conditions  which  will  avoid  the  whole  contract. 

Sec.  75.  Conditional  subscriptions  continued. 

Sec.  76.  Fraudulent  subscriptions. 

Sec.  77.  Subscriptions  in  contemplation  of  incorporation. 

Sec.  78.  Fraud  in  relation  to  subscriptions. 

Sec.  79.  Rules  depend  upon  statutes  or  constating  instruments. 

Sec.  80.  Defense  to  subscriptions  on  other  grounds. 

Sec.  81.  Changes  in  charter. 

Sec  82.  Assessments  and  calls  for  payments. 

Sec.  83.  Promise  to  pay,  eflFect  of,  by  whom  calls  should  be  made. 

Sec.  84.  Diversion  of  capital  to  other  purposes. 

Sec.  85.  Forfeiture  of  stock. 

Sec.  86.  Assessments  —  rules  in  relation  to. 

Sec.  87.  Power  to  lay,  cannot  be  delegated. 


78  PltlVATE    CORPOEATIONS. 

Statutory  power  must  be  followed. 

Several  assessments  may  be  laid  at  one  time,  when. 

Notice  of  assessments  or  calls. 

Sufficiency  of. 

Rights  of  stockholders  to  dividends. 

Right  of  purchaser  to  dividends. 

Effect  of  declaring  dividend. 

A  stockholder  may  sue  for  his  dividends. 

Income  on  stock  in  trust. 

Money  in  hands  of  directors. 

Right  to  sell  and  assign  shares. 

Transfer  of  stock. 

Power  of  attorney  to  transfer,  presumption  arising  from. 

Liabilities  of  assignees  to  corporations. 

Liability  of  purchasers  from  trustees. 

Right  of  trustee  to  pledge. 

Rights  of  cesttd  que  trust  against  purchaser. 

Stockholder's  right  to  vote  — holding  stock  constitutes  right. 

Right  of  stockholders  to  access  to  books. 

Holders  of  preferred  stock. 

When  it  can  be  issued  —  dividends  on. 

Scrip  and  preliminary  subscriptions. 

Stock  defined,  etc. 

Issuing  certificates  of  shares. 

Certificates  unlawfully  issued. 

Fraud  in  issuing  stock  certificates. 

Shares  and  income  —  character  and  quality  of,  as  property. 

Interest  of  stockholders  in  corporate  property. 

How  stockholder's  interest  is  conveyed. 

Character  and  quality  of  certificates 

Transfer  of  shares  —  how  made . 

Effect  of  assignment  and  delivery. 

Refusal  of  the  corporation  to  transfer. 

Contracts  for  the  transfer  of  shares. 

Liens  of  the  corporation  on  stock. 

Company  may  refuse  to  transfer,  when. 

Instances   where  corporation  has  been  held  justified  in  refusing 

to  transfer. 
Corporation  may  be  compelled  to  transfer. 
Stock  subject  to  execution  against  assignor,  until  transferred. 
Stockholder's  right  of  action  against  the  corporation. 
When  stockholder  may  have  injunction  against  corporation. 
Liability  of  the  stockholders  in  equity  to  creditors. 
Overissued,  and  "  watered  stock." 

Sec.  51.      Composition  of  private  corporations. — We  liave  stated  that 
a  corporation  is  an  association  of  persons  constituting  in  law  one 


Sec. 

88. 

Sec. 

89. 

Sec. 

90. 

Sec. 

91. 

Sec. 

93. 

Sec. 

93. 

Sec. 

94. 

Sec. 

95. 

Sec. 

96. 

Sec. 

97. 

Sec. 

98. 

Sec. 

99. 

Sec. 

100. 

Sec. 

lOL 

Sec. 

102. 

Sec. 

103. 

Sec. 

104. 

Sec. 

105. 

Sec. 

106. 

Sec. 

107. 

Sec. 

108. 

Sec. 

109. 

Sec. 

110. 

Sec. 

111. 

Sec. 

113. 

Sec. 

113. 

Sec. 

114. 

Sec. 

115. 

Sec. 

116. 

Sec. 

117. 

Sec. 

118. 

Sec. 

119. 

Sec. 

130. 

Sec. 

131. 

Sec. 

123. 

Sec. 

133. 

Sec. 

134. 

Sec. 

135. 

Sec. 

136. 

Sec. 

137. 

Sec. 

138. 

Sec. 

139,. 

Sec. 

130. 

Members  —  Stockholdees  and  Stock.  79 

artificial  person,  endowed  with  certain  capacities  and  incidents  ; 
and  tliat  the  component  parts  or  corporators  need  not  necessarily 
be  natural  persons.  On  the  contrary,  this  incorporeal,  imaginjlry 
and  artificial  person  may  be  composed  of  other  artificial  persons 
or  coi'porations,  or  of  copartnerships,  as  well  as  natural  persons  ; 
and  they  may  consist  of  women  and  children  as  well  as  adult  per- 
sons."' 

Sp;c.  52.  The  government  may  constitute  a  member, — The  govern- 
ment may  be  a  stockholder  in  a  corporation  or  company,  and, 
when  it  assumes  that  relation,  to  that  extent,  it  divests  itself  of 
its  sovereign  character,  and  takes  that  of  a  private  citizen,^  and 
the  fact  that  the  state  is  the  sole  owner  of  the  stock  of  a  corpora- 
tion does  not  dejDrive  a  creditor  of  the  corporation  of  his  legal  or 
equitable  remedies,*  nor  does  a  debt  due  to  such  a  corporation 
acquire  any  incidents,  or  priorities,  not  possessed  by  debts  due  to 
individuals  or  other  corporations.^  In  the  case  of  the  original 
United  States  Bank,  incorporated  in  1791,  the  goverimient  be- 
came one  of  its  members  by  subscription  to  its  stock  to  the  amount 
of  one-fifth  thereof."  This  institution  was  not  merely  a  com- 
mercial institution,  but  was  mainly  and  essentially  of  a  financial 
and  political  character ;  and  like  the  banks  of  England,  Yenice 
and  Genoa,  it  was  chartered  mainly  for  governmental  purposes  ; 
and  the  United  States  became  a  member  by  subscribing  to  its 
stock  through  its  authorized  agent.''  So,  in  case  of  tlie  Planters' 
Bank  of   Georgia,  and  the  State  Bank  of  South  Carohna.     Al- 

'  Kyd  on  Corp.  32;  Bank  of  U.  S.  ^  gank  of  U.  S.   v.  Planters'  Bank, 

V.   Planters'   Bank   of  Ga.,  9  Wheat.  9   Wheat.  907  ;  Louisville,  etc.,  R.  R. 

907.  Co.  V.  Letson,  2  How.  (U.  S.)  497;  Penn- 

*  Ayliffe's   Civ.   L.   204;  1  Kyd  on  sylvania  v.  Wheeling  Bridge  Co.,  13  id. 

Corp.  32;  10  Co.    R.  31   b.;    Ogdens-  518. 

burg,  Rome   &   Clayton   R.  R.  Co.   v.  *  Curran   v.  Arkansas,  15  How.  (U. 

Frost,  21  Barb.  (N.  Y.)  541.     An  infant  S.)  304;  Seymour  v.  Turnpike  Co.,  10 

stands  in  the  same  relation  to  a  cor-  Ohio,  476. 

poration  for  a  portion  of  whose  stock  ^  Central  Bank  of  Georgia  v.  Little, 

he  has  subscribed,  as  he  does  to  a  per-  11    Ga.    346;  Bank   of   Tennessee    v. 

son  with  whom  he  has  contracted.     If  Dibrell,  3  Sneed,  379. 

upon  becoming  of  age  he  disclaims  the  ^  Hildreth   on  Banks  and  Banking, 

contract,  and  restores  the   thing  with  59  et  seq. 

all  its  advantages,  his  liability  is  ter-  ■"  Hildreth   on  Banks  and  Banking, 

minated,  and  he  cannot  be  made  liable  58;    Ency.  Am.,  vol.  1,  p.  548;   Bank 

for   calls.     Birkenhead,    etc..  Railway  of  U.  S.  v.  Planters'  Bank  of  Georgia, 

Co.  V.  Brownrigg,  4  Exch.  426;  London  9  Wheat.  907. 
&  North  Western   Railway  Co.  v.  Mc- 
Michael,  5  id.  855. 


80  Private  Corporations. 

tlioiigli  tlicsc  banks  were  chartered  by  tlic  states  of  Georgia  and 
South  Carolina,  respectively,  the  states  creating  them  became 
membei's  thereof.' 

Several  corporations  may  form  a  component  part  of  one  corpora- 
tion,* and  if  authorized  to  do  so  hy  the  legislature,  a  municipal 
coi*poration  may  become  a  stockholder  in  a  private  corporation ' 
but  not  otherwise,*  and  in  all  cases,  where  the  statute  prescribes 
the  manner  in  which  the  subscrij^tion  shall  be  made,  or  the  doing 
of  certain  things  as  a  prerequisite  to  its  validity,  the  statute  must 
be  substantially  complied  with,  or  the  subscri]3tion  will  be  void.* 
And  the  mayor  or  aldermen  and  commonalty  may  constitute  a 
corporation  ;  but  in  such  a  case  "  neither  of  them  has  any  corpo- 
rate capacity  distinct  from  the  other  two,  and,  therefore,  the 
mayor  cannot  in  his  political  character  of  mayor  take  in  succession 
any  thing  as  a  sole  corporation  ;  nor  can  the  aldermen  as  a  select 
body  take  any  thing  to  them  and  their  successors  as  an  aggregate 
corporation."  *  There  are  various  corporations  in  England,  espe- 
cially political  or  municipal,  that  are  constituted  of  integral  parts, 
■without  which  parts  the  corjjoration  would  not  be  complete  ;  nor 
has  any  of  the  integral  parts  power  to  act  without  the  others.'' 
Such  is  the  mayor,  aldermen  and  commonalty ;  they  constitute 
three  distinct  parts.* 

Under  the  former  railroad  system  of  England,  the  corporate  or- 
gans of  railroad  corporations  were  three-fold,  viz. :  The  general 
assembly  of  the  company,  the  board  of  directors,  and  a  duly  con- 
stituted agent.*  But  in  this  country,  especially  private  corpora- 
tions for  the  pecuniary  emolument  of  its  members,  are  constituted 
on  the  unitary  principle,  and  usually  in  all  matters  relating  to  the 
objects  for  which  tlie  corporation  is  instituted,  the  constating  in- 
struments confer  on  a  limited  number  of  directors  the  manage- 

'  State    Bank    S.   C.    v.   Gibbs,    3  '•Thomson    v.     Lee    County,   ante; 

McCord  (S.  C),  377;  State   Bank   of  Comm.  v.  Pittsburgh,  41  Penn.  St.  278  ; 

N.  C.  V.  Clark   et   al.,   1  Hawks   (N.  Mississippi,  etc.,  R.  R.  Co.  v.  Camden, 

C),  36.  23  Ark.  3U0. 

2  1  Kyd  on  Corp.  36.  «  Bullock     v.    Curry,  2  Mete.  (Ky.) 

3 Thomson  v.  Lee  County,  3  Wall.  171. 

327  ;  Cass  v.  Dillon,  21  Ohio  St.  607  ;  « 1  Kyd  on  Corp.  36. 

Prettyman  v.  Supervisors,  19  111.  40(5  ;  ''Id. 

State  V.  Common  Council  of  Madison,  ^lA. 

7  Wis.  688;  Slack  v.  Maysville,  etc.,  ^Wolf   on   Railways,  70;  see   ante, 

R.  R.  Co.,  13  B.  Monr.  9.  chap.  2. 


Members  —  Stockholders  and  Stock.  81 

ment  of  its  affairs.  In  the  absence  of  snch  an  arrangement  the 
members  of  it  constitute  the  corporate  body,  and  there  are  usually 
at  least  no  separate  or  constituent  parts.  Membei'ship  is  usually 
provided  for  by  the  general  law  under  which  it  is  instituted  or  by  the 
articles  or  certificate  of  association,  signed  and  filed  for  record  by 
the  original  corporators  in  some  public  oflice  or  ofiices  designated 
by  the  general  law  imder  which  it  is  organized  and  constituted. 

Sec.  53.  Admission  and  election  of  members  and  officers. —  The  rules 
and  doctrines  of  the  common  law  in  relation  to  the  admission  and 
election  of  members  and  officers  in  corporations  of  a  religious  or 
literary  character  has  generally  no  application  in  this  country  to 
corporations  instituted  under  general  statutes  for  pecuniary  profit. 
The  number  of  the  members  under  the  former  class  is  fre- 
quently limited  by  the  charter,  and  Avhen  a  vacancy  occurs 
provision  is  usually  made  for  filling  it  by  an  election  of  some 
person  by  the  remaining  corporators.  But,  in  ordinary  private 
statutory  corporations,  the  joint  stock,  or  capital,  is  divided  into 
equal  shares,  and  membership  consists  of  the  ownership  of  shares, 
either  by  original  subscription  and  ownership,  or  by  subsequent 
purchase  of  shares  of  the  same.^ 

Sec.  54.  Disfranchisement  or  expulsion  of  members.  —  The  right  tO 
deprive  a  meuiber  of  a  corporation  of  his  rights  as  such  by  ex- 
pulsion depends  upon  the  nature  and  character  of  the  corporation, 
the  provisions  of  the  charter  or  act,  and  sometimes  on  the  pro- 
visions of  the  by-laws.  This  right  has  no  general  application  to 
ordinary  statutory  corporations  with  property  interests  in  the 
stockholders  created  for  pecuniary  gain,  with  a  joint  stock,  or 
capital  divided  into  shares.  In  such  a  case,  as  we  have  noticed, 
ownership  of  shares  constitutes  membership  ;  and  the  stockholders 
are  secured  all  the  rights  of  membership  so  long  as  they  continue 
to  own  shares  of  stock.  They  may  become  such  by  purchase,  and 
cease  to  be  such  when  they  transfer  their  stock  certificates.  The 
character  or  conduct  of  a  stockholder  cannot  be  made  the  lee^al 
ground  of  removal,  nor  can  the  company  divest  him  of  his  in- 

'  Gilbert  v.  Manchester  Iron  Co.,  11     N.  J.    L.    66;    Green's   Brice's    Ultra 
Wend.  637  ;  Sargent  v.  Franklin  Ins.     Vires,  45-47. 
Co.,  8  Pick.  90  ;  Downing  v.  Potts,  33 

Jl 


82  Private  Corporations. 

terest  without  his  assent.'  But  such  power  can,  uncloubtedl}',  be 
expressly  cout'erred  bj  the  special  act  or  by  general  acts  of  incor- 
poration, or  by  virtue  of  the  paramount  authority  of  the  legisla- 
ture ;  and  is,  in  fact,  thus  conferred,  or  by  the  articles  of  associa- 
tion, whenever  the  company  or  its  directors,  who  represent  it,  are 
authorized  to  forfeit  stock  for  the  non-payment  of  dues ;  ^  in  which 
case  the  rights  of  the  owner  cease  on  the  forfeiture  being  legally 
declared.  But  in  corporations  of  this  class  the  power  of  expelling 
a  stockholder  only  exists  by  virtue  of  the  statute,  and  only  for 
the  causes  named  therein,  and  the  decision  of  the  officers  of  the 
corporation  as  to  whether  such  cause  actually  existed  is  by  no 
means  final,  unless  expressly  so  provided  by  the  statute.  It 
would  be  a  singular  condition  if  a  person  who  has  become  a  stock- 
holder in  a  moneyed  corporation,  by  taking  and  paying  for  a  cer- 
tain number  of  shares  of  its  stock,  could  be  expelled  therefrom 
and  deprived  of  his  property  without 'compensation,  unless  the 
charter  or  laws  under  which  the  corporation  was  founded  con- 
tained such  a  provision,  so  that  he  could  be  said  to  be  charged 
with  notice  of  suL;h  authority,  and  the  causes  for  which  the  au- 
thority might  be  exercised. 

The  power  to  remove,  however,  otherwise  than  above  stated,  is 
seldom  conferred  by  law,  either  upon  the  corporation  or  the  board 
of  directors  of  a  joint-stock  corporation,  constituted  purely  for 
pecuniary  profit. 

Sec.  55.  Quasi  corporations ;  right  of  expulsion  therefrom.  — There  is 
a  class  of  q^msi'privsite  corporations  instituted  for  private  purposes, 

1  2  Kent's  Com.  298  ;  Green's  Brice's  ter.     And  if  an  owner  of  stock  could 

Ultra  Vires,  45-47.  be  excluded,  without  any  provision  in 

'■^  Evans  v.  Philadelphia  Club,  50  the  charter,  from  participating  in  the 
Penn.  St.  107;  Society  v.  Common-  election  of  officers,  and  in  the  other 
wealth,  52  id.  125  ;  Leech  v.  Harris,  2  aifairs  of  the  company,  he  would  still 
Brewst.  571.  See,  also,  Waterbury  v.  be  entitled  to  the  amount  of  his  stock. 
Express  Co.,  3  Abb.  Pr.  (N.  S.)  163  ;  and  could  recover  it  in  an  action 
State  V.  Justinian  Soc,  15  La.  Ann.  73.  against  the  corporation.  Evans  v. 
"With  regard  to  whatare  called  joint-  Phil.  Club,  50  Penn.  St.  107;  Society 
stock  incorporated  companies,  or,  in-  v.  Commonwealth,  52  id.  125  ;  Hop- 
deed,  any  corporation  owning  property,  kins  v.  Exter,  L.  R.,  5  Eq.  Cas.  63; 
it  cannot  be  pretended  that  a  member  Roehler  v.  Mechanics'  Aid  Roc.  ,  32 
Can  be  expelled,  and  thus  deprived  of  Mich.  86  ;  Davis  v.  Bank  of  Eng.,  2 
his  interest  in  the  stock  or  general  Bing.  393  ;  State  v.  Tudor,  5  Day 
fund  in  any  case  by  a  majority  of  the  (Conn.),  329  ;  Delacy  v.  Neuse  Riv. 
corporators,  unless  such  power  has  Nav.  Co.,  IHawks  (N.  C),  274  ;Ebaugh 
been  expressly  conferred  by  the  char-  v.  Hendel,  5  Watts,  48. 


Members  —  Stockholders  and  Stock,  83 

thotigli  not  for  direct  pecuniary  profits,  where  tlie  aim  and  object 
of  the  corporators  and  the  provisions  of  the  charter  or  by-laws  may 
.warrant  and  authorize  the  expulsion  of  members.  And  where  a 
charter  of  a  society  directed  the  mode  of  proceeding  against  a  mem- 
ber charged  with  an  offense  indicated  by  it,  and  authorized  the  so- 
ciety to  expel  a  member  guilty  of  it,  it  was  held  that  such  a  person 
might  be  lawfully  expelled,  and  that,  if  the  proceedings  were  regu- 
lar, the  action  of  the  corporation  in  this  respect  could  not  be  in- 
quired into  collaterally  in  a  proceeding  by  mandamus,  or  in  any 
other  manner  in  the  courts.^  But  a  member  of  a  corporation  is 
entitled  to  notice  of  an  intention  to  expel  him,  and  to  an  oppor- 
tunity to  hear  the  evidence  against  him,  and  to  be  heard  to  dis- 
prove the  charges  upon  which  it  is  sought  to  deprive  him  of 
membership,*  and  the  right  of  expulsion  should  be  clear  and  un- 
questionable, and  the  law  will  not  tolerate  sharp  and  summary 
removals  when  the  rights  of  a  party  are  involved  and  he  had 
had  no  reasonable  op])ortunity  to  be  heard/  And  where  a  by- 
law of  a  chamber  of  commerce  provided  for  the  expulsion  of 
members  for  the  violation  of  it,  it  was  held  to  be  reasonable  and 
valid  and  enforceable,  even  though  the  contract  made  in  violation 
of  its  provisions  was  void  by  the  statute  of  frauds,  and  although 
it  was  not  made  during  the  session  of  change  of  the  chamber  of 
commerce.*     And  where  the  charter  stated  that  the  corporation 

'  Leech  v.  Harris,  2  Brewst.  (Penn.)  any  contract,  eitlier  verbal  or  written, 

571.  or  of  making  false  or  fictitious  reports 

'^  Delacy  v.  Neuse  River  Navigation  of  sales  or  purchases,  or  of  any  other 

Co.,  1  Hawks  (N.    C),   274  ;  Southern  act  contrary  to  the  spirit  which  should 

Plaukroad  Co.  v.   Hixon,  5   Ind.    165  ;  govern    all    commercial    transactions, 

People  v.  St.  Fransiscus'    Benevolent  they  shall  report  the  same  to  the  as- 

Soc,  24How.  Pr.  216;  Bartlett  v.  Medi-  sociation,    either  at  a  regular  annual 

cal  Society,  32  N.  Y.  187.  meeting  or  at  a  meeting  called  for  that 

^  Bartlett  v.  Medical  Society,  ante,  purpose  ;    and  the  member   shall    be 

**  Dickenson    v.   Chamber    of    Com-  suspended   or   expelled,    if   so   deter- 

merce,  29  Wis.  4o.  mined  by  a  majority  of  the  members 

In  this  case  the  by-law  under  which  present  and  voting,  the  number  not 
the  proceedings  were  taken  provided  :  being  less  than  one  hundred  *  *  * 
"  It  shall  be  the  duty  of  the  board  No  member  shall  be  suspended  or  es- 
of  directors  to  examine  charges  of  pelled  without  having  an  opportunity 
misconduct  in  business  matters,  pre-  of  beins  heard  iu  his  own  defense, 
ferred  against  any  member  of  the  and  any  member  having  been  expelled, 
association,  when  made  to  the  presi-  shall  be  ineligible  to  membership  un- 
dent or  secretary  in  writing,  by  a  til  the  association  see  proper  to  remove 
member   of    the    association,    and    if  his  disability." 

the  party  shall  be  found  guilty  of  a  The  bill  of  the  plaintiff  was  for  an 
violation  of  the  rules,  of  failing  to  injunction,  for  the  purpose  of  restrain- 
promptly  comply  with    the  terms  of  ing    the   defendant   from   interfering 


84 


Pix'IVATE    OoRPORATiONS. 


Wcas  instituted,  among  otlier  things,  to  inculcate  jnst  and  equitable 
principles  in  trade,  it  was  held  that  a  member  might  be  expelled 
for  obtaining  goods  under  false  pretenses,  though  the  offense  was 
not  committed  within  the  local  jurisdiction  of  the  corporation  nor 
against  a  member  thereof.  And  where  a  member  of  such  a 
corporation  performs  an  act  in  direct  contravention  of  the  purposes 
for  which  it  is  instituted,  it  has  been  held  that  it  possesses  the 
power  to  expel  such   member.^     Where  the  regulations  of  an 


with  his  rights  and  privileges  as  a 
member  of  the  association,  and  from 
suspending  or  expelling  him  from  the 
privileges  thereof  ;  and  it  averred  in 
substance  the  intention  of  the  de- 
fendant so  to  do  on  the  ground  of  the 
phiiutiffs  failure  to  keep  and  perform 
two  verbal  contracts  for  the  sale  of 
wheat ;  that  they  were  void  by  the 
statute  of  frauds ;  that  the  contracts 
were  not  made  during  any  session  of 
change  of  the  chamber  of  commerce  ; 
that  the  contract  did  not  in  any  way 
relate  to  the  aflairs  or  business  of  the 
corporation  ;  that  the  contracts  were 
made  after  the  hours  of  change,  and 
in  the  offices  of  the  other  parties  to 
the  contract.  The  court  below  re- 
fused, on  motion,  to  dissolve  the  in- 
junction. On  appeal.  Cole,  J.,  ob- 
served :  "If  it  was  one  of  the  ob- 
jects of  the  association  '  to  inculcate 
just  and  equitable  principles  of,  in 
trade,'  it  is  apparent  would  be  better 
attained  by  raising  the  standard  of  mo- 
rality among  its  members,  'n  requiring 
them  to  perform  all  their  business  en- 


gagements, whether  legally  binding 
upon  them  or  not.  Consequently,  we 
can  see  no  valid  objection  to  the  by- 
law which  provides  that  if  a  member 
shall  be  found  guilty  of  a  failure  to 
comply  promptly  with  the  terms  of 
any  contract,  either  verbal  or  written, 
it  should  constitute  a  good  ground  for 
the  suspension  or  expulsion  of  such 
member  from  the  privileges  and  bene- 
fits of  the  corporation.  There  is  surely 
nothing  unreasonable  or  unjust,  noth- 
ing illegal  or  wrong,  in  such  a  by-law. 
Nor  do  we  think  there  is  any  ground 
for  saying  that  this  by-law  only  had 
reference  to  such  contracts  as  were 
made  during  a  session  of  change  of 
the  chamber  of  commerce,  and  made 
upon  the  floor  of  the  chamber  of  the 
corporation.  It  applied  to  all  his  busi- 
ness conduct  and  relations  with  the 
members  of  the  association  at  least. 
And  the  plaintiff,  after  having  volun- 
tarily connected  himself  with  the  as- 
sociation, is  bound  to  observe  the  rules 
and  regulations  adopted  by  it  to  secure 
the  objects  of  its  creation." 


'  People  V.  New  York  Loan  Commer- 
cial, 18  Abb.  Pr.  271.  See,  also.  People, 
ex  rel.  Page,  v.  The  Board  of  Trade  of 
Chicago,  45  111.  113. 

In  Dickinson  v.  Chamber  of  Com- 
merce, supra,  it  was  further  held,  that 
a  member  might  be  expelled  for  the 
following  causes,  and  that  the  power 
in  this  respect  expressed  in  the  char- 
ter was  inherent  in  the  corporation  : 

1.  Where  an  offense  is  committed 
which  has  no  immediate  relation  to  a 
member's  corporate  duty,  but  is  of  so 
infamous  a  nature  as  to  render  him 
unfit  for  the  society  of  honest  men, 
and  where  no  trial  and  conviction  be- 
fore a  court  is  necessary,  previous  to 
the  act  of  expulsion  by  the  corpora- 
lion. 


2.  Where  the  offense  is  against  his 
duty,  as  corporator,  he  may  be  ex- 
pelled on  trial  and  conviction  by  the 
corporation. 

3.  When  the  offense  is  of  a  mixed 
nature  against  the  member's  duty  as 
a  corporator,  and  also  indictable  by 
the  law  of  the  land. 

Where  a  medical  society  provided 
in  their  by-laws  for  the  expulsion  of 
members,  it  was  held  that  it  was  not 
vested  with  arbitrary  power  or  uncon- 
trolled discretion  in  the  matter  ;  and 
that  the  courts  might  investigate  the 
legality  of  the  action  of  the  corporate 
body  taken  under  it. 

The  State  v.  Georgia  Med.  Soc,  38 
Ga.  608  (1869). 


Members  —  Stockholders  ajstd  Stock. 


85 


asylum  for  aged  seamen  forbid  inmates  thereof  to  leave  the 
premises  without  permission  of  certain  officers,  and  enjoins  quiet 
demeanor  at  the  table  on  pain  of  expulsion,  it  was  held  that  such 
regulations  were  reasonable,  and  that  an  expulsion  for  their  breach 
was  lawful.'  So  it  has  been  held  that  the  guardians  of  tlie  poor 
may  expel  a  memder  who  has  been  guilty  of  charging  the  corpora- 
tion with  money  as  having  been  paid  by  him  for  it,  which  he 
never  paid,  but  that  lie  cannot  be  expelled  for  a  mere  misemploy- 
ment  of  public  moneys."  But  it  must  be  understood,  as  previously 
stated,  that  this  power  of  removal  cannot  be  exercised  except 
where  it  is  authorized  by  the  charter  or  the  general  law  under 
which  the  corporation  is  organized,  nor  unless  the  member  has 
been  guilty  of  some  offense  which  affects  the  interests  or  good 
order  of  the  corporation,  or  which  is  indictable  by  law.^  Nor  can 
the  power  conferred  be  exercised  arbitrarily  or  unfairly,  or  with- 
out notice  of  the  party  sought  to  be  removed,  nor  otherwise  than 
in  the  manner  specified  in  the  charter  or  by-law.* 


'People  V.  Sailors'  Snug  Harbor, 
5  Abb.  Pr.  (N.  S.)  119. 

"^  Comm.  V.  Guardians  of  the  Poor,  G 
S.  &  R.  469. 

^  Comm.  V.  German  Society,  15  Penn. 
St.  251 ;  Comm.  v.  St.  Patrick's  Benevo- 
lent Society,  2  Biun.  (Penn.)  441  ; 
Evans  v.  Philadelphia  Club, '50  Penn. 
St.  107. 

■*  Green  v.  African  Methodist  Society, 
1  S.  &R.  254 ;  Comrn.  v.  German  Society, 
15  Penn.  St.  251;  Comm.  v.  Penn. 
Beneficial  Institution,  2  S.  &  R.  141  ; 
Comm.  V.  Guardians  of  the  Poor,  (mte. 

The  charter  of  a  private  corporation 
provided  that  if  any  member  should 
i)e  found  breaking  the  rules  of  the 
society,  he  should  be  served  with  a  no- 
tice to  attend,  to  answer  at  the  next 
stated  meeting,  after  which  a  decision 
should  be  made  by  ballot,  and  if  two- 
thirds  considered  him  guilty,  he 
should  be  dealt  with  conformably  to 
the  by-laws.  The  by-laws  provided 
that  no  member  should  be  entitled  to 
receive  any  'benefit  from  the  society, 
whose  complaints  are  the  result  of  in- 
toxication, etc.  A  member  was  ex- 
pelled, by  the  required  majority,  after 
due  notice,  and  brought  an  action  to 
recover  the  allowance  granted  to  dis- 
abled members.     Held,  that  the  regu- 


larity of  the  proceedings  to  expel  him 
could  not  be  investigated  in  such 
action,  and  that  the  court  had  no  juris- 
diction, by  action,  to  compel  payment 
of  the  allowance.  Black  and  White 
Smith  Soc.  v.  Vandyke,  2  Whart.  809; 
S.  P.,  Commonwealth  v.  Pike  Bene- 
ficial Soc,  8  VV.  &  S.  247. 

A  member  of  an  association  cannot 
be  expelled  on  a  report  of  a  committee 
of  investigation.  The  return  to  the 
mandamus  must  show  that  the  relator 
had  notice  to  appear  and  defend  him- 
self ;  that  an  assembly  of  the  proper 
persons  was  duly  held  ;  the  proceed- 
ings before  them  ;  a  conviction  of  the 
ofTense ;  and  an  actual  amotion  by 
them.  Especially  is  this  the  case 
where  the  charter  of  the  society  pro- 
vides that  the  party  charged  shall  have 
the  right  to  be  heard  in  his  defense, 
be  confronted  with  the  witnesses 
against  him,  and  of  producing  evi- 
dence in  his  favor.  Commonwealth 
V.  German  Soc,  15  Penn.  St.  251. 

Under  the  constitution  and  by-laws 
of  a  beneficial  society,  each  member 
was  entitled  to  receive,  in  case  of  sick- 
ness, $o  per  week,  and  each  member 
was  bound  to  contribute  such  monthly 
dues  as  the  society  might  declare,  and 
a  member  was  entitled  to  twenty-four 


86 


Pkivate  Coepokations, 


Tlie  right  of  a  corporation,  not  involving  property  rights,  to 
expel  members  for  cause  is  conceded  by  a  large  line  of  cases,  bnt  the 
offenses  for  which  a  member  may  be  expelled  must  be  specifically 
defined  either  in  the  charter  or  by  the  by-laws  of  the  company, 
or  mud  he  of  such  a  character  as  violates  some  one  of  the  express 
or  implied  conditions  of  membership,^  and  in  all  organizations  of 
this  character  there  is  an  implied  condition  that  the  members  will 
not  violate  their  duty  to  the  corporation,''  consequently,  it  being 


hours'  notice  before  lie  could  be  ex- 
pelled. In  an  action  by  a  member  for 
an  illegal  expulsion, — Held,  that  the 
secretary  of  the  society,  being  liable 
for  an  assessment  of  the  amount 
that  might  be  recovered  in  the  suit, 
was  incompetent  to  testify  on  the 
part  of  the  society ;  that  where  an 
expulsion  took  place  in  the  absence 
of  a  member,  without  notice  or  the 
waiver  thereof,  the  party  expelled 
miglit  recover  damages  to  the  extent 
of  the  injury;  and  that  the  want  of 
notice  rendered  the  expulsion  invalid, 
and  neither  the  minutes  of  the  pro- 
ceedings of  the  society,  nor  oral  testi- 
mony of  the  statements  of  the  secre- 
tary to  the  society  at  the  time  of  the 
expulsion,  was  admissible  in  favor  of 
the  society.  Washington  Beneficial 
Soc.  V.  Bacher,  20  Penn.  St.  425. 

The  Pennsylvania  supreme  court 
will  not  approve  a  charter  for  the  iu- 
corporatiou  of  any  association,  where 
the  articles  contain  an  indefinite  state- 
ment of  the  offenses  that  may  result 
in  expulsion ;  as  that  any  member 
may  be  expelled  who  commits  a  mis- 
demeanor or  any  other  act  that  may 
prove  injurious  to  his  character  or 
standing.  Butchers'  Beneficial  Assoc, 
il8  Penn.  St.  298  ;  Beneficial  Assoc. 
of   Brotherly  Unity,  id.  299. 

Where  the  charter  of  a  corporation 
declared  its  purpose,  among  other 
things,  to  be  "  to  adjust  controversies 
between  its  members  and  to  establish 
just  and  equitable  principles  in  the 
cotton  trade,"  and  gave  it  power  to 
make  all  proper  and  needful  by-laws, 


not  contrary  to  the  constitution  and 
laws  of  the  state  of  New  York  or  of 
the  United  States  ;  and  "  to  admit  new 
members  and  expel  any  member  in  such 
manner  as  may  be  provided  by  the  by- 
laws ;"  and  the  by-laws  provided  for 
expulsion  for  the  improper  conduct, 
but  did  not  state  what  should  be  con- 
sidered as  such,  it  was  held  that  there 
being  in  the  charter  or  by-laws  of  the 
corporati^in  no  express  or  implied  au- 
thority to  determine  who  was  the 
owner  of  a  right  to  a  membership  in 
dispute,  a  member  was  not  guilty  of 
improper  conduct  warranting  his  ex- 
pulsion, for  resorting  to  the  courts  to 
prevent  the  corporation  from  dispos- 
ing of  such  a  right  claimed  by  him. 

That  in  refusing  to  submit  to  a  re- 
port against  his  title,  a  member  was 
not  acting  in  antagonism  to  the  corpo- 
rate power  of  "  adjusting  controversies 
between  its  members"  or  of  "estab- 
lishing just  and  equitable  principles 
in  the  cotton  trade,"  and  that  his  right 
to  appeal  to  another  tribunal,  if  to  be 
foreclosed,  should  be  so  by  explicit  con- 
tract or  agreement  (not  shown  in  this 
case),  not  by  mere  construction  of 
language  employed  in  a  by-law,  or  by 
implication  from  something  contained 
in  it ;  for  forfeitures  depend  upon  clear 
and  explicit  language,  and  are  even 
then  looked  upon  with  disfavor,  and 
the  presumption  should  be  against 
the  power  to  expel,  except  for  the 
causes  recognized  in  the  adjudged 
cases.  People  v.  N.  "Y .  Cotton  Ex- 
change, 8Hun(N.  Y.),  216. 


'  People  v.  Medical  Society  of  Erie, 
32  N.  Y.  194;  The  King  v.  Mayor  of 
Liverpool,  2  Burr.  732;  People  v. 
New  York  Board  of  Underwriters,  7 
Hun  (N.  Y.),  248  ;  Dubree  v.  Reliance 
Engine  Co.,  1  W.  N.  C.  (Penn.)  524; 


Comm.  V.  German  Societv,  15  Penn. 
St.  251. 

^  Rex  V.  Liverpool,  ante;  Comm. 
v.  St.  Patrick's  Society,  2  Biun. 
(Penn.)  448. 


Members  —  Stockiioldees  and  Stock. 


87 


tlie  duty  of  a  ineniber  to  comply  with  a  lawful  by-law  of  the 
corporation,  it  follows  that  its  violation  by  him  constitutes  a  suf- 
cient  ground  of  expulsion.'  But  the  courts  retain  a  revisory 
power  over  the  action  of  corporations  in  this  respect,  and,  unless 
its  action  is  legal,  will  compel  the  restoration  of  an  exj^elled 
member  by  mandamus^  and,  where  tlie  question  as  to  whether 


'  In  People  v.  N.  Y.  Board  of  [In- 
derwriters,  ante,  the  relator,  as  presi- 
deut  of  the  Relief  Fire  Insurance 
Company,  was  an  incorporator  in  the 
defendant  corporation,  incorporated 
by  the  laws  of  New  York.  Its  pur- 
poses were  declared  to  be  "  to  incul- 
cate just  and  equitable  principles  in 
the  business  of  insurance  ;  to  estab- 
lish and  maintain  uniformity  among 
its  members  in  policies  or  contracts  of 
insurance,  and  acquire,  preserve  and 
disseminate  valuable  information  rela- 
tive to  the  business  in  which  they  are 
engaged."  And  power  was  conferred 
upon  it  "to  make  all  needful  by-laws 
not  contrary  to  the  provisions  of  the 
act,  or  the  constitution  and  laws  of 
this  state  or  of  the  United  States."  A 
by-law  was  adopted  providing  that 
the  board  might  establish  or  alter 
rates  of  premiums  for  insurance  by  a 
majority  of  its  members  at  any  regu- 
lar meeting,  or  one  especially  called 
for  that  purpose,  and  that  such  rates 
should  be  binding  on  all  the  members. 
The  Relief  Fire  Insurance  Company 
subscribed  the  charter  and  by-laws, 
and  agreed  to  be  governed  by  and  to 
maintain  all  the  rates,  rules  and  regu- 
lations adopted  by  the  board.  The 
board  adopted  and  prescribed  rates 
which  should  be  charged  and  received 
by  its  members  as  premiums  for  in- 
surance upon  property.  And  the  re- 
lators afterward  violated  those  rates 
by  insuring  two  steamers  for  smaller 
amounts  than  those  which  had  been 
established  by  the  board.  For  that, 
after  an  investigation  of  the  charge, 
the  Relief  Fire  Insurance  Company 
was  expelled  from  its  membership  in 
the  board.  The  defendant  owned  no 
other  property  than  that  allowed  to  be 
acquired  for  the  purposes  of  Its  incor- 
poration ;  and  that  amounted  to  the 
sum  of  about  $50,000.  It  issued  no 
stock,  but  was  empowered  to  assess 
upon  the  organizations  and  agencies 
of   svhich   its   membership    consisted. 


not  to  exceed  two  per  centum  of  the 
aggregate  premiums  returned  by  them 
as  received,  such  sums  as  should  be 
necessary  to  defray  its  expenses,  and 
to  sustain  a  fire  patrol,  if  that  should 
be  provided.  It  was  also  permitted 
to  take  and  hold  real  and  personal 
property  to  an  amount  not  exceeding 
$100,000,  for  the  purposes  of  the  cor- 
poration ;  and  they  were  regulating 
and  managing  the  business  of  insur- 
ance carried  on  by  such  organizations 
and  agencies.  The  members  owned 
none  of  the  property  acquired,  and  no 
earnings  were  to  be  made  in  which 
they  could  in  any  form  participate. 
But  the  assessments  collected  were 
designed  to  pay  the  expenses  to  which 
the  corporation  should  be  subjected 
in  the  management  of  its  atfairs,  and 
the  acquisition  of  real  estate  and  per- 
sonal property  required  for  that  pur- 
pose. The  court  held  that,  under  this 
state  of  facts,  no  property  interests 
were  involved,  and  the  corporation, 
being  in  no  sense  a  trading  corpora- 
tion, it  clearly  had  the  power  to  expel 
a  member  for  the  violation  of  the  by- 
law named.  The  inquiry  in  such 
cases  is  whether  the  by-law  is  wit_Jiin 
the  scope  of  the  corporate  powers  of 
the  company.  People  v.  N.  Y.  Com- 
mercial Assoc,  18  Abb.  Pr.  (N.  Y.) 
271.  It  has  been  held  a  sufficient 
cause  for  the  disfranchisement  of  a 
member  of  a  beneficial  society,  that 
he  feigned  sickness,  or  drew  relief  af- 
ter his  recovery  from  actual  sickness. 
Society  for  the  Visitation  of  the  Sick 
V.  Comm.,  53  Penn.  St.  125.  But  a 
member  of  a  social  club  who  has  paid 
a  large  sum  for  admission  cannot  be 
expelled  merely  for  disorderly  conduct 
which  does  not  affect  the  interests  of 
the  corporation.  Evans  v.  Philadel- 
phia Club,  50  Penn.  St.  107.  Nor  be- 
cause he  refuses  to  resign.     Id. 

^  State  V.  Georgia  Medical  College, 
38  Ga.  608. 


88  PltlVATE    COKPOKATIONS. 

a  member  has  violated  a  by-law  is  one  of  construction  merel}^ 
the  society  will  not  be  permitted  to  exercise  an  uncontrollable 
discretion  in  the  construction  and  enforcement  of  such  by-law, 
and,  imless  its  construction  thereof  is  legal,  its  action  will  be 
neutralized  by  the  courts.'  Thus,  where  the  constitution  of  an 
incorporated  society  made  "  slander  against  the  society "  by  a 
member,  an  offense  for  which  he  may  be  fined  or  expelled,  it  was 
held  that  in  order  to  constitute  a  breach  thereof  an  offense  analo- 
gous to  slander  at  the  common  law  must  be  established,  and  that 
an  expulsion  for  an  offense  short  of  that  was  without  authority,^ 
The  power  of  amotion,  whether  relating  to  the  disfranchisement 
of  a  member,  or  the  removal  of  an  officer  of  a  corporation,  is  judi- 
cial in  in  its  charactei',  and,  when  exercised  by  the  corporation, 
the  member  must  be  given  a  reasonable  opportunity  to  meet  the 
charges  against  him,  and  the  matter  must  be  fairly  and  judicially 
decided,  and  if  it  appears  that  in  fact  the  charges  were  not  suffi- 
cient or  were  not  sustained,  or  that  the  action  of  the  corporation 
was  unfair,  the  courts  will  restore  the  member  to  all  his  rights/ 
A  member  cannot  be  expelled  arbitrarily,  without  charges  being 
preferred  against  him  and  without  notice  and  an  opportunity  to 
be  heard  in  answer  thereto,*  and  the  records  of  the  corporation 
should  show  that  all  the  requisite  steps  were  taken  for,  and 
the  grounds  of  a  legal  expulsion,^  and  if  it  appears  that  he 
was  expelled  by  default,  no  witnesses  being  heard  in  support  of 
the  charges,*  or  that  he  was  expelled  for  the  violation  of  an  ille- 
gal by-law,'  or  without  complying  with  the  requirements  of  the 
charter  or  by-laws  in  reference  to  the  filing  of  charges  and  the 
hearing  thereon,  the  expulsion  will  be  set  aside  by  the  courts.* 

'  State  V.  Georgia  Med.  Col.,  ante.  (N.  T.),  361  ;  People  v.  Young  Men's, 

''People  V.  Mechanics'  Aid  Society,  etc.,  Soc,  65  Barb.  357. 

23  Mich.  86.  'People  v.  St.   Franciscus  Benevo- 

3  State  V.  Adams,  44  Mo.  570;  Rid-  lent  Soc,  24  How.  Pr.  216. 

dell    V.    Harmony   Fire    Ins.    Co.,    8  ®Comm.  v.  German  Soc,  15  Penn. 

Phila.  310.  St,  251.     In   People   v.  American    In- 

''  People  V.  St.   Franciscus  Benevo-  stitute,  44  How.  Pr.  468,  a  corporation 

lent  Soc,  24  How.  Pr.  316  ;  People  v.  having  adopted  Cushing's  Manual  as 

Benevolent  Soc,  3  Hun  (N.  Y.),  361  ;  its  rules    of  order,  where  a   member 

Comm.  V.  German  Society,  ante  ;  Kid-  was  expelled  for  improper   language 

dell  V.  Harmony  Fire  Ins.  Co.,  ante ;  used  at  a  meeting  of  the  society,  the 

Washington,  etc.,  Soc.  v,    Bacher,  20  court  restored  him  on  the  ground  that 

Penn.  St.  435.  the  words  were  not  reduced  to  writing 

^  People  V.  Mechanics'  Aid  Society,  and   acted    upon    at    the    meeting   at 

33  Mich.  86.  which  they  were  spoken. 

*  People  V.  Benevolent  Soc,  3  Hun 


Members  —  Stockholders  and  Stock. 


89 


But,  in  Pennsylvania,  a  member  of  such  a  corporation  cannot 
be  expelled  for  the  non-payment  of  dues  without  notice  to  him 
and  a  vote  of  the  society.^  And  even  where  the  right  to  expel  for 
just  cause  exists,  it  cannot  be  exercised  in  an  arbitrary  and  sum- 
mai-y  manner,  but  the  party  charged,  with  the  violation  of  duty 
nnder  the  charter  or  by-laws  of  the  association  sliould  have  an 
opportunity  to  be  heard  in  answer  to  the  charges.^ 

When  a  member  of  a  corporation  is  wrongfully  expelled  there- 
from or  illegally  expelled,  lie  may  be  restored  to  membership  by 
mandamus^  and  even  though  a  member  has  been  technically  guilty 
of  a  breach  of  the  by-laws  or  regulations  of  the  corporation,  yet 
if  the  breach  is  trivial,  and  not  ^vithin  the  spirit  thereof,  his 
restoration  to  membership  will  be  ordered.  Thus,  where  a  mem- 
ber was  expelled  for  defrauding  the  company  out  of  fifty  cents, 
it  was  held  not  a  sufficient  cause  of  disfranchisement  and  his 
restoration  to  membership  was  ordered.* 


'  Comm.  V.  Penn.  Ben.  Inst.,  2  S.  & 
R.  (Penn.)  141  ;  Comm.  v.  German  So- 
ciety, 15  Penn.  St.  251;  Diligent  Fire 
Ins.  Co.  V.  Commonwealth,  75  id. 
291. 

'^  Southern  Plankroad  Co.  v.  Hixon, 
5  Ind.  105  ;  People  v.  St.  Frauciscus' 
Benevolent  Soc,  24  How.  Pr.  216 ; 
Delacy  v.  Neuse  River  Nav.  Co.,  1 
Hawks  (N.  C),  274  ;  Bartlett  v.  Med. 
Soc,  82  N.  Y.  187  ;  People  v.  Sailors' 
Snug  Harbor,  5  Abb.  Pr.  (X.  S.)  119. 
And  when  the  articles  of  a  corporation 
authorized  expulsion  for  scandalous 
and  improper  proceedings  wbich 
might  injure  the  reputation  of  the  so- 
ciety, a  member  may  be  expelled  for 
altering  the  amount  of  a  physician's 
bill  from  $4  to  $40 ;  and  for  present- 
ing the  bill  to  the  president  as  the 
basis  of  a  claim.  Commonwealth  v. 
Philanthropic  Soc,  5  Binn.  486.  See, 
also,  Black  &  White  Smith's  Soc.  v. 
Van  Dyke,  2  Whart.  309;  Common- 
wealth V.  Pike  Beneficial  Soc,  8  W. 
•Sc  S.  247  ;  Commonwealth  v.  German 
Soc,  15  Fenn.  St.  251  ;  Washington 
Beneficial  Soc  v.  Bacher,  20  id.  425  ; 
Butchers'  Beneficial  Assoc. ,  88  id.  298  ; 
Society  for  Visitation  of  the  Sick  v. 
Commonwealth,  o2  id.  125. 

^  Comm.  V.  German  Soc,  15  Penn„  St. 
251  ;  People  v.  Medical  Society  of 
Erie,    24    Barb.    570;    People   v.    St. 

12 


Franciscus' Benevolent  Soc,  24  How. 
Pr.  216  ;  Sibley  v.  Carteret  Club  of 
Elizabeth,  40  N.  J.  L.  295 ;  Sturges  v. 
Board  of  Trade,  86  111.  441.  And  a 
court  of  equity  has  no  power  to  sus- 
pend an  officer  of  a  corporation.  The 
power  of  amotion  belongs  to  the  cor- 
poration within  the  scope  of  its  legal 
posver.  Griffin  v.  St.  Louis  Vine,  etc., 
Assoc,  4  Mo.  App.  495.  But  courts 
will  not  generally  interfere  to  control 
the  manner  of  enforcing  the  by-laws 
of  a  purely  voluntary  association, 
which  is  not  organized  for  the  pur- 
poses of  business,  but  for  the  purpose 
of  inculcating  certain  principles 
among  its  members.  People  v.  Board 
of  Trade,  SO  111.  134. 

*Comm.  V.  German  Society,  ante.  A 
private  corporation  or  club,  owning 
property  and  at  liberty  to  accumulate 
more,  expelled  one  of  its  members  for 
quarreling  with  and  striking  another 
member  within  the  walls  of  the  club- 
house. Held,  that  the  club  had  no 
authority  for  such  expulsion,  in  the 
absence  of  any  provision  therefor  in 
the  charter,  notwithstanding  that  it 
was  provided  for  by  a  by-law  ;  and  a 
mandamus  was  awarded  for  the  res- 
toration  of  such  member.  Evans  v. 
Philadelphia  Club,  50  Penn.  St.  107. 

The  foregoing  decision  was  affirmed 
by  the  court  by  operation  at  law,  the 


90  Pjbivate  Corporations. 

Sec.  5G.  Membership  under  general  statutes.— Where  a  Corpora- 
tion is  instituted,  under  general  statutes,  tliey  and  the  articles 
authorized  by  them  furnish  the  measure  and  limitations  of  the 
general  powers  and  privileges  of  the  corporators  and  they  gener- 
ally provide  as  to  membership  and  the  riglits  and  privileges  of 
members.  These  instruments  become  the  supreme  law  of  the 
corporation,  limited  and  controlled  only  by  the  constitution  of 
the  state  creating  it,  or  the  constitution  of  the  federal  government. 

What  constitutes  membership  usually  depends  upon  the  nature 
of  the  corporation,  the  ])rovisions  of  the  general  law,  the  articles 
or  certiiicate  of  original  association,  or  the  rules  or  by- laws  adopted 
by  the  corporators,  not  inconsistent  witli  the  general  or  funda- 
mental law.  The  parties  subscribing  articles  of  association  may 
adopt  by-laws,  providing  for  and  regulating  membership ;  and  if 
such  authority  is  not  expressly  given,  it  would  be  among  the  im- 
plied and  inherent  powers  of  a  corporation.  The  statutes  or 
regulations  of  private  corporations,  for  pecuniary  gain,  usually 
provide  for  tlie  amount  of  the  capital  stock  of  the  corporation, 
and  for  its  division  into  equal  shares  of  a  certain  amount,  and 
that  stockholders  are  members  and  entitled  to  a  voice  or  vote  in 
the  management  of  the  corporate  affairs.^ 

judges  being  equally  divided  in  opin-  the  secretary,  which  was  the  ground 
ion.  lb.  of  his  disfranchisement,  was  not  be- 
On  an  application  for  arule  to  show  fore  the  court,  the  rule  asked  for  was 
cause  wliy  a  writ  of  ma/idami'7S  should  made  absolute;  that,  in  order  to  en- 
not  issue  to  a  literary  corporation,  able  the  corporation  to  set  out,  in  its 
commanding  it  to  restore  a.i  expelled  return  to  the  writ,  sisecifically  the 
member  to  tiie  rights  of  membership,  grounds  of  its  action,  the  writ  was 
where  it  appeared  that  the  proceed-  ordered  to  issue  in  the  alternative, 
ings  of  the  corporation,  which  first  either  to  restore  the  applicant  to  his 
suspended  the  member  from  debate,  rights  of  mpuiberahip,  or  to  show  good 
and  afterward  wholly  disfranchised  cause  to  the  contrary.  Sleeper  v. 
him,  were  irregular;  and  where  a  cer-  Franklin  Lyceum,  7  R.  I.  523. 
tain  letter  written  by  the  applicant  to 

'  "  In  all  bridge,  railroad  and  turn-  scription,   purchase  or    transfer,  is  a 

pike  companies,  in  all  bank,  insurance  member  thereof,  and  is  entitled  to  all 

and    manufacturing   companies,    and,  the  rights  and  privileges  of  a  member, 

generally,    in    corporations   having   a  Gilbert    v.    Manchester     Iron    Co.,  11 

capital  stock  and    looking   to    profits.  Wend.  637.  Nor  is  it  necessary  that  he 

membersliip  is  constituted  by  a  trans-  should  have  a  certificate  of  l.us  shares, 

fer  of  shares  according  to  the  by-laws,  if  he  is  an  original    subscriber   to  the 

without  any  election  on   the   part   of  stock.     Agricultural  Bank  v.  Burr,  24 

the  corporation  itself."       Opinion  of  Me.  256  ;  Chester  Glass  Co.  v.   Dewey. 

Shaw,  Ch.  J.,    in   Boston   Overseers,  16 Mass.  94.  See  Easton  Plankroad  Co. 

etc.,    V.    Sears,   22   Pick.    132.      Any  v.  Vaughan,   14   N.  Y.  546  ;  Chase  v. 

person  who  owns  stock  in  a  corpora-  Sycamore  &  C.  R.  R.  Co.,  88  111.  215  . 
tion,  whether  he  acquired  it   by    sub- 


Members  —  Stockholders  and  Stock.  91 

Sec.  56  «.  Certificates  of  stock  — nature  of,  etc.— Certificates  of 
stock  are  not  strictly  couunonnal  paper,  but  they  approxitnato  to 
it  as  nearly  as  is  practicable,'  and  are  transferable  by  assignment 
unless  the  charter  or  the  by-laws,  made  in  pursuance  of  a  power 
conferred  therein,  provides  a])articular  mudeof  transfer,  in  which 
case  such  mode  must  be  pursued.  But,  if  the  certificate  itself 
contains  a  statement  as  to  how  a  transfer  may  be  made,  such 
statement  is  binding  upon  the  company  and  constitutes  the  regu- 
lation on  the  subject,''  and  the  company  will  not  be  permitted  to 
assert  a  claim  in  violation  of  its  own  regulations,  especially  when 
the  violation  is  a  matter  essential  to  the  protection  of  the  party 
against  whom  the  claim  is  asserted.'  If  the  charter  confers  the 
power  upon  the  directors  to  make  by-laws,  they  may  also  waive 
compliance  therewith.  If  stock  has  been  transferred  in  the  mode 
provided  by  the  charter  or  by-laws  to  a  person  having  no  notice 
of  any  claim  thereon  by  the  company,  it  cannot  refuse  to  enter 
the  ti"ansfer  upon  its  transfer-books  upon  the  ground  that  it  has 
a  lien  thereon,  unless  such  lien  is  given  by  the  charter."  A  lien 
may  be  given  by  a  by-law,^  but,  except  where  the  purchaser  has 
notice  of  the  lien  before  his  purchase  of  the  stock,  or  the  certifi- 
cate on  its  face  contains  something  which  should  put  him  upon 
inquiry  aS  to  the  existence  of  a  lien  thereon,  he  will  not  be  preju- 
diced by  such  lien.'  A  mere  assignment  of  stock,  accompanied 
by  delivery  of  the  certificate  to  the  purchaser,  is  valid  between 
the  parties,  and  also  against  attaching  creditors  of  the  assignor 
with  notice,  although  no  transfer  has  been  made  upon  the  books 

'Lanier    v.    Bank,    11    Wall.    3G9.  ing  Co.,  53  Cal.  428  ;  Fraser  ,v.   Char- 

They  are  likened  to  bills  of  lading  and  leston,  11  S.  C.  48G. 

other  quad  negotiable  securities.  Ross  '^  Bank  of  Holly  Springs  v.  Pinson, 

V.  S.  W.  R.  R.  Co.,  53  Ga.  514  ;  Black  58  Miss.  421  ;  38  Am.  Re^i.  330  ;  Van- 

V.  Zacliarie,  3  How.  (U.  S.)  483  ;  N.  Y.  sands  v.  Middlesex  Co.  Bank,  25  Conn. 

&  N.  H.  R.  R.  Co.  V.  Schuyler,  34  N.  144. 

Y.  30;  Duke  v.  Cahawba  Navigation  ^  Bank  of  Holly  Springs  v.  Pinson, 

Co.,  10  Ala.  82;  Ijanier  v.   Bank,    11  ante. 

Wall.   3G9;  Broadway  Bank  v.  McEl-  ^  Union    Bank    v.  Laird,  2   Wheat, 

rath,  13  N.J.  Eq.  24;   Pratt   v.   Tilt,  390;    Steamship   Dock   Co.  v.  Heron, 

12  C.  E.  Greene,  393;    Finney's  Ap-  52  Penn.  St.  280. 

peal,  59  Penn.  St.  598;  Smith  V.  Cres-  «  Child   v.    Hudson   Bay   Co.,   2   P. 

cent  City  Co.,  30  La.  Ann.  1378;  Co-  Wms.  12. 

nant  V.  Seneca  Co.  Bank,  1  Ohio  St.  *But   see   SteainshiD  Dock   Co.   v. 

298 ;  McNeil  v.  Tenth  Nat.  Bank,  4G  Heron,  52  Penn.  St.  280. 
N.  Y.  325  ;  Winter  v.  Belmont  Min- 


92  Pkivate  Corporations. 

as  required  by  the  cliarter  or  bj-law.s, '  and  the  same  rule  prevails 
as  to  an  assignee  in  bankruptcj.  Thus,  the  owner  of  a  national 
bank  stock  delivered  his  certificate  with  a  power  of  attorney  to 
transfer  the  stock  as  collateral  security  for  his  note.  The  by- 
laws of  the  bank  provided  that  stock  was  assignable  only  on  its 
books  subject  to  the  national  banking  act,  and  that  a  transfer-book 
should  be  kept  and  that  the  old  certificates  should  be  surrendered 
and  new  ones  issued.  The  owner  of  the  stock  afterward  went 
into  bankruptcy.  On  notice  to  him  and  the  assignee,  the  payee 
sold  the  stock,  and  the  l)ank  refusing  the  demand  of  the 
assignee  for  a  transfer,  transferred  it  to  the  purchasers.  Tlie 
court  held  that  the  bank  was  not  liable  to  the  assignee  for  aeon- 
version.'^  The  certificate  is  merely  evidence  of  the  holder's  in- 
terest in  the  corporation,  his  actual  interest  therein  is  represented 
by  his  "  shares  of  stock  "  and  the  certificate  is  only  evidence  of 
sncb  interest  and  is  by  no  means  conclusive,  because  the  shares 
may  have  been  levied  upon  and  sold  upon  execution,  so,  that  the 
certificate  represents  no  value  whatever,  or  the  corporation  by 
virtue  of  its  charter  may  have  a  lien  thereon  for  its  full  value,  so 
that  the  real  evidence  of  a  party's  property  interest  in  the  stock 
of  a  corporation  is  the  stock-book  of  the  company.  For  this  rea- 
son it  is  held  that  an  action  for  conversion,  as  enlarged  by  codes, 
lies  for  the  conversion  of  the  "  shares  of  stock,"  rather  than  for 

1  Snrgent   v.    Essex  Marine   Ry.,  9  Deaue   v.   Hall,    3  Russ.   1,  wliicli  is 

Pick.  202  ;  Bullard  v.  Bauk,  18  Wall,  followed    in  Foster  v.  Cackerell  3  CI. 

589.      It  seems    that  in  some   of  the  &  F.  456,  it  is  held  that  of  two  inno- 

states   an    equitable    assignment     of  cent  purchasers,  he  shall  be  preferred 

stock  is  good  as  against  the  attaching  who  first  gave  notice  to  the  trustee  or 

creditors  of  the  assignor.     Especially  holder  of  the  legal  title.      But  as  it 

is   this   the    rule    in    Massachusetts,  cannot   be    presumed    that   the    law, 

Boston  Music  Hall  Assoc,  v.  Cory,  129  statutory  or  common,  intends  that  one 

Mass.  435  ;  Dickinson  v.  Central  Nat.  man's  property  shall  be  taken  to  pay 

Bank,   id.  279  ;  Kingman    v.  Perkins,  another   man's   debts,    unless   so    ex- 

105  id.  Ill  ;  Tiiayer  v.  Daniels,  113  id.  plicitly  stated,  it  is  held  that  the  right 

129.  and  in  Westoby  v.  Day,  2  E.  &  B.  extends  to   the    equitable,  as  well  as 

605.    It  is  said  to  have  been  the  rule  the  legal  right.     Scott  v.  Lord  Hast- 

ever  since  the  time  of  Richard  I,  that  ings,  4  K.  &  J.  633  ;  Robinson  v.  Nes- 

an  equitable  assignment  of  a  chose  in  bitt,  L.  R.,  3  C.  P.  264  ;  Gill  v.  Conti- 

action   should   prevail   against  an  at-  nental  Gas  Co.,  L.    R.,  7   Excli.  332; 

tachment.    In  Vermont,  Rice  v.  Cour-  Dunster  v.  Lord  Glengall,  3  Ir.  Ch.  47  ; 

tis,  32  Vt.  464  ;  Illinois,  People's  Bank  Bickering  v.  Ilfracombe  Ry.  Co.,  L.  R., 

V.  Gridley,  91  111  457;  and  Connecticut,  3  C.  P.  235  ;  Eyre  v.  McDonald,  9  H. 

Colt   V.    Ives,    31   Conn.    25;    and    in  L    619;  Beavan  v.  Earl    of  Oxford,  6 

Pennsylvania  this  rule  also  prevails,  D.  G.  M.  &  G.  524 ;    Cornick  v.    Rich- 

unless  the   corporation   has  notice  of  ards,  3  Lea  (Tenn.),  1. 
the  assignment.     Littell  v.    Scranton         '■'Dickinson   v.  Central    Nat.    Bank, 

Gas,  etc.,  Co.,  2  Luz.  L.  Obs.  82.     In  129  Mass.  279  ;  37  Am.  Rep.  351. 


Members  —  Stockholders  and  Stock.  93 

the  certificates  of  stock/  but  the  action  of  trover,  as  it  exists  at 
common  law,  will  lie  for  a  conversion  of  the  certificates  of  stock 
and  the  rule  of  damages  is  the  market  value  of  the  stock,  such 
certificates  being  treated  as  goods,  wares  and  merchandise." 

In  Pennsylvania  it  is  held  that  trover  will  not  lie  for  "  shares 
of  stock."  Sharswood,  J.,  says  "A  share  of  stock  is  an  incor 
poreal,  intangible  thing.  It  is  a  right  to  a  certain  proportion  of 
the  capital  stock  of  a  corporation,  never  realized  except  upon  the 
dissolution  and  winding  up  of  the  corporation,  with  the  right  to 
receive,  in  the  meantime,  such  profits  as  may  be  made  aud  de- 
clared in  the  shape  of  dividends.  Trover  can  no  more  be  main- 
tained for  a  share  of  the  capital  stock  of  a  corporation,  than  it  can 
for  the  interest  of  a  partner  in  a  commercial  firin."  '  In  com- 
menting upon  this  decision,  McKee,  J.,  in  a  California  case,* 
says  : 

"  Upon  the  idea  that  shares  of  stock  cannot  be  taken  away  or 
wrongfully  detained  from  the  owner  or  that  they  cannot  be  lost 
by  the  owner  or  found  by  a  stranger,  there  is  ,110  doubt  of  the 
soundness  of  that  decision.  But  the  fiction  on  which  the  action 
of  trover  was  founded,  namely,  that  a  defendant  had  found  the 
property  of  another,  which  was  lost,  has  become,  in  the  progress 
of  law,  an  unmeaning  thing,  which  has  been  by  most  courts  dis- 
carded ;  so  that  the  action  no  longer  exists  as  it  did  at  common 
law,  but  has  been  developed  into  a  remedy  for  the  conversion  of 
every  species  of  personal  property.  It  lies  for  bank  notes  sealed 
in  a  letter;  *  for  negotiable  instruments  ;  *  for  a  judgment ; '  for 
a  promissory  note  which  has  been  paid  ;  *  for  copies  of  a  creditor's 
account ;  ^  for  a  writ  of  execution  issued  on  a  judgment,'"  and  for 
certificates  of  shares  of  stock." 

"  At  the  same  time  that  the  action  has  been  thus  expended,  the 

iPavne  v.  Elliott,  54  Cal.  339;  35        ^j^oody  v.  Keener,    7  Port.    (Ala.) 

Am.  Rep.  80  ;  Ruhn  v.  McAllister,  1  218. 

Utah,  375  ;  Boylan  v.  Hagnel,  8  Nev.         ^  Comparet  v.  Burr,  5  Blackf.  419. 
353.  •'Hudspeth  v.   Wilson,  3  Dev.  (N. 

■2  North   V.    Forest,    15   Conn.    400;  C.)373. 
Tisdale  v.   Harris,  20  Pick.   9;   Free-        « Pierce  v.  Gibson,  9  Vt.  216. 
man  v.  Harvvood,  49  Me.   195;  Marv-        ^  Fullam  v.  Cummingrs,  16  Vt.  697. 
land  Ins.   Co.    v.  Dalrymple,  25  Md.         '"Keelerv.  Fassett,  21  Vt.  539. 
243;  Boardman  v.  Cutter,  138  Mass.         "  Anderson  v.  Nicholas,   28  N.  Y. 

388:  Somerby  v.  Buntin,  118  id.  279.  600  ;    Atkins  v.   Gamble,  43  Cal.   98  ; 

sNeiler  v.  Kelly,  69  Penn.  St.  407.  Von  Schmidt  v.  Bourn,  50  id.  616, 

4  Payne  v.  Elliott,  54  Cal.  339  ;  35 
Am.  Rep.  80. 


94  Private  Corporations. 

words  '  things  in  action  '  have  undergone  such  a  development  from 
their  original  meaning,  tliat  they  now  represent  things  to  the 
imagination  in  the  light  of  tangible  objects  ;  and  as  such,  they  are 
tlie  subject  of  contract,  sale,  gift,  mortgage,  bailment,  and  pledge  ; 
and  under  the  provisions  of  our  codes  they  are  personal  property, 
subject  to  taxation,  attachment,  execution,  levy  and  sale.' 

" It  is,  therefore,  the  '  sliares  of  stock'  which  constitute  the 
property  which  belongs  tothesliarcholder.  Otherwise,  the  prop- 
erty would  be  in  the  certificate ;  but  the  certificate  is  only  evi- 
dence of  the  property ;  and  it  is  not  the  only  evidence,  for  a 
transfer  on  the  books  of  the  corporation,  without  the  issuance  of 
a  certificate,  vests  title  in  the  shareholder ;  the  certificate  is, 
therefore,  but  additional  evidence  of  title,  and  if  trover  is  main- 
tainable for  the  certificate,  there  is  no  valid  reason  why  it  is  not 
also  maintainable  for  the  thing  itself  which  the  certificate  repre- 
sents." 

Sec.  57.  Management  by  directors.  —  The  rights  and  privileges  of 
members  are  ge*nerally  left  to  be  provided  for  by  the  by-laws 
which  may  be  adopted  by  the  corporators.  By  virtue,  also,  of 
such  statutes,  articles  or  by-laws,  the  management  of  the  business 
of  the  corporation  may  be  vested  in  a  limited  number  of  the 
members,  or  in  a  board  of  directors,  who  are  ajjpointed  by  the 
members  at  some  general  meeting  called  for  that  purpose.  By 
such  means,  the  authority  to  manage  the  affairs  of  the  corpora- 
tion which,  on  general  principles,  Avould  rest  in  the  members,  is 
conferred  upon  a  board  of  directors  thus  appointed,  whose  action, 
however,  is  by  virtue  of  the  election  or  appointment  authorized 
by  the  corporators,  and  is  the  action  of  the  corporation,  binding 
the  same  in  every  respect  as  though  it  were  done  by  all  its  mem- 
bers, lawfully  assembled  and  acting  for  the  corporate  body. 
Whether  the  business  is  managed  by  the  corporators  directly,  or 
indirectly,  by  a  board  of  managers  or  directors,  tlie  management 
is  considered  to  be  in  accordance  with  the  will  of  the  majority  of 
the  members  or  stockholders ;  and  that  will  must  be  expressed  in 
either  case  by  a  majority  of  either,  at  a  lawful  meeting,  unless  it 
is  otherwise  provided  in  the  law  constituting  it,  or  by  by-laws 
lawfully  adopted. 

1  §§  543,  688,  Code  Civ.  Proc. 


Members  —  Stockitot.deks  and  Stock.  95 

As  it  is  usually  quite  irapracticiible  for  the  members  of  a  cor- 
poration to  meet  and  express  its  will  by  a  majority  of  its  members 
or  stockholders,  the  convenience,  if  not  the  necessity,  of  having  a 
small  body  of  such  members  to  represent  and  act  for  them  will 
be  apparent.  The  wisdom  of  such  an  arrangement  cannot  be 
questioned.  For  the  various  matters  that  must  arise  in  the  ex- 
tensive operations  of  many  of  our  private  coi-porations  would 
render  it  almost  impossible  practically  to  conduct  its  affairs,  un- 
less the  general  management  was  confided  to  a  limited  number. 
The  members  or  stockholders  are  usually  difficult  to  be  found, 
and  it  would  be  more  difficult  to  convene  them  for  corporate  busi- 
ness, on  all  the  various  questious  that  would  usually  arise,  calling 
for  corporate  action. 

Sec.  58.  Shareholders  are  members  ;  right  to  vote.—  As  the  power 
to  appoint  directors  would,  on  general  principles  of  the  law,  even 
in  the  absence  of  special  regulations,  vest  iii.  the  members,  and  as 
membersliip  consists  usually  in  ownership  of  shares,^  and  the  right 
to  and  ownership  of  such  shares  is  evidenced  by  certificates  of 
stock  duly  prepared  and  authenticated  by  the  proper  agents,  and 
as  such  certificates  may  be  held  by  the  original  owners  or  trans- 
ferred to  other  parties  by  assignment,  and  the  assignees  thereby 
become  stockholders  and  members  of  the  same  and  entitled  to  a 
voice  or  vote  for  each  share  so  held  by  them,  at  all  general  cor- 
porate meetings,  it  becomes  necessary  for  the  adoption  of  some 
rule  or  by-law,  providing  for  such  transfer  of  the  certificates  of 
such  stock,  and  for  some  record  of  the  same  on  proper  books  of 
the  corporation  kept  for  such  purpose.  It  is  usual,  therefore,  to 
provide,  either  by  the  articles  or  the  by-laws,  that  suitable  books 
shall  be  kept  for  the  registry  and  transfer  of  the  capital  stock  of 
the  company,  and  that  every  transfer  of  such  stock  to  be  valid 
shall  be  made  upon  such  books,  and  signed  by  the  assignor  of  such 
shares,  or  by  his  agent,  duly  constituted  in  writing.^  It  is  possible 

'  Scliaeffer    v.    Missouri,   etc.,    Ins.  v.  Ferris,  42  Conn.  560.     But  a  mere 

Co.,  46  Mo.  248.  subscription  to  stock,  of  itself,  does  not 

*  Every  person  in  whose  name  stock  constitute  a  subscriber  a  stockholder, 

stands  upon  the  books  of  a  corporation  but  entitles  him  to  become  one  upon 

is,  as  to  the  corporation,  a  stockholder,  complying   with  the  terms  and  condi- 

and  entitled  to  all  the  rights  and  sub-  tions  of  the  subscription.     Busey    v. 

ject  to  all  the  liabilities  as  such.   State  Hooper,  31  Md.  15.   As  between  a  cor- 


96 


Pefvate  Corporations. 


that,  under  tlie  general  provisions  of  statutes,  the  powers  and 
franchises,  as  well  as  the  capital  stock,  may  be  possessed  and 
owned  hy  one  person  constituting  it,  in  one  sense,  a  sole  corpora- 
tion, but  with  the  powers  and  privileges  of  an  aggregate  one. 
In  fact,  it  is  expressly  provided  by  the  statutes  of  some  of  the 
states,  that  tlic  rights  and  powers  conferred  by  the  incorporating 
statutes  may  be  enjoyed  by  a  single  person,  who  may,  by  comply- 
ing with  the  provisions  of  the  statutes  so  far  as  the  same  can  be 
applicable  to  tlie  incorporation  of  a  single  person,  become  thereby 
incorporated.^ 


poration  and  a  corporator,  the  stock- 
book  is  primary,  and  the  certificate 
secondary  evidence  of  their  relation. 
Bank  of  Commerce's  Appeal,  73  Peun. 
St.  59.  The  right  of  a  stockholder  to 
vote  is  not  destroyed  by  the  circum- 
stance that  he  has  become  bankrupt 
and  that  his  assignee  has  a  right  to 
demand  a  transfer,  so  long  as  the 
stock  stands  upon  the  books  of  the 
corporation  in  the  name  of  the  bank- 
rupt. "  The  party  who  appears  to  be 
the  owner  by  the  books  of  the  corpo- 
ration," says  Park,  C.  J.,  in  State  v. 
Ferris,  42  Conn.  56S,  "  has  the  right 
to  be  treated  as  a  stockholder  and  to 
vote  on  whatever  stock  stands  in  his 
name,  Marlborough  Mfg.  Co.  v. 
Smith,  2  Conn.  579;  Northrop  v. 
Newtown,  etc.,  Turnpike  Co.,  3  id. 
544  ;  Vansands  v.  Middlesex  Co.  Bank, 
26  id.  144;  Ex  parte  Willcocks,  7 
Cow.  403  ;  Matter  of  Barker,  G  Wend. 
509;"  Gilbert  v.  Manchester  Iron  Co., 
11  id.  639;  Hoppiu  v.  Buffum,  9  R.  I. 
518;  Fisher  v.  Essex  Bank,  9  Gray, 
373.  Even  though  he  has  parted  with 
his  title  or  pledged  his  stock,  so  long 
as  it  stands  in  his  name  upon  the 
books  of  the  corporation.  Ex  parte 
Willcocks,  ante;  Gilbert  v.  Manches- 
ter Iron  Mfg.  Co.,  ante.  "  What  mat- 
ters it,"  says  Pakk,  C.  J.,  in  State  v. 
Ferris,  ante,  "to  the  other  stockhold- 
ers which  of  these  parties  voted  on 
the  stock  so  long  as  one  party  or  the 
other  manifestly  had  the  right  to  vote 
and  both  were  agreed  as  to  who  should 


vote."  It  has  been  held  that  a  person 
who  has  pledged  his  stock  to  the  cor- 
poration as  collateral  security  for  a 
loan  not  yet  due  may  vote  upon  the 
stock.  Scholfield  v.  Union  Bank,  2 
Cranch's  C.  C.  115.  Or  to  a  third  per- 
son. Matter  of  Barker,  6  Wend.  509  ; 
Ex  parte  Willcocks,  ante.  So,  too,  it 
has  been  held  that  the  mortgagor  of 
stock  may  vote  thereon  at  all  elec- 
tions until  his  title  thereto  has  been 
divested  by  foreclosure.  Varnell  v. 
Thompson,  ante.  And,  generally,  it 
may  be  said  that  so  long  as  the  stock- 
holder in  whcse  name  stock  stands 
upon  the  books  of  the  company  re- 
tains any  title  to  the  stock,  legal  or 
equitable,  he  may  vote  thereon  ;  but, 
after  he  has  parted  with  all  his  title 
thereto,  he  has  no  right  to  vote 
thereon,  although  the  stock  still  stands 
in  his  name  upon  the  books.  People 
V.  Deviu,  17  111.  84.  The  certificates 
of  sliares  are  usually  signed  by  the 
president  or  vice-president  and  coun- 
tersigned by  the  secretary  of  the  com- 
pany. Uuiou  Bank  v.  Laird,  3  Wheat. 
390;  Black  v.  Zacharie.  3  How.  (U. 
S,)  513  ;  Fisher  v.  Essex  Bank,  5  Gray, 
373  ;  Chouteau  Spring  Co.  v.  Harris, 
20  Mo.  383 ,  Grant  v.  Mechanics' 
Bank,  15  S.  &  R.  143  ;  Duke  v.  Cahaba 
Nav.  Co..  14  Ala.  82  ;  Arnold  v.  Suf- 
folk Bank,  27  Barb.  424;  Bank  of 
Utica  V.  Smalley,  2  Cow.  770  ;  Gilbert 
V.  Manchester  5lanuf.  Co.,  11  Wend. 
627;  Sargent  v.  Franklin  Ins.  Co.,  8 
Pick.  90. 


1  See  Code  Iowa,  ^  1088,  which  pro- 
vides as  follows  :  "  A  single  individual 
may  entitle  himself  to  all  the  advant- 
ages of  this  chapter  (relating  to  incor- 
porations   for    pecuniary    profit)   pro- 


vided he  complies  substantially  with 
all  its  requirements,  omitting  those 
which  from  the  nature  of  the  case 
are  inapplicable . " 


Membees  —  Stockholders  and  Stock.  97 

Sec.  59.  Transfer  on  books  of  company.  —  As  against  all  persons 
but  the  corporation,  the  sale  of  shares  is  completed  when  the 
seller  has  subscribed  the  proper  autliority  to  the  transfer  agents 
of  the  company,  to  make  a  transfer  on  the  books,  and  has  de- 
livered it,  together  with  the  old  certificate,  to  the  buyer,  and  the 
conditions  of  the  sale  have  been  complied  with.  Such  acts  trans- 
fer the  title,  subject  only  to  such  rights  as  the  company  may  have 
to  refuse  assent  to  the  transfer,  and  neither  a  fomial  transfer  nor 
the  issue  of  a  new  certificate  are  necessary  to  perfect  the  buyer's 
title.' 

As  between  buyer  and  seller,  this  principle  applies  even  though 
the  statute  provides  that  no  transfer  of  stock  shall  be  valid  for 
any  purpose  whatever  until  it  shall  have  been  entered  in  the  book 
prescribed  and  in  accordance  with  the  law.  Such  a  statute  is 
held  to  be  confined  in  its  application  to  the  security  and  ease  of 
remedy  of  creditors,  and  for  the  information  of  stockholders  and 
creditors,  and  does  not  affect,  as  between  the  vendor  and  vendee, 
the  validity  of  an  assignment  of  the  stock,  and  after  such  an  as- 
signment the  vendee  assumes  and  holds  to  the  corporation  and  its 
creditors  the  same  relation  as  the  vendor  held  before  the  assign- 
ment, and  if,  by  reason  of  his  neglect  to  have  the  stock  regularly 
transferred  on  the  books,  the  vendor  is  subjected  to  liability  for 
any  of  the  debts  of  the  corporation,  the  vendee  is  liable  to  him 
therefor."  The  rule  may  be  said  to  be  that  an  assignment  of 
stock,  unaccompanied  by  a  transfer  upon  the  books  of  the  corpora- 
tion, vests  in  the  assignee  only  an  equitable  title  as  against 
the  company,  hut  an  ahsohite  legal  ownership  as  against  the 
assignor,  and  this  too  although  there  is  no  manual  delivery 
of  the  certificate.'  The  provision  for  the  transfer  of  stock 
on  the  books  of  the  corporation  is  necessary  in  order  that  the 
ofiicers  or  agents  of  the  corporation  may  know  on  whom  to 
serve  notices  of  the  general  meetings,  and  to  secure  the  mem- 
bers   against    fraud,    which     otherwise    might    be    perpetrated 

I  Ross  V.  Southwestern  R.  R.  Co.,  53  America  v.  McNeil,  10  Bush,  54;  Mc- 

Ga.  514;  Hill  &  Newichawanick  Co.,  Neil  v.   Tenth  Nat.  Bank,  46  N.   Y. 

48  How.  Pr.  427;    Bruce  v.  Smith,  44  325. 

Ind.  1;  Leitch   v.    Welles,  48   N.  Y.  « Johnson  v.  Underhill,    52   N.   Y. 

585  ;  Scripture  v   Francestown  Soap-  203. 

stone   Co.,   50  N.    H.  571;    Bank  of  ^Qrymeg  v.  Hone,  49  N.  Y.  17. 

13 


98  Private  Corporations. 

upon  them.  For,  as  we  shall  have  occasion  hereafter  to  notice 
more  fully,  the  members  are  generally  entitled  to  notice  of  cor- 
porate meetings,  and  to  vote  at  such  meetings  the  number  of 
votes  which  the  stock  they  may  own  may  entitle  them  to,  and  a 
majority  of  such  votes  may  control  the  action  and  the  policy  of 
the  corporate  body,  either  directly  by  the  stockholders  or  indi- 
rectly by  the  duly  constituted  board  of  directors.^ 

We  have  said  that  ownership  of  stock  constitutes  member- 
ship and  entitles  the  owner  to  vote  at  all  corporate  meet- 
ings.^ It  has  been  held  that  when  a  holder  of  a  certificate 
of  corporate  stock  really  holds  it  for  another,  but  such  trust  does 
not  appear  on  the  books  of  the  company,  and  it  is  not  disclosed 
by  the  trustee,  votes  of  such  trustee  on  such  stock  at  a  coi'porate 
meeting  are  valid ;  and  that  especially  would  this  be  the  case 
where  it  did  not  appear  that  the  votes  thus  cast  were  not  in  ac- 
cordance with  the  wishes  of  the  cestui -que  trusty  or  that  the  latter 
was  not  satisfied  that  the  stock  should  thus  stand  in  the  name  of 
the  person  thus  voting,^  and  a  subscriber  to  stock  to  whom  a 
regular  certificate  has  been  issued  is  entitled  to  vote  thereon, 
although  he  has  paid  nothing  on  the  stock."  But  merely  sub- 
scribing for  a  certain  number  of  shares  of  the  stock  of  a  corpora- 
tion does  not  make  a  person  a  member  of  a  corporation  so  as  to 
entitle  him  to  the  privileges,  or  impose  upon  him  the  liabilities  of 
a  member,^  especially  if  any  thing  remains  to  be  done  before  he 

'  In  Massacliusetts,  it  appears  tliat  facie  evidence  as  to  who  possesses  that 
it  is  uot  necessary,  in  order  to  consti-  right.  Hoppin  v.  Buifum,  9  R.  I.  513. 
tute  a  person  a  member  of  a  corpora-  A  combination  between  a  portion 
tion  for  manufacturing  purposes,  that  of  tlie  members  of  a  mining  corpora- 
he  should  have  a  certificate  of  his  tion  to  secure  a  board  of  directors  and 
shares.  Cliester  Glass  Co.  v.  Dewey,  the  management  of  the  property  was 
16  Mass.  94.  held  not  to   be   void   as   against  pub- 

But  where  the  statute  requires  every  lie  policy.     Faulds  v.  Yates,  57  111.  416. 

subscriber  to  pay  a    certain    sum    of  'A  subscriber  who  has  paid  part  of 

money  to  become  a  member,  the  mere  his  subscription,  but  whose  stock    ia 

subscription    to    stock    of    the    com-  afterward  forfeited    for  the  non-pay- 

pany,  without  payment  of  the  sum  re-  ment    of    calls,  is    not  a  stockholder 

quired,  does  not  constitute  the  party  within  the  meaning  of  the  New  York 

subscribing  a  member  on  his  subscrip-  statutes.     Mills   v.  Stewart,  41  N.  Y. 

tion.     Highland  Turnpike  Co.  v.  Mc-  884. 

Kean,  1 1  Johns.  98  ;  Hibernia  Turnp.  '  Wilson  v.  Proprietors    of  Central 

Co.  V.  Henderson,  8  S.  &  R.  219  ;  S.  C,  Bridge,  9  R.  I.  590. 

13  id,  484.  ^  Downing  V.  Potts,  23  N.  J.  L.  66. 

In  case  of  a  dispute  as  to  the  right  *  Chase  v.  Sycamone  R.    R.   Co.,   38 

to  vote  at    a   corporate  meeting,  the  111.  215;  Thrasher  v.  Pike,  etc.,  R.  R. 

books  of    the  corporation    are  'prima  Co.,  25  id.  398. 


•  Members  —  Stockholders  and  Stock.  99 

is  entitled  to  a  certificate  of  tlie  stock  subscribed  for.  Thus,  if 
the  statute  or  the  terms  of  the  subscription  require  that  each 
person  subscribing  for  stock  shall  pay  a  certain  amount  upon 
each  share  at  the  time  of  subscribing,  those  who  do  not  pay  are 
not  members/  nor  does  a  person  who  subscribes  for  stock  in  the 
name  of  a  third  person,  but  without  autliority  from  him,  become 
a  member  of  the  corporation  under  such  subscription.*  But, 
where  a  person  subscribes  for  stock  and  complies  with  the  re- 
quirements of  the  charter  or  statute  relative  thereto,  be  immedi- 
ately becomes  a  member  of  the  corporation,  although  no  certifi- 
cate of  the  stock  subscribed  for  has  been  issued  to  him.  A  per- 
son becomes  a  member  of  a  corporation  by  accepting  a  transfer 
of  stock  therein,  and  thereupon  becomes  entitled  to  all  benefits, 
and  subject  to  all  liabilities  which  such  relation  creates.^  But 
where  stock  stands  in  the  name  of  a  person  as  trustee  for  the  cor- 
poration, such  trustee  cannot  vote  thereon,^  nor  can  any  one  vote 
upon  stock  standing  upon  the  books  in  the  name  of  the  corpora- 
tion itself.^  Where  stock  stands  in  the  name  of  a  person  as 
"  cashier,"  *'  president,"  etc.,  these  words  are  treated  as  mere 
matter  of  description,  and  his  successor  in  the  office  cannot  vote 
thereon  until  a  transfer  is  made.*  The  question  as  to  the  right 
to  vote  at  such  meetings  is  determined  by  reference  to  the 
books  of  the  company  which,  under  the  regulations  in  ref- 
erence to  the  issue  and  transfer  of  stock,  should  show  the  pai'ty 
who  ow^ns  the  same ;  and  they  are  usually  at  least  jprima  facie 
evidence  as  to  who  is  2:>ossessed  of  the  right  to  vote  on  shares.'' 
But  in  New  York,  while  by  statute  the  inspectors  are  bound  by 
the  transfer  book,  yet  the  courts  may  go  behind  and  determine 
whether  a  transfer  appearing  thereon  was  a  sale  or  only  a  pledge, 
and  whether,  under  the  circumstances,  the  pledgor  or  the  pledgee 
was  entitled  to  vote  thereon,*  and,  independent  of  any  statutory 

1  Hibernia  Turnpike  Co.  v.  Header-  ^  United    States  v.  Columbian  Ins. 

son,  8  S.  &   R.   219;    Highland   Turn-  Co.,  2  Crancli's   C.    C.    266;  Ex  parte 

pike  Co.  V.  McKean,   11  Johns.   100;  Holmes,  5  Cow    426. 

Goshen  Turnpike  Co.  v.  Hurtin,  9  id.  *  Mous.seaux   v.  Urquhardt,   19  La 

218.  Ann.  482. 

^  Salem  Mill  Dam  Corp'n  v.  Ropes,  *  Matter   of  Mohawk  &  Hudson  R 

9  Pick.  187  R.  Co.,  19  Wend.  135. 

3  Kane   v.  Bloodgood,  7  Johns.  Ch.  '  Hoppin  v.  Buffum,  9  R.  I.  513. 

90;  Clinton,  etc.,  R.  R.  Co.  v.  Eason,  «  Strong  v.  Smith,  15  Hun,  222 
14  La.  Ann.  816 ;  Brigham  v.  Mead.  10 
Allen,  245. 


100  PlilVATE    COKPOKATIONS. 

provision  to  that  end,  there  can  be  no  question  but  that  the  court 
may  go  behind  tlio  transfer  book  so  far  as  is  necessary  to  ascer- 
tain wliether  the  votes  cast  were  cast  by  a  person  legally  author- 
ized to  do  so.  While,  as  a  rule,  the  pledgor  of  stock  is  entitled 
to  vote  thereon,  yet,  if  the  pledgee  for  a  long  time  acquiesces  in 
the  pledgee's  control  thereof,  and  by  the  books  of  the  corporation 
the  pledgee  appears  to  be  the  owner  thereof,  in  the  absence  of 
any  fraud,  a  court  of  equity  will  not  interfere  to  aid  the  pledgor 
in  asserting  control  thereof  at  a  contested  election.'  But  where 
stock  is  transferred  without  consideration  for  the  purpose  of 
fraudulently  controlling  an  election  a  court  of  equity  will  enjoin 
the  transferees  from  voting  thereon.^  Where  an  election  of 
officers  is  procured  by  the  abuse  of  legal  processes  and  proceed- 
ings under  a  preconceived  scheme  to  that  end,  to  prevent  a  fair 
election,  it  will  be  set  aside.' 

Sec.  50  a.  Rights  of  corporation  in  stock,  lien,  etc.  —  Liability  for 
unauthorized  transfers,  etc.  —  A  Corporation,  in  the  absence  of  any 
provision  in  its  charter,  or  the  statutes  giving  it  a  lien  thereon, 
or  giving  the  board  of  directors  discretionary  power  in  that  re- 
spect, cannot  refuse  to  transfer  stock  u23on  its  books ;  *  and  even 

'  Hoppin  V.  Buffum,  9  R.  I.  513.  plaintiflPs  husband,  and  by  its  terms 
^  Webb  V.  Ridgely,  38  Md.  364.  was  transferable  only  upon  the  books 
^People  V.  Albany,  etc.,  R.  R.  Co.,  of  the  company  upon  surrender  of  the 
55  Barb.  (N.  Y.)  344.  old  certificate.  Cushman  executed  an 
^Jasigi  V.  Chicago,  etc.,  R.  R.  Co.,  assignment  of  the  stock  in  proper 
129  Mass.  46;  Purchase  \.  N.  Y.  Ex-  form  to  the  plaintiff,  which  was  wit- 
change  Bank,  3  Robt.  (N.  Y.)  164.  nessed  by  one  Reals,  an  officer  of  the 
When  the  required  evidence  of  assign-  defendant  corporation.  Subsequently 
ment  is  produced,  the  corporation  is  Cushman  executed  an  assignment  of 
bound  to  permit  a  transfer  of  stock,  the  same  stock  to  Beals.  On  the  same 
Commercial  Bank  v.  Kortright,  22  day  that  the  assignment  was  executed 
Wend,  348.  But  the  remedy  is  by  ac-  to  the  plaintiff,  she  presented  it  to  the 
tion,  and  not  by  'mandamus.  Ex  parte  defendant,  offered  to  surrender  it,  and 
Fireman's  Ins.  Co. ,6  Hill  (N.  Y.)243;  demanded  a  transfer  of  the  stock  to 
Sargent  v.  Franklin  Ins.  Co.,  8  Pick,  her  upon  the  company's  books,  and 
79  ;  Rex  v.  London  Assurance  Co.,  5  B.  that  a  certificate  be  issued  to  lier,  which 
&  Aid.  899.  Especially  where  spurious  the  defendants  refused,  and  an  action 
stock  is  afloat.  People  v.  Vein  Coal  was  brought  to  compel  such  transfer. 
Cd*.  10  How.  Pr.  (N.  Y.)  186.  Assump-  Miller,  J.,  said  :  "  That  an  equita- 
sit  lies  for  such  refusal.  Hill  v.  Pine  ble  action  will  lie,  in  such  a  case,  has 
River  Bank,  45  N.  H.  300;  Helm  v.  been  distinctly  recognized  in  a  uum- 
Svviggett,  12  Ind.  194;  Noyes  v.  ber  of  the  adjudicated  cases  in  this 
Spaulding,  27  N.  H.  20 ;  Hardenbergh  state.  In  Middlebrook  v.  Merchants' 
V.  Bacon,  33  Cal.  356.  In  Cushman  Bank,  41  Barb.  (N.  Y.)  481  ;  27  How. 
V.  Thayer  Mfg.  Co.,  76  N.  Y.  365,  the  (N.  Y.)  474,  the  action  was  brought  to 
original  certificate  of  the  stock  was  compel  the  bank  to  allow  the  transfer 
issued    to    Peter    B.    Cushman,    the  of  certain  shares  of  bank  stock  to  the 


Meivibers  —  Stockholders  and  Stock. 


101 


where  the  statute  provides  that  a  transfer  shall  be  subject  to  the 
approval  and  acceptance  of  the  board  of  directors,  it  is  held  that 
this  discretion  cannot  be  exercised  without  limitation,  so  as  to 


plaintiff.  A  decree  was  made  direct- 
ing the  transfer,  and,  upon  appeal  to 
the  court  of  appeals,  the  judgment  of 
the  supreme  court  was  aiJBrmed.  3 
Abb.  App.  Dec.  295.  No  question 
was  raised  in  either  of  the  courts  as  to 
the  right  to  maintain  the  action ;  and 
it  is  said,  in  the  opinion  of  the  court 
of  appeals:  'His'  (the  plaintiff's) 
'  right  was  perfect  and  his  demand 
wrongfully  refused.'  As  no  point  was 
made  that  the  action  did  not  lie,  it 
is  fair  to  assume  that  it  was  con- 
ceded that  it  could  be  maintained. 
In  Com.  Bk.  of  Buffalo  v.  Kortright, 
32  Wend.  (N.  Y.)  348,  it  was  held 
that  an  action  of  assumpsit  Vies  a.ga.inst 
a  corporation  for  damages  for  refusing 
to  permit  a  transfer  of  stock  on  its 
books.  The  chancellor,  who  dissented 
from  a  majority  of  the  court,  in  his 
opinion,  says  tliat  tlie  plaintiff  might 
still  file  a  bill  to  have  a  sale  of  the 
pledge  and  to  compel  the  bank  to  al- 
low a  transfer  of  the  stock  to  the  pur- 
chaser. The  decision  of  the  case  did 
not  turn  on  the  question  now  consid- 
ered ;  and  hence  the  point  was  not 
decided,  and  the  remarks  of  the  chan- 
cellor are  only  entitled  to  weight  as 
the  opinion  of  a  judge  learned  and 
distinguished  in  this  department  of 
the  law.  In  Pollock  v.  National  Bank, 
7  N.  Y.  274,  it  was  held  that  a  bank 
which  has  permitted  a  transfer  of 
stock  owned  by  a  stockliolder,  upon  a 
forged  power  of  attorney,  and  has 
cancelled  the  original  certificates,  may 
be  compelled  to  issue  new  certificates; 
and  if  it  has  no  shares  which  it  can  so 
issue,  to  pay  the  value  thereof.  If, 
in  such  a  case,  new  certificates  may 
be  decreed  to  be  issued,  surely  it 
should  be  done  where  the  right  of  the 
owner  is  entirely  clear.  The  action 
was  of  an  equitable  character,  and 
the  principle  decided  recognizes  the 
right  to  compel  a  transfer  of  stock  by 
the  bank.  In  Purchase  v.  N.  Y.  Ex. 
Bk.,  3  Robt.  (N.  Y.)  164,  it  was  held 
that  after  an  assignment  of  bank  stock, 
the  bank,  upon  the  application  of  the 
owner,  is  bound  to  allow  the  transfer 
to  be  made  on  its  books,  and  to  issue 
a  new  certificate,  unless  restrained  by 


the  order  of  a  court  of  competent  ju- 
risdiction. In  White  v.  Schuyler,  1 
Abb.  Pr.  (N.  Y.)  N.  S.  800,  it  was  held 
that  specific  performance  of  an  agree- 
ment to  transfer  stock  may  be  de- 
creed, where  the  contract  to  convey  is 
clear,  and  the  uncertain  value  of  the 
stock  renders  it  difficult  to  do  justice 
by  an  award  of  damages.  The  spe- 
cific objection  that  the  party  had  a 
remedy  at  law  was  not  taken,  although 
the  point  was  in  the  case.  The  ques- 
tion was  considered  in  tlie  opinion  by 
HoGEBOOM,  J.,  and  numerous  authori- 
ties are  cited  to  sustain  the  principle 
laid  down.  The  same  rule  is  held  in 
the  case  of  Buckmaster  v.  Consumers' 
Ice  Co.,  5  Daly  (N.  Y.  C.  P.),  313. 
These  cases  show  a  recognition  of 
the  principle  that  a  court  of  equity 
will  interfere  when  the  remedy  is  de- 
fective at  law,  if  such  an  interference 
be  not  against  equity  and  good  con- 
science. See  Seymour  v.  Delancey,  6 
Johns.  Ch.  (N.  Y.)  222. 

"  While  the  general  rule  is  for  courts 
of  equity  not  to  entertain  jurisdiction 
for  a  specific  performance  on  the  sale 
of  stock,  this  rule  is  limited  to  cases 
where  a  compensation  in  damages 
would  furnish  a  complete  and  satis- 
factory remedy.  Phillips  v.  Berger, 
2  Barb.  (N.  Y.)603  ;  Story's  Eq.  Jur., 
§  717.  Judge  Story,  in  section  717, 
states  as  the  reason  why  a  contract 
for  stock  is  not  specifically  decreed, 
that  '  it  is  ordinarily  capable  of  such 
an  exact  compensation.'  He  further 
says  :  '  But  cases  of  a  peculiar  stock 
may  easily  be  supposed,  where  courts 
of  equity  might  still  feel  themselves 
bound  to  decree  a  specific  perform- 
ance, upon  the  ground  that  from  its 
nature  it  has  a  peculiar  value,  and  is 
incapable  of  compensation  by  dam- 
ages.' He  also  says,  in  regard  to  the 
general  rule  as  to  jurisdiction,  in  sec- 
tion 718  :  '  The  rule  is  a  qualified  one 
and  subject  to  exceptions;  or  rather, 
the  rule  is  limited  to  cases  where  a 
compensation  in  damages  furnishes  a 
complete  and  satisfactory  remedy.' 
The  case  considered  comes  directly 
within  the  exception  stated.  A  re- 
covery of  damages   would  furnish  in- 


102 


Pkivate  Corpokations. 


defeat  the  rights  of  otliers,'  but  can  be  exercised  and  enforced 
only  so  far  as  is  necessary  to  protect  the  rights  of  the  corpo- 
ration, and    that,  if   the  corporation    has  no    rights    to   be    pro- 


adequate  compensation ;  the  remedy 
by  inaiulamns  cannot  be  invoked  as 
the  authorities  hold,  and  there  can  be 
no  question  that  in  a  case  of  this  kind 
a  court  of  equity  alone  can  grant  the 
proper  relief. 

"  It  is  insisted  that  when  the  plaint- 
iff demanded  a  transfer  on  the  books 
of  the  company,  the  stock  had  already 
been  transferred  to  another  person, 
who  had  paid  a  money  consideratiou 
to  the  plaintiff's  husband,  from  whom 
she  claimed,  and  the  remedy,  if  any, 
was  by  an  action  for  damages.  We 
think  that  the  transfer  alleged,  under 
the  circumstances,  was  not  a  valid 
one  as  against  the  plaintiff,  and  fur- 
nishes no  sufficient  answer  to  the 
plaintiff's  claim,  if,  as  we  have  seen, 
she  had  a  right  to  maintain  an  action 
in  equity  to  compel  a  transfer  of  the 
stock  to  her.  Her  right  was  para- 
mount to  that  which  the  defendant 
seeks  to  interpose  as  a  defense.  The 
stock  had  previously,  and  on  the  19th 
of  January,  1875,  been  transferred  to 
her  by  an  assignment  indorsed  on  the 
back  of  the  certificate,  and  on  the 
same  day  a  power  of  attorney  had  been 
executed  by  the  owner  to  her,  which 
authorized  the  plaintiff  to  act  for  him 
and  in  his  behalf.  That  the  transfer 
was  made  without  a  moneyed  consid- 
eratiou can  make  no  diffe/euce,  as  it 
was  otherwise  valid.  The  assign- 
ments to  Beals,  which,  it  is  claimed, 
are  entitled  to  priority,  bore  date 
some  time  after  the  transfer  to  the 
plaintiff.  As  they  were  subsequent 
to  such  transfer,  and  as  by  the  cer- 
tificate the  stock  was  only  transferable 
upon  the  books  of  the  company  upon 
a  surrender  of  the  same,  no  title  could 
pass,  unless  the  transfer  was  thus 
made.  The  delivery  of  the  certificate, 
as  between  the  owner  and  assignee, 
with  the  assignment  and  power  in- 
dorsed, passes  the  entire  legal  and 
equitable  title  in  the  stock,  subject 
only  to  such  liens  or  claims  as  the  cor- 
poration may  have  upon  it.  McNeil 
V.  Tenth  Nat.   Bk.,   46  N.  Y.   381  ;  7 


Am.  Rep.  341  ;  N.  Y.  &  N.  H.  R.  R. 
Co.  V.  Schuyler,  34  N.  Y.  30,  80.  Any 
act  suffered  by  the  corporation  that  in- 
vested a  third  party  with  the  owner- 
ship of  the  shares,  without  due  pro- 
duction and  surrender  of  the  certifi- 
cate, rendered  it  liable  to  the  owner  ; 
and  it  was  its  duty  to  resist  any  trans- 
fer on  the  books  without  such  produc- 
tion and  surrender.  Smith  v.  Ameri- 
can Coal  Co.  of  Allegany  Co.,  7  Lans. 
(N.  Y.)  317.  See,  also,  N.  Y.  &  N.  H. 
R.  R.  Co.  v.  Schuyler,  34  N.  Y.  83. 
Beals  was  a  witness  to  the  original 
assignment  to  the  plaintiff,  was  an 
officer  of  the  company,  and  took  the 
transfer  to  himself  with  full  knowl- 
edge of  plaintiffs  claim  for  a  very 
trilling' consideration,  and  in  fraud  of 
plaintiff's  rights  as  the  owner  of  the 
stock.  In  view  of  the  facts,  Beals  has 
no  reason  for  questioning  the  plaint- 
iff's title  ;  and  the  defendant  cer- 
tainly has  no  valid  grotinds  for  claim- 
ing that  Beals  was  the  owner  instead 
of  the  plaintiff. 

"  That  no  demand  of  the  stock  was 
made  by  Thayer,  who  was  named  in 
the  assignment  and  authorized  to 
make  the  transfer  on  the  books  of 
the  company,  was  not  important.  If 
he  was  unwilling  or  neglected  to  do 
so,  it  would  not  deprive  the  plaintiff 
of  her  right,  as  the  owner  of  the  stock, 
to  a  transfer  of  the  same.  But  the 
demand  and  refusal  was  admitted  by 
the  answer;  and  when  the  plaintiff 
rested,  it  was  stated  that  the  demand 
and  refusal  was  admitted  by  the 
pleadings,  and  no  claim  made  to  the 
contrary,  or  exception  taken  to  such 
statement. 

"  There  was  no  error  in  the  fourth 
finding  of  fact,  which  was  to  the  effect 
that  Cushman  transferred  the  certifi- 
cate of  stock  for  a  good  consideration; 
and  there  was  sufficient  evidence  to 
sustain  such  finding.  That  money 
was  not  paid,  and  that  it  was  a  gift  to . 
the  plaintiff,  does  not  impair  or  affect 
the  validity  of  the  assignment  of  the 
same.     For  similar  reasons,  the  fourth 


'  Farmers'  and  Mechanics'  Bank  v.  Wasson,  48  Iowa,  336  ;  30  Am.  Rep.398. 


Members  —  Stockholders  and  Stock. 


103 


tected  by  its  exercise,  and  other  parties  would  be  deprived 
of  their  rights  thereby,  it  cannot  be  enforced.  "  Its  enforce- 
ment," says  Beck,  J.,'  "  would  operate  as  an  infringement  upon 
the  property  rights  of  others,  which  the  law  will  not  permit. 
It  would,  besides,  operate  as  a  restraint  upon  the  disposition  of 
property  in  the  stock  of  the  corporation,  in  the  nature  of  restraint 
of  trade,  which  the  courts  will  not  tolerate."  "^ 

If  the  corporation,  by  virtue  of  its  charter  or  of  the  general 
law,  has  a  lien  upon  the  stock  for  assessments,  calls  or  the  in- 
debtedness of  the  stockholder  to  it,  it  may  refuse  to  transfer  the 
stock  until  such  lien  is  discharged,^  and  it  is  held  in  Pennsylvania 
that  such  a  lien  may  be  acquired  by  usage,*  but  the  rule  is  gen- 
erally held  to  be  that  such  a  lien  cannot  be  acquired  as  against  a 
purchaser  without  notice  unless  it  is  given  by  the  charter  or  gen- 
eral law,  of  which  the  purchaser  is  bound  to  take  notice, 
or  by  a  by-law  of  the  coi*poi-ation  to  that  effect  of  which 
he  has  notice.^     At  the  common  law  no  lien   exists   in   favor 


and  fifth  requests  to  find  were  properly 
refused.  The  subsequent  power  of 
attorney  and  transfer  to  Beals,  with- 
out the  certificate,  could  not  aifect  or 
impair  the  validity  of  the  previous 
assignment  to  the  plaintiff;  and  as  we 
have  already  seen,  Beals  acquired  no 
right  under  the  same.  As  the  case  is 
presented,  there  are  no  facts  to  au- 
thorize the  conclusion  that  the  trans- 
fer to  the  plaintiff  was  revoked  by  the 
assignment  and  power  of  attorney 
subsequently  executed  to  Beals  ;  and 
he  acquired  no  title  thereby.  The 
acts  of  Cushman,  in  attempting  to 
transfer   stock   to   which   he  had    no 


title,  and  of  Beals,  in  accepting  the 
same  with  full  knowledge  of  that  fact, 
could  not  affect  the  plaintiff's  owner- 
ship in  any  form  ;  and  any  transfer  on 
the  books  of  the  company  would  be 
utterly  unavailable  in  conferring  any 
title  upon  Beals.  The  assignment 
was  absolute  to  the  plaintiff ;  and 
Cushman  had  reserved  no  right  to 
make  any  other  or  different  disposi- 
tion of  the  stock,  and  was  without 
any  authority  to  do  so.  Beals  was 
fully  acquainted  with  the  facts  ;  and 
in  accepting  a  transfer,  and  claiming 
under  the  same,  he  acquired  no  title 
whatever." 


'  Farmers',  etc.,  Bank  v.  Wasson, 
ante. 

-  Sargent  v.  Franklin  Ins.  Co.,  8 
Pick.  90;  Quinet  v.  Marblehead  Ins. 
Co  ,  10  Mass.  476;  United  States  v. 
Vaughn,  3  Binn.  (Penn.)  394;  Chani- 
bersburg  Ins.  Co.  v.  Smith,  11  Penn. 
St.  120  ;  Choteau  Springs  Co.  v.  Harris, 
20  Mo.  382. 

3  Great  North  of  England  Rv.  Co.  v. 
Biddulph,  7  M.  &  W.  243;  Quinet  v. 
Marblf^head  Social  Ins.  Co.,  10  Mass. 
476  :  Regina  v.  Wing,  33  Eug.  L.  & 
Eq.  80;  iST.  A.  Colonial  Assn.  of  Ireland 
v.   Bentley,   15   Jur.    187  ;   Regina   v. 


Londonderry,  etc.,  Ry.  Co.,  13  Q.  B. 
998;  Newry,  etc.,  Ry.  Co.  v.  Edmonds, 
2  Exch.  118;  Arabergate,  etc.,  Ry.  Co. 
V.  Mitchell,  4  id.  540. 

*  Morgan  v.  Bank  of  North  America, 
8  S.  &  R.  73. 

^  Dana  v.  Brown,  1  J.J.  Marsh.  304; 
Mass.  Iron  Co.  v.  Hooper,  7  Cush.  183; 
Heart  v.  State  Bank,  2  Dev.  Eq.  Ill; 
Farmers',  etc.,  Bank  v.  Wasson,  48 
Iowa,  336.  In  Bank  of  Holly  Springs 
V.  Pinson,  58  Miss.  421;  38  Am.  Rep. 
330,  a  bank  was  empowered  by  its 
charter  to  make  "  all  needful  rules 
and  by-laws  for  the     *     *    *    mode 


104 


Private  Corporations. 


of  a  corporation  upon  a  stockholder's  stock  for  his  indebt- 
edness to  it,'  and  upon  an  assignment  of  such  stock  by  him 
it  is  bound  to  permit  its  transfer  notwithstanding  such  indebted- 
ness,'' unless  there  is  written  or  printed  on  the  certificate  a  notice 
that  transfers  will  not  be  permitted  while  the  stockholder  is  in- 
debted to  the  corporation,^  or  the  corporation  has  established  a 
usage  to  that  effect,  of  which  the  assignee  is  bound  to  take 
notice,^  or  there  is  a  by-law  to  that  effect  made  in  pursuance  of 
a  power  given  by  the  charter,  warranting  such  a  condition.* 
It  is  incumbent  on  the  assignee  of  stock  to  reasonably  satisfy  the 
corporation  of  the  entire  genuineness  of  the  assignment,  and  the 
coi'poration  may  require  the  personal  attendance  of  the  assignor 
in  cases  wliere  there  is  a  real  doubt  as  to  the  genuineness  of  the 


and  manner  of  transferring  its  stock," 
enacted  a  by-law  that  the  stock  should 
be  assignable  only  on  its  books,  and 
that  no  transfer  should  be  made  by 
any  stockholder  indebted  to  it,  and 
that  the  certificates  of  stock  should 
contain  notice  of  this  provision.  A 
certificate  of  stock  was  issued  to  C. , 
reciting  that  the  shares  were  "trans- 
ferable at  the  ofBce  in  person,  or  by 
attorney."  C.  pledged  the  certificate 
to  Pinson,  as  collateral  security,  by  an 
assignment  indorsed  thereon,  appoint- 
ing him  attorney  to  demand  and  ob- 
tain a  transfer  on  the  books.  The 
bank  refused  to  transfer  the  stock 
on  the  ground  that  C.  owed  it  more 
than  the  amount  of  the  stock  and 
that  it  had  a  lien  on  the  stock 
therefor.  Pinson  had  no  notice 
of  this  claim  when  the  assign- 
ment was  msfde.  The  court  held  that 
Pinson  was  entitled  to  the  transfer. 
In  Steamship  Dock  Co.  v.  Heron,  52 
Penn.  St.  280,  a  stockholder  whose 
estate  was  insolvent  died  indebted  to 
the  corporation,  and  after  his  death 
the  company  passed  a  resolution  pro- 


hibiting  the  transfer  of  stock  by  any 
one  indebted  to  the  company  until 
such  indebtedness  was  paid  or  secured. 
The  stock  was  subsequently  sold,  the 
purchaser  having  no  knowledge  of 
the  stockholder's  indebtedness  or  of 
the  resolution  of  the  company.  The 
court  held  that  the  corporation  was 
bound  to  permit  the  transfer.  But 
where  a  certificate  of  stock  states 
upon  its  face  that  the  stock  is  trans- 
ferable, "  subject,  nevertheless,  to 
his  indebtedness  and  liability  at  the 
bank,  according  to  the  charter  and  by- 
laws of  said  bank ,'"  it  has  been  held 
that  these  words  may  be  held  to  sus- 
tain a  lien  although  no  lien  was  ex- 
pressly provided  for  in  the  charter  or 
by-laws,  and  that  the  corporation,  hav- 
ing relied  on  the  stock  as  security, 
were  entitled  to  insist  upon  the  lien 
against  the  holder  of  the  stock  and 
against  his  assignee,  as  the  words 
were  sufficient  to  put  the  assignee 
upon  inquiry  as  to  whether  the 
assignor  was  or  not  indebted  to  the 
corporation.  Vansands  v.  Middlesex 
Co.  Bank,  26  Conn.  144. 


'  Steamship  Dock  Co.  v.  Heron,  .53 
Penn.  St.  280;  Mass.  Iron  Co.  v.  Hooper, 
7  Cush.  183. 

2  Heart  v.  State  Bank,  2  Dev.  Eq.  111. 

^Vansands  v.  Middlesex  Co,  Bank, 
26  Conn.  144. 

4  Morgan  v.  Bank  of  N.  America,  8 
S.  &  R.  73. 

^  St.    Louis    Perpetual   Ins.    Co.  v. 


Ooodfellow,  9  Mo.  149  ;  Cunningham 
V.  Alabama  Life,  etc.,  Ins.  Co.,  4  Ala. 
(N.  S.)  652;  Child  v.  Hudson  Bay  Co., 
2  P.  Wms.  207;  Tuttle  v.  Walton,  1 
Qa.  43;  McDowell  v.  Bank  of  Wil- 
mington, 1  Harr.  (Del.)  27;  Union 
Bank  v.  Laird,  2  Wheat.  390  ;  Stebbins 
V.  Phoenix  Fire  Ins.  Co.,  3  Paige  Ch. 
350, 


Membeks  —  Stockholders  and  Stock.  105 

transaction,  but  after  a  transfer  has  once  been  made  nnder  a 
power  of  attorney  the  corporation  is  bound  by  and  cannot  rescind 
it,  and  if  it  permits  a  transfer  to  be  made  where  it  ought  not  to 
liave  done  so,  as  where  it  was  made  under  a  power  of  attorney 
executed  by  a  lunatic,  it  may  be  set  aside  and  the  corporation 
will  be  liable  for  the  damages  sustained.'  The  reason  for  this 
rule  is  that  the  corporation  is  a  trustee  for  the  property  and  title 
of  each  o^yner  of  the  stock  and  consequently  are  bound  to  ex- 
ercise proper  diligence  and  care  in  its  preservation.  This  rule 
applies  with  additional  force  when  the  stock  is  expressed  to  be 
held  on  trust  for  certain  persons  named,  ^  and  if  a  corporation 
permits  a  transfer  of  stock  to  be  made  upon  its  books  without 
examining  the  will  as  to  the  specific  becpiests  of  the  stock  therein 
made,  it  is  deemed  guilty  of  negligence  and  liable  to  the  cestui 
que  trust  on  the  conversion  of  the  stock  by  the  executor  to  his 
own  use,^  and  such  has  also  been  held  to  be  the  rule  where  the 
stock  of  a  ward  has  been  transferred  by  the  guardian  and  the 
certificates  canceled  by  the  corporation,*  and  when  the  transfer 
.  was  made  under  a  forged  power  of  attorney,^  and  it  has  been  held 
that  a  stockholder  may  recover  the  dividends  on  the  stock,  al- 
though at  the  time  the  dividends  were  payable  he  knew  that  the 
stock  had  been  placed  in  the  nanie  of  another  person  under  a 
forged  power  of  attorney,  and  omitted  to  inform  the  corporation 
and  did  not  demand  the  dividends  until  the  offender  had  es- 
caped.® So  where  a  corporation  permitted  the  transfer  of  stock 
under  an  assignment  which  had  been  altered  so  as  to  embrace 
all  of  the  assignor's  stock  when  it  really  embraced  only  a  part 
thereof,  the  corporation  was  held  liable  to  the  owner  for  the 
amount  of  stock  wa-ongfully  transferred.^  But  where  the  stock- 
holder has  himself  been  guilty  of  negligence    in    the   mode   of 

'  Chew  V.  Bank  of  Baltimore,  14 Md,  *  City  of   Baltimore   v.   Norman,   4 

299;    Bayard    v.    Farmers     and    Me-  Md.  353. 

chanics' Bank  of   Phila.,  53  Penn.  St.  ^  Pollock  v.  National  Bank,  7  N.   Y. 

233;  Pollock   v.    Nat.   Bank,   7    N.  Y.  274. 

274;    Davis    v.   Bank   of   England,   2  ^  Davis  v.  Bank  of  England,  2  Bing. 

Bing.  393;    Sewall   v.    Boston   Water  393;  Taylor  v.  Midland  Ry.  Co.,  6Jur. 

Power  Co.,  4  Allen,  277.  (N.  S.)  595. 

"^  Bayard  v.  Farmers',  etc.,  Bank,  ante.  '  Sewall  v.  Boston  Water-power  Co., 

^  Lowry  v.    Commercial,  etc..  Bank  4  Allen  (Mass.),  377. 

(U.    S.  C.   C.  Md.),  G  Western   L.   J. 

121. 

14 


106  Pkivatk  Corporations. 

filling  up  the  assignment,^  or  has  misled  tlie  corj)oration  by  his 
conduct  after  the  transfer,  tlie  corporation  cannot  be  held 
chargeable  for  any  loss  to  the  assignor.^ 

Skg.  60.  Executor  of  stockholder,  rights  of—  Upon  the  death  of 
a  stockholder,  in  a  corporation,  intestate,  and  the  appoint- 
ment of  an  executor  or  administrator  of  his  estate  who  accepts 
the  trust,  he  becomes,  by  operation  of  law,  vested  with  the 
legal  title  to  the  stock,  and  with  all  the  rights  appertaining 
to  the  ownership  of  the  same,  and  especially  the  right  of 
voting  at  elections  of  directors  of  the  company,  without  any 
formal  transfer  of  the  stock  on  the  books  of  the  company 
being  necessary  for  that  purpose/  But  it  is  evident  that  the 
corporation  in  snch  cases  might  properly  require  evidence  of  the 
decease  of  the  o^vner,  and  of  the  due  appointment  of  such  execu- 
tor or  administrator,  who  should  claim  the  right  to  vote  by  virtue 
of  his  appointment  as  the  representative  of  the  deceased. 

Sec.  61.    stockholder's   right  to  vote  by  proxy  or  attorney.  —  There 

is  usually  a  provision  in  the  articles  of  association,  that  the  mem- 
bers may  be  represented  in  the  corporate  meetings  by  an  agent  or 
proxy  duly  constituted.  In  such  cases  the  personal  attendance 
of  the  member  at  a  general  meeting  is  unnecessary,  but  the  votes 
which  a  principal  would  be  entitled  to  cast  if  personally  present 
may  be  cast  by  his  duly  constituted  agent.  But  the  right  of 
proxies  to  vote,  as  well  as  the  manner  of  voting  in  moneyed  cor- 
porations, is  usually  provided  for  by  the  articles  of  association, 
or  the  by-laws  duly  adopted  in  accordance  with  such  articles,  they 
constituting  the  guide  and  authority  in  this  matter.  When  the 
constating  instruments  provide  for  the  right  of  voting  by  proxy, 
that  settles  all  questions  relating  to  the  subject."     And  it  is  gen- 

•  Swan  V.  North  British,  etc.,  Co.,  7     ment    of    the    profit  is  not     void    as 
H.  &  N.  G03.  ai^ainst  public  policy.   Faulds  v.  Yates, 

2  Duncan  v.  Lintley,  2  Mac.  &  Q.  30;     57  111.  416. 

Coles  V.  Bank  of  England,   10  Ad.  &  '' The  right  to  vote  at  corporate  meet- 
El.  437.  iogs  on  shares  of  the  stock  of  the  cor- 

3  Matter  of  North  Shore  Ferry  Co.,  poration  held  in  trust  for  the  benefit 
63  Barb.  556.     And  a  combination  be-  of  the  corporation  is  suspended  while 
tween  a  portion  of  the  members  of  a  they  are  so  held.     American   Railway 
corporation  to  secure  an  election   of  a  Frog  Co.  V.  Haven,  101  Mass.  398. 
board    of    directors  and  the  manage- 


Members  —  Stockholders  and  Stock.  107 

erally  so  provided,  in  case  of  corporations  for  pecuniary  gain. 
But  it  was  formerly  a  controverted  question  whether  the  corpora- 
tion could  by  its  by-laws  pi-ovide  for  such  a  method  of  voting 
where  the -constating  instruments  were  silent  upon  the  question. 
Mr.  Kent  observes  :  "  Though  in  case  of  elections  in  public  and 
municipal  corporations,  and  in  all  other  elections  of  a  public  na- 
ture, every  vote  must  be  personally  given  ;  yet  in  the  case  of 
moneyed  corporations,  instituted  for  private  purposes,  it  has  been 
held  that  the  right  of  voting  by  proxy  might  be  delegated  by  the 
by-laws  of  the  institution,  when  the  charter  was  silent."^  But  in 
a  New  York  case,^  the  chancellor  doubted  the  validity  of  the 
right  of  voting  by  proxy,  when  the  right  is  not  given  either  ex- 
pressly or  impliedly  in  the  act  creating  the  institution ;  and 
subsequently,  after  a  full  consideration  of  the  question  by  the 
supreme  court  of  New  Jersey,  it  was  held  to  be  a  principle 
of  the  common  law,  that  where  an  election  depended  upon 
the  exercise  of  judgment,  the  right  could  not  be  deputed; 
and  that  it  required  legislative  sanction  before  any  corporation 
could  make  a  valid  by-law  authorizing  members  to  vote  by 
proxy. ^ 

But  we  shall  consider  this  subject  more  fully  under  the  head  of 
corporate  meetings.^ 

Sec.  62.  Matters  stockholders  are  presumed  to  know. —  It  is  a  gene- 
ral rule  that  a  person  who  becomes  a  member  of  a  corporation  is 
presumed  to  know  the  obligations  he  assumes  under  the  charter 
and  the  by-laws  of  the  body.  And  if  he  or  the  corporation  is 
mistaken  in  their  construction  of  them,  this  would  not  be  the 
ground  for  setting  aside  a  contract  between  tliem.^  And  it  has 
been  held  that  parties  assuming  to  act  in  a  corporate  capacity,  and 

*  2  Kent's  Com.  394 ;  State  v.  Tudor,  corporator,  and  sue  or  be  sued  on  the 
5  Day  (Conn.),  329  contract.     Culbertson  v.  Wabash  Nav. 

'2  Phillips   V.    Wickham,    1    Paige,  Co.,  4  McLean,   544.     But  a  corpora- 

593.  tion  is  not  generally  bound  by  the  ad- 

*  Taylor  v.  Griswold,  14  N.  J.  L.  mission  of  its  members,  unless  ac;ing 
223.  by   its   express   authority.      Shay  v. 

4 See  chap.  8.  Tuolumne  Co.  Water  Co.,  6  Cal.  73. 

*  Chesapeake,  etc..  Canal  Co.  v.  Du-  Subscribers  for  stock  in  a  railway 
lauy,  4  Cranch's  C.  C.  85;  Palmyra  v.  company  must  be  presumed  to  know 
Morton,  25  Mo.  593;  Wight  v.  Shelby  the  provisions  of  the  charter  of  the 
R.  R.  Co.,  16  B.  Monr.  4.  company.     Wight  v.  Shelby,  etc.,  R. 

A  corporation  may  contract  with  a     R.  Co.,  16  B.  Monr.  4. 


K)8  Private  CoRPORAnoNS. 

as  members  of  a  corporation  which  has  in  fact  no  corporate  ex- 
istence, are  personally  liable  to  those  with  whom  they  contract  as 
partners,  if  it  appears  that  they  were  so  acting  at  the  time  the  con- 
tract was  made. ' 

Sec.  63.      Personal  liability  of  stockholders  under  statutes. —  At  the 

common  law,  a  stockholder  of  a  corporation  is  not  liable  for  its 
debts  or  for  the  acts  of  its  oiScers  in  the  prosecution  of  the  busi- 
ness of  the  company,  but  they  are  frecfuently  made  individually 
responsible  for  the  debts  and  liabilities  of  the  corporation,  or  to  a 
limited  amount  or  proportion  of  the  same,  by  the  exjjress  pro- 
visions of  the  incorporating  statutes,  or  the  constitution  of  the 
state.  These  provisions  vary  the  general  common-law  rule,  ex- 
empting the  members  from  individual  liability  beyond  their  ex- 
press obligations  to  the  company.  But  the  liability  being  purely 
statutory,  they  are  not  liable  except  in  the  mode  and  to  the  ex- 
tent provided  in  the  statute.  In  a  Yermont  case,*  the  charter  of 
a  corporation  provided  that  the  "  persons  and  property  of  said 
corporation  shall  be  holden  to  pay  their  debts,  and  when  any  exe- 
cution shall  issue  against  such  corporation,  the  same  may  be  levied 
on  the  person  or  property  of  any  individual  thereof,"  and  it  was 
held  that  this  did  not  authorize  the  levying  of  an  execution 
against  the  corporation  upon  the  persons  or  property  of  the  stock- 
holders in  the  first  instance,  but  that  proceedings  must  first  be 
had  against  the  corporation  and  the  remedies  against  it  exhausted 
before  the  liability  of  the  stockholders  attached.  When  the 
statute  simply  imposes  liability  upon  the  stockholders  to  an 
amount  equal  to  their  stock,  together  with  any  unpaid  subscrip- 
tion, this  is  the  limit  of  their  liability,  and  when  it  has  been  once 
exhausted  by  a  suit  by  a  creditor,  the  liability  ceases,^  and  it  seems 
that  a  honafide  judgment  debt  in  favor  of  a  stockholder  against 
the  corporation  may  be  set  off  by  him  in  equity  against  a  suit  to 
make  him  individually  liable  in  proportion  to  his  stock."  It  was 
also  held  in  the  case  last  cited  that  a  creditor  need  not  sue  all  the 
stockholders,  but  may  pursue  one   or  more,   provided,  however, 

1  Fuller  V.  Bo  we,  57  N.  Y.  23.  ^  gtate  Savings  Bank  v.  Kellogg,  63 

^Danely  v.  Brown,  24  Vt.  197.  See,  Mo.  540. 

also,    Stewart  v.    Say,  45   Iowa,  (504  ;  •»  Boyd  v.  Hall,  56  Ga.  563. 
Hanson  v.  Donkersley,  37  Mich.  181. 


Members  —  Stockholders  and  Stock.  109 

that  his  recovery  shall  in  no  case  exceed  the  amount  of  his  stock. 
The  statute  of  California  concerning  mining  corporations  provides 
that  "  each  stockholder  shall  be  individually  and  personally  liable 
for  his  proportion  of  all  the  debts  and  liabilities  of  the  company 
contracted  or  incurred  during  the  time  that  he  was  a  stockholder, 
for  the  recovery  of  which  joint  or  several  actions  may  be  insti 
tuted  and  prosecuted." ' 

And  the  constitution  of  that  state  provides  that  "  dues  from  cor- 
])orations  shall  be  secured  by  such  individual  liability  of  the  cor- 
porators and  other  means  as  may  be  prescribed  by  law,"  '  and  that 
"each  stockholder  of  a  corporation  or  joint-stock  association  shall 
be  individually  and  personally  liable  for  his  proportion  of  all  its 
debts  and  liabilities." '  In  a  suit  against  stockholders  of  a  min- 
ing company  in  California  to  recover  against  them  personally  a 
debt  due  from  the  corporation,  the  question  was  presented  whether 
the  stockholders  were  personally  liable  beyond  their  proportion  of 
all  the  debts  and  liabilities  of  the  corporation,  contracted  or  in- 
curred during  the  time  they  were  stockholders,  and  whether  the 
statutory  provision  was  not  void  as  in  conflict  with  the  constitution. 

Sawyer,  C.  J.,  in  delivering  the  opinion  of  the  supreme  court 
in  the  case,  observed  :  "  It  was  manifestly  contemplated  that  the 
legislature  should  regulate  the  liability  and  prescribe  the  rule  by 
which  each  stockholder's  proportion  should  be  ascertained.  The 
principle  adopted  by  the  legislature  makes  every  stockholder  liable 
for  his  share  of  all  debts  contracted  while  he  is  a  stockholder. 
The  entire  body  of  stockholders  for  the  time  being  is  personally 
liable  for  the  entire  debt  contracted  ;  an  entire  set  of  stockholders 
is  liable  for  every  debt.  This  is  sufficient  to  answer  all  the  re- 
quirements of  the  constitution.  There  is  nothing  in  the  provision 
that  requires  each  man  when  he  becomes  a  stockholder  to  do  so 
on  the  penalty  of  becoming  responsible  for  all  prior  liabilities  of 
the  corporation  that  remain  uncanceled.  This  would  be  to  make 
several  different  sets  of  stockholders  personally  responsible  for 
some  debts  and  only  one  set  for  others.  There  is  nothing  in  the 
constitution  requiring  such  a  result."  *     In  an  action  against  a 

'  Act  passed  April  17, 1853, amended  ^Larrabee  v.  Baldwin,  35  Cal.  155. 

1863.  See,  also,  French  v.  Teschemaker,  24 

"Art.  4,  §33.  id.  539. 
2  Id.,  §  36. 


110  Pkivate  Corpoeations. 

stockholder  under  the  provision  of  tlie  foregoing  statute,  to  re- 
cover a  proportional  share  of  one  of  the  corporate  debts,  the  evi- 
dence must  show  that  he  was  a  stoclvliolder  at  the  time  the  debt 
was  contracted ;  and  where  a  judgment  against  the  corporation 
does  not  show  when*  the  debt  upon  which  it  was  rendered  was 
contracted,  it  would  not  be  sufficient  to  establish  the  liability  of  a 
stockholder  thereon,  nor  would  a  judgment  against  the  corpora- 
tion, while  a  party  is  a  stockholder,  ujion  a  contract  entered  into 
before  that  time,  constitute  a  contract  within  the  meaning  of  the 
act  which  provides  that  a  stockholder  shall  be  liable  for  corporate 
debts  contracted  or  liabilities  incuri'ed  while  he  was  a  holder  of 
stock,  so  as  to  renderhimpersonally  liable  for  any  portion  thereof ; 
but,  in  case  of  liability,  a  joint  and  several  action  may  be  main- 
tained against  the  stockholders  for  a  corporate  debt.^ 

Sec.  64:.  Cause  of  action  accrues,  when. — -Under  SUch  statutes  it 
becomes  a  very  important  question  when  a  cause  of  action  against 
a  corporation  against  its  stockholders  upon  their  individual  lia- 
bility, for  debts  and  liabilities  of  the  corporation  contracted  or 
incurred  during  the  time  they  were  stockholders.  That  is,  whether 
it  accrues  at  the  same  time  it  accrues  against  the  corporation,  or 
not  until  after  a  judgment  has  been  obtained  against  the  corpora- 
tion, and  the  creditor  has  failed  to  collect  it  from  the  corporation, 
or,  in  other  words,  whether  the  liability  of  the  stockholder  is 
conditional,  upon  the  failure  or  inability  of  the  corporation  to  pay. 

These  questions  have  oeen  settled  by  the  supreme  court  of  Cali- 
fornia, in  a  case  involving  the  construction  of  the  constitutional 
and  statutory  provisions  referred  to,  in  which  Cope,  J.,  who  de- 
livered the  opinion  of  the  court,  said  :  ''  It  would  seem,  from  a 
just  and  reasonable  construction  of  the  constitutional  and  statu- 
tory provisions  upon  this  subject,  that  an  individual  corporator 
in  respect  to  his  personal  liability  for  the  debts  of  the  corpora- 
tion does  not  occupy  the  position  of  a  surety,  but  that  of  prin- 
cipal debtor.^     His  responsibility  commences  with   that  of  the 

'  Id.;  Davidson  v.  Eankin,  34  Cal.  under  the  peculiar  provisions  of  the 

503(1868);  S.  C,  1  With.  Corp.  Cases,  California  statute,  yet  we  should   be 

199.  derelict    in    our   duty  if    we   did   not 

^  Without  questioning  the  accuracy  warn  the  profession  that  this  doctrine 

of  the  doctrine  stated  by   the   court,  is  only  applicable  under  statutes  con- 


Members  —  Stockuoldeks  ai^d  Stock. 


Ill 


corporation  and  continues  during  the  existence  of  the  indebted 
ness.     It  is  not  in  any   sense  contingent,  but  is  declared  to  be 
absolute  and  unconditional.     The  remedial  effect  of  these  pro- 
visions, in  which  consists  their  only  value,  should  not  be  impaired 


tainin^  identical  provisions.  It  will 
be  observed  that  under  this  statute 
the  creditor  may  proceed  against  the 
corporation  and  the  stockholders  in 
the  same  action,  or  may  pursue  them 
separately,  so  that  the  doctrine  which 
is  usually  lield  in  reference  to  a  stock- 
holder's liability,  that  the  corporation 
is  primarily  liable,  and  the  remedies 
against  it  must  be  first  exhausted,  has 
no  application,  as  it  would  have  ex- 
cept for  this  provision.  But  the  state- 
ment of  the  learned  judge  that  their 
corporate  debts  and  liabilities  stand  in 
the  same  position  in  relation  to  cor- 
poration creditors  as  if  they  were  con- 
ducting their  business  as  an  ordinary 
partnership  can  have  no  application 
under  tlie  California  statute,  because 
under  it  each  stockholder  is  not  made 
individually  liable  for  the  entire  debts 
of  the  corporation,  as  an  individual 
partner  would  be,  but  only  for  "his 
proportion  of  all  the  debts  of  the  cor- 
poration during  the  time  he  was  a 
stockholder."  That  is,  under  a  fair 
construction  of  the  statute  his  liability 
is  to  be  in  the  ratio  which  the  amount 
of  the  stock  owned  by  him  bears  to 
the  whole  stock  of  the  corporation, 
and  this  liability  has  no  resemblance 
to  the  liability  of  an  ordinary  partner. 
The  court  evidently  had  in  mind,  when 
it  made  use  of  the  expression  referred 
to,  the  doctrine  held  by  Hosmeh,  C. 
J.,  and  two  other  judges,  in  South- 
mayd  v.  Russ,  3  Conn.  53.  But  that 
doctrine  was  held  under  a  very  pe- 
culiar clause  in  the  charter,  to-wit : 
"  That  the  persons  and  property  of  the 
members  of  said  corporation  shall  at 
all  times  be  liable  for  all  debts  due  by 
said  corporation."  Under  this  statute 
the  liability  of  a  stockholder  is  not 
limited,  but  is  co-ex.tensive  with  the 
obligations  and  liabilities  of  the  cor- 
poration itself,  nor  is  the  liability  re- 
stricted to  the  share  of  each  stock- 
holder, so  that  the  court  might  well 
say  that  "  they  are  liable  as  if  there 
had  been  no  incorporation.  The  debt 
is  no  sooner  incurred  than  their  liabil- 
ity commences  *  *  *  while  the 
members  of  the  company  enjoy  all  the 


privileges  of  a  corporation,  their  cred- 
itors the  rights,  and  are  entitled  to 
the  remedies  which  are  furnished  by 
established  law,  against  an  ordinary 
partnership."  But  even  under  this 
peculiar  provision,  which  will  prolja- 
bly  not  be  met  with  in  the  charter  of 
any  other  incorporated  company  in  ex- 
istence, Petkos,  J.,  and  Bristol,  J., 
refused  to  give  their  assent  to  the 
statement  of  Hosmer,  J.,  that  the  de- 
fendants were  to  be  treated  as  a  mer- 
cantile copartnership,  nor  generally, 
under  these  charters  and  statutes,  will 
it  be  found  that  there  is  any  attempt 
even  to  render  the  stockholders  pri- 
marily liable  with  the  corporation  for 
its  debts,  and  unless  the  statute,  as 
does  the  statute  of  California,  ex- 
pressly so  provide,  the  courts  will 
hold  that  the  liability  is  merely  sec- 
ondary, and  only  attaches  when  the 
creditor's  remedy  against  the  corpora- 
tion has  been  exhausted  and  proved 
wholly  or  partially  fruitless.  This 
liability,  being  purely  statutory,  and 
in  derogation  of  the  common  law,  the 
statutes  conferring  or  imposiug  it  will 
be  strictly  construed,  and  liberally  in 
favor  of  the  stockholder,  and,  in  de- 
terminining  the  question,  the  language 
of  the  charter  or  statute  will  never 
be  extended  beyond  the  plain  and  or- 
dinary import  of  the  language  em- 
ployed. The  doctrine  of  strict  con- 
struction is  illustrated  in  a  Pennsyl- 
vania case  in  which  this  question  was 
ably  discussed  by  the  court.  Mayer 
v.  Pennsylvania  Slate  Co.,  71  Penn. 
St.  293.  In  that  case  the  charter  con- 
tained a  provision  that  the  stockhold- 
ers should  be  individually  liable  "  for 
debts  due  mechanics,  workmen  and 
laborers  employed  by  the  company, 
and  for  material  furnished,"  and  the 
court  held  that  the  language  could 
not  be  extended  so  as  to  make  them 
liable  for  hauling,  for  repairing  wag- 
ons, for  lumber,for  erecting  machinery, 
provender  for  horses,  powder  for 
blasting,  tools,  etc.,  as  the  word  "ma- 
terials "  must  be  restricted  to  that 
which  forms  a  part  of  the  products  of 
the  company. 


112  Private  Corporations. 

by  constrnction.  Similar  provisions  in  otlier  states  liave  generally 
been  construed  in  the  same  manner.  It  lias  been  declared  that 
the  members  of  a  corporation  who  are  answerable,  personally,  for 
the  corporate  debts  and  liabilities,  stand  in  the  same  position  in 
relation  to  creditors  of  the  corporation  as  if  they  were  conducting 
their  business  as  a  common  partnership."  '  Of  course,  no  general 
rules  can  be  given  by  which  to  determine  either  the  fact,  or  the 
extent  of  a  stockholder  s  liability  under  these  statutes,  as  in  every 
case  it  depends  upon  the  language  of  the  statute.  But,  under  a 
statute  making  the  stockholder  liable  for  the  debts  of  the  com- 
pany, his  liability  is  restricted  to  demands  arising  ex  contractu^ 
and  he  cannot  be  made  liable  for  torts."  And,  even  though  a 
judgment  is  obtained  against  the  corporation  for  a  tort,  yet,  if  it 
is  sought  to  i-ender  a  stockholder  liable  therefor,  the  question  of 
liability  depends,  not  upon  the  judgment,  but  upon  the  original 
ground  of  action.  Under  these  statutes^  a  subscriber  for  stock  is 
held  liable,  although  he  has  never  paid  his  subscription  or  done 
any  act  as  a  stockholder,'  because  the  court  will  not  look  beyond 
the  legal  title  to  the  stock  as  shown  by  the  books  of  the  corpora- 
tion." In  Xew  York  it  is  held,  under  the  statute  existing  there, 
that  the  liability  of  a  stockholder  is  several  and  not  joint,  and 
that  each  creditor  has  a  remedy  against  each  stockholder,  ^  and 
that  they  are  not  primarily  liable,  as  partners,  but  only  as  cor- 
porators. " 

Sec.  65.  intentional  deceit  as  to  organization,  etc. —  Under  the 
statutes  of  various  states  it  is  also  provided  that  any  failure  to 
comply  with  the  requirements  of  the  statute  or  the  articles  of  as- 
sociation in  organizing  the  corporation,  or  in  intentionally  de- 
ceiving the  public  as  to  their  means  or  liabilities,  subjects  the  stock- 
holders, or  those  in  fault  in  these  respects,  to  a  personal  liability ; 
and  they  are  made  liable  for  the  corporate  debts  in  the  former 

'  Mokelumne  Hill  Canal  Co.  v.  Wood-  monson   v.  Spencer,    15   Wend.   548  ; 

bury,  14  Cal.  265  ;    Davidson  v.  Ran-  Todbunter   v.    Walters,  29    lud.    105 

kin,  supra.      See,  also.  Moss   v.  Mc-  (1868). 

Cullough,  7  Barb.  295  ;  Harder  v.  Mc-        -  Heacock  v.  Sherman,  14  Wend.  58. 
Cullough,  2  Den.  119  ;  Marcy  v.  Clark,         ^  Spear  v.  Crawford,  id.  20. 
17  Mass.  330;  Southmavd  v.   Knss,  8         ^  ^Iderley  v.  Storm,  6  Hill,  624. 
Coun.  56  ;  Moss  v.  Oakley,  2  Hill,  265;         ^  Abbott" v.  Aspinwall,  26  Barb.  202. 
Aliens  V.  Sewall,  2  Wend.  327  ;  Corn-        « Conant  v.  Van  Schaick,  24  id.  87. 
ing  V.  McCullougb,  1  Comst.  47 ;  Si- 


Members  —  Stockholders  and  Stock. 


113 


case,  and  in  tlie  latter  to  such  damages  as  may  be  sustained 
tliereby.^  But  it  is  generally  provided  in  such  cases  that  satis- 
faction must  first  be  sought  of  the  corporation."  The  liability  of 
corporatoi's  for  failure  to  comply  with  the  law  in  the  institution 
of  the  corporation  does  not  generally  apply  to  railroad  corpora- 
tions ;  the  usual  limit  of  liability  of  members  in  such  corporations, 
and  in  some  other  cases,  being  the  amount  of  stock  held  by  them.' 


•  Code  Iowa,  ^§  1068-1071  ;  Corpo- 
ration Acts  of  California,  1853-1863  ; 
Rev.  Stat.  Me.,  chap.  7G. 

^Id.,  §  108;}.  See,  also,  as  to  the 
construction  of  a  former  but  similar 
statute  of  that  state,  Donworlh  v. 
Coolbaugh,  5  Iowa,  300  ;  McKellar  v. 
Stout,  14  id.  359. 

3  Iowa  Code  (1873),  1068  ;  Md.  Act, 
1853,  chap.  338.  The  decisions,  under 
the  personal  liability  provisions  of  the 
statutes  of  the  various  states,  are  as 
follows: — 

California.  Mokelumne,  etc.,  Co.  v. 
Woodbury,  14  Cal.  265;  Irvine  v. 
McKeon,  23  id.  473.  But  such  a  clause 
in  the  constitution  may  be  waived,  by 
a  stipulation  to  that  effect  incorporate 
contracts.  French  v.  Teschemaker,  34 
id.  518.  See,  also,  as  to  the  effect  of  a 
writing  signed  by  the  president  of  a 
corporation,  as  evidence,  Curtiss  v. 
Murry,  26  id.  633.  See,  also,  as  to 
individual  responsibility  under  a  par- 
ticular provision  of  the  California 
statute,  Davidson  v.  Rankin,  34  id. 
503. 

Oonneeticut.  Southmayd  v.  Russ,  3 
Coun.  53;  Middleton  Bank  v.  Russ,  id. 
135 ;  Beardsley  v.  Smith,  16  id.  368. 

Georgia.  A  stockholder  subjected  to 
liability  may  have  his  remedy.  Force 
V.  Dahlonega  Tanning,  etc.,  Co.,  23 
Ga.  86 ;  Conner  v.  Southern  Ex.  Co., 
37  id.  397. 

Illinois.  Where  a  stockholder  is  lia- 
ble to  the  amount  of  his  stock,  there 
should  be  an  averment  of  the  amount 
in  the  declaration.  Sherman  v.  Smith, 
20  111.  350.  So  suit  should  be  brought 
within  one  year.  Tarbell  v.  Page,  34 
id.  46.  See,  also,  Baker  v.  Backus,  33 
id.  79. 

loioa.  Execution  should  follow  the 
judgment,  with  a  clause  that  it  be 
levied  on  the  property  of  the  members. 
Hampson  v.  Weare,  4  Iowa,  13.  See, 
also,  Don  worth  v.  Coolbaugh,  5  id. 
300  ;  Corse  v.  Sanford,  14  id.  235.  The 

15 


bank  officer,  liable  individually  un- 
der the  statute,  for  payment  of  bills 
issued,  may  contract  with  another 
party  for  the  redemption  of  them. 
Alleu  V.  Pegram,  16  id.  163. 

Kentucky.  Greenup  v.  Barbee,  1 
Bibb,  320.  Corporators,  only,  liable 
for  a  note  who  were  such  at  the  time 
it  was  given.     Castleman  v.  Holmes, 

4  J.  J.  Marsh.  1.  See,  also,  Roman  v. 
Fry,  5  id.  634  ;  De  Wolf  v.  Mallett,  3 
Dana,  218  ;  U.  S.  Bank  v.  Dallam,  4 
id.  574  ;  Cornwall  v.  Easthman,  2 
Bush,  561. 

Louisiana.  Brown  v.  Union  Ins.  Co., 
3  La.  Ann.  177  ;  Robertson  v.  Conrey, 

5  id.  297  ;  Stark  v.  Burke,  id.  740. 
One  whose  stock  has  been  forfeited 
will  not  be  further  personally  liable. 
Macauly  v.  Robinson,  18  id.  619. 

Maine.  The  creditor  must,  under 
act  of  February  16,  1836,  first  obtain 
judgment  against  the  corporation. 
Drink  water  v.  Portland  Marine  R.,  18 
Me.  35. 

A  statute,  making  stockholders  in  a 
pre-existing  corporation  liable  indi- 
vidually for  the  debts  of  the  corpora- 
tion ,  is  constitutional  in  respect  to 
debts  contracted  after  the  passage  of 
the  statute.  Stanley  v.  Stanley,  20 
Me.  191.  See,  also,  Longley  v.  Little, 
id.  162  ;  Fowler  v.  Robinson,  31  id. 
189  ;  Fowler  v.  Ludwig,  34  id.  455  ; 
Grose  v.  Hilt,  36  id.  23  ;  Hudson  v. 
Carman,  41  id.  84  ;  Cummings  v.  Max- 
well, 45  id.  190. 

Under  the  act  of  1856,  a  stockholder 
cannot  be  personally  liable  in  an  ac- 
tion commenced  after  the  passage  of 
the  act,  to  recover  a  debt  contracted 
before  its  enactment.  Coffin  v.  Rich, 
45  id.  507  ;  Carroll  v.  Hinkley,  46  id. 
81  ;  Cathorn  v.  Towle,  id.  302  ;  Holt  v. 
Blake,  47  id.  63. 

Judgment  against  the  corporation 
is  binding  upon  the  stockholders,  and, 
until  reversed,  is  conclusive  upon 
them   in   a   subsequent  suit    against 


114 


Privatk  Corporations. 


Sec.  6().  General  liabilities  on  subscriptions  for  stock. —  The  charter 
or  act  of  incorporation,  or  tlie  general  statutes  and  articles  of  as- 
sociation,   under   Avhich  a    corporation   is    instituted,     like     the 


them  by  the  same  plaintiff.     Millikeu 
V.  VVhitehouse,  49  Me.  527. 

Maryland.  Section  9,  of  chapter  338, 
of  the  act  of  18o2,  provides  that  stock- 
holders "  shall  be  severally  and  indi- 
vidually liable  to  the  creditors  of  the 
company  iu  which  they  are  stockhold- 
ers to  an  amount  equal  to  the  amount 
of  stock  held  by  them  respectively, 
for  all  contracts  made  by  such  com- 
pany until  the  whole  amount  of  capi- 
tal stoclc  fixed  and  limited  by  such 
company  shall  have  been  paid  in,  one- 
half  thereof  in  one  year,  and  the  other 
half  iu  two  years,  from  and  after  tlie 
incorporation  of  said  company,  or  such 
corporation  shall  be  dissolved." 

On  a  bill  filed  by  creditors,  to  make 
certain  stockholders  liable  under  this 
provision,  the  latter  attempted  to  set 
off  the  amount  of  certain  loans  made 
by  them  to  the  company.  But  the 
supreme  court  of  Maryland  held  ;  1. 
That  thouj^h  the  doctrine  of  recoup- 
ment might  arise,  it  did  not  follow 
that  the  stockholders  were  absolved 
from  liability  to  the  creditors  of  the 
company  ;  2.  That  the  statute  did  not 
refer  to  them  in  their  corporate  capac- 
ity, but  as  individual  stockholders ; 
and  it  declared  their  liability  without 
reference  to  the  amount  they  might 
have  paid  for  tlie  stock  ;  3.  That  the 
stockholders  were  not  liable  for  debts 
contracted  by  the  company  subsequent 
to  the  parting  with  tlieir  stock  ;  4. 
That  each  might  insist  upon  contribu- 
tion from  the  others,  of  their  propor- 
tion of  the  complainant's  claims. 
Matthews  v.  Albert,  21  Md.  527. 

Massachusetts.  Liability  several  and 
not  joint.  Pratt  v.  Bacon,  10  Pick. 
127.  Law  should  be  construed  strictly. 
Gray  v.  Cotfin,  9  Cush.  192.  See,  also, 
Holyoke  Bank  v.  Burnhara,  11  id. 
183;  Handrahan  v.  Cheshire,  etc.,  4 
Allen,  396  ;  Mason  v.  Same,  id.  398  ; 
Hutchins  v.  NoW  England,  etc.,  Co.,  id. 
580.  Under  the  statutes  of  1851, chap. 
133,  see  Bonk  v.  Clark,  6  id.  361 ;  Tyr- 
rell V.  Washburn,  id  466.  Under  act 
1862,  chap.  218,  g  3,  see  Peele  v. 
Phillips,  8  id.  86 

JVe?o  York.  Slee  v.  Bloom,  19  Johns. 
456;  Briggs  v.  Penniman,  8  Cow.  387; 


Aliens  v,  Sewall,  2  Wend.  327.  Stock- 
holder liable  though  he  has  paid  no 
part  of  his  subscription.  Spear  v. 
Crawford,  14  id.  20  ;  Moss  v.  Oakley, 
2  Hill,  265. 

Debts  barred  by  the  statute  of 
limitations  cannot  be  enforced.  Van 
Hook  V.  Whitlock,  3  Paige,  409;  Same 
V.  Same,  7  id.  373;  Corning  v.  Mc- 
CuUough,  1  N.  Y.  47;  Bogardus  v. 
Rosendale  Manuf.  Co.,  7  id.  147;  Moss 
V  Averell,  10  id.  449  ;  Burr  v.  Wilcox, 
23  id.  551  ;  Bailey  v.  Hollister,  26  id. 
112.  The  liability  of  a  trustee  under 
the  act  of  1848  is  confined  to  debts 
contracted  while  he  was  trusiee. 
Shaler,  etc.,  Co.   v.  Bliss,  27  id.  297. 

Stockholder  liable  while  he  appears 
upon  the  books  as  such,  though  he  has 
transferred  his  stock.  Worrall  v.  Jud- 
son,  5  Barb.  210.  See,  also,  Hoagland 
V.  Bell,  36  id.  5  7;  Williamson  v.Wad.=- 
worth,  49  id.  294;  Ogden  v.  Rollo,  13 
Abb.  Pr.  300;  Wait  v.  Ferguson,  14 
id.  379  ;  Maher  v.  Carman,  38  N.  Y. 
24;  Witherhead  v.  Allen,  28  Barb. 
661  ;  Perkins  v.  Church,  31  id.  84. 

The  plaintiflF  must  show  that  the 
defendant  was  a  stockholder  at  the 
time  the  debt  was  contracted.  Young 
V.  N.  Y.,  etc.,  Steamship  Co.,  15  Abb. 
Pr  69. 

North  Carolina.  Under  the  provis- 
ions of  an  act  of  incorporation,  provid- 
ing "that  the  private  property  of  the 
individual  stockholders  shall  be  liable 
for  the  debts  of  contracts  and  liabili- 
ties of  the  corporation,"  it  was  held 
that  the  responsibility  of  the  indi- 
vidual stockholders  was  secondary, 
and  that  when  the  corporation  became 
extinct  the  liability  of  the  stockhold- 
ers became  extinct  also.  Malloy  v. 
Mallett,  6  Jones'  Eq.  345. 

Ohio.  Kearney  v.  Buttles,  1  Ohio  St. 
362  ;  Medill  v.  Collier,  16  id.  599. 

Pennsytvnnia.  Carr  v.  Le  Fevre,  27 
Penn.  St.  413.  A  decision  in  relation 
to  liabilities  of  stockholders,  under  the 
act  of  1853.  See,  also,  Patterson  v. 
Wyomissing,  etc.,  Co.,  40  id.  117.  See, 
also,  Wilson  v.  Pittsburgh,  etc.,  Co., 
43  id.  424 ;  Mansfield,  etc.,  v.  Will- 
cox,  52  id.  377. 

South  Carolina.  Where   the   charter 


Members  —  Stockholders  and  Stock.  115 

constitution  of  a  state,  not  only  the  organic  hnt  the  supreme  law 
of  its  being.  By  these  constating  instruments,  the  amount  of 
the  capital  stock  is  fixed,  as  well  as  the  times  and  conditions  for 
the  payment  for  subscriptions  for  the  stock,  the  proportion  of  in- 
debtedness to  the  capital  stock,  and,  if  organized  under  general 
statutory  provisions,  the  preliminary  steps  necessary  to  incorpo- 
rate the  association.  Provision  is  also  usually  made  b}'  the  articles 
of  association  or  by-laws,  for  a  division  of  the  capital  stock  into 
equal  shares,  for  the  issuing  of  proper  certificates  therefor  to  pur- 
chasers or  subscribers,  who  thereby  become  members  of  the  cor- 
poration,' and  for  a  record  of  such  sales,  and  of  all  transfers  of 
the  certificates  on  proper  books  of  the  company. 

Controversies  frequently  arise  between  subscribers  and  the  com- 
pany as  to  the  liability  as  well  as  the  rights  of  the  former  on  their 
subscriptions.  The  subscribers  for  stock  are  bound  to  take  notice 
of  the  requirements  of  the  charter,  articles  and  by-laws  of  the 
company,  and  of  the  obligations  thereby  imposed  upon  them. 
These  usually  control  the  contract  and  explain  the  obligation. 
The  subscription  becomes  a  contract  between  the  subscriber  and 
the  corporation  to  pay  the  sum  stipulated,  in  such  manner  and  on 
such  conditions  as  may  be  provided  in  the  express  contract,  inter- 
preted by  the  constating  insti'uments,  to  which  he  subscribes,  or  in 
the  absence  of  this,  at  such  times  and  on  such  conditions  as  may 
be  provided  by  the  articles  or  by-laws.^ 

provided   that   notliing   therein     con-  Cotton  Man.  Co.,   10  Rich.  95.     See, 

tained   should   exempt  the   members  also,  Haslett  v.  Wotherspoon,  1  Strobh. 

"  from  all  liabilities  pertaining  to  gene-  Eq.  209  ;  Farrow  v.  Bivings,   13  Kich. 

ral    partners,"    it   was    held    that    the  Eq.  25. 

members   were  liable  to  creditors  of         Tennessee.      Ohio   Life  Ins.  and  T. 

the  company  as  partners,   and  might  Co.   v.  Merchants' Ins.   and    T.  Co.,  11 

be  sued  as  such   under  the  corporate  Humph.  1. 
name.     Planters'  Bank  v.  Bivingsville 

'The  subscriber  to  capital  stock  of  11  Johns.  100;  Goshen  Turnpike  Co. 
an  incorporated  company  becomes  a  v.  Hurtin,  9  id.  218;  Hibernia  Turn- 
member  of  it,  even  though  he  may  pike  Co.  v.  Henderson,  8  S.  &  R.  219; 
subsequently  fail  to  meet  calls  on  his  Trumbull  v.  Mutual  Fire  Ins.  Co.,  17 
subscription.  SchaefiTer  v.  Missouri  Ohio,  407:  Gayle  v.  Cahawba,  etc., 
Ins.  Co.,  46  Mo.  248.  But  this  will  de-  Ry.  Co.,  8  Ala.  586;  Stokes  v.  Leb- 
pend  upon  the  terms  of  the  statute  un-  anon  Turnpike  Co.,  6  Humph.  241; 
der  which  the  company  is  formed.  Hartford,  etc.,  R.  Co.  v.  Kennedy,  12 
Under  the  Massachusetts  statute  the  Conn.  499  ;  Essex  Bridge  v.  Tuttle,  2 
subscribers  can  hardly  be  said  to  be  Vt.  393;  Union  Lock,  etc.,  v,  Towne, 
members  of  the  company,  unless  they  1  N.  H.  44  ;  Wadsw.  on  Joint-Stock 
finally  elect  to  take  and  pay  for  the  Comp.  317;  Hall  v.  U.  S.  Ins.  Co.,  5 
shares  subscribed  for.  Gill.  484. 

*  Highland  Turnpike  Co.  v.  McKean, 


116  Private  Corporations. 

Sec.  67.  Conditions  provided  by  the  constating  instruments. —  Wliei'O 
tlie  charter  of  a  railroad  com})any  provided  that  no  subscri[)tioii 
should  be  received  and  allowed  without  the  payment  of  five  dollars 
on  each  of  the  shares  at  the  time  of  the  subscription,  it  was  held 
that  a  subscription  without  such  payment  did  not  invest  the  sab- 
scriber  with  any  of  the  privileges  of  a  corporator,  nor  render  him 
liable  either  as  a  subscriber,  stockholder  or  otherwise.^  And  where, 
by  the  incorporating  act,  the  shares  of  stock  were  fixed  at  twenty- 
five  dollars,  and  it  required  the  payment  of  ten  dollars  on  each 
share  subscribed  at  the  time  of  subscribing,  it  was  held  in  New 
York  that  the  subscription  and  payment  were  both  essential  to  con- 
stitute membership,  and  to  consummate  the  contract.  The  court, 
in  an  early  New  York  case,^  in  which,  the  question  was  deter- 
mined, say:  "Suppose  the  speculation  liad  been  an  advantageous 
one,  and  before  the  first  call  of  the  president  and  directors,  the 
stock  had  risen  considerably  in  value',  could  not  the  directors, 
with  propriety,  have  refused  to  consider  Mr.  Jenkins  (the  defend- 
ant) as  a  stockholder,  on  account  of  his  not  having  made  the  pay- 
ment required  by  the  act  on  his  subscribing  ?   I  think  they  could. 

'  Wood  V.  Coosa,  etc.,  R.  Co.,  32  Ga.  scription,  if  tlie   statute  is   complied 

273.     See,  also.   Highland  '  T.  Co.  v.  with  before  suit  brought.     If  both  the 

McKeau,  11  Johns.  98.  subscription  and  the  actual  cash  pay- 

'■*  1  Cai.  (N.  Y.)  381.  The  rule  adopted  ment  of  ten  per  cent  have  been  made, 
in  this  case  was  followed  in  Highland  the  contract  is  binding,  although  the 
Turnpike  Co.  v.  McKean,  llJohns.  acts  are  not  simultaneous.  Ogdens- 
98;  Charlotte,  etc.,  R.  R.  Co.  v.  Blake-  burgh,  etc.,  R.  R.  Co.  v.  Wolley,  34 
ley,  3  Strobh.  245,  and  Hibernia  Turn-  How.  Pr.  54.  See,  also,  Napier  v. 
pike  Co.  V.  Henderson,  8  S.  &  R.  219.  Poe,  12  Ga.  170.  A  subsequent  pay- 
But,  unless  the  charter  or  the  law  ment  will  operate  as  a  waiver  of  the 
under  which  the  corporation  is  formed  condition,  and  the  party  making  it  will 
makes  such  payment  a  condition  pre-  be  treated  as  recognizing  his  original 
cedent,  it  is  not  believed  that  the  sub-  liability.  Beach  v.  Smith,  28  Barb, 
scriber  can  set  up  his  failure  to  pay  as  254  ;  Hall  v.  Selma,  etc.,  R.  R.  Co.,  6 
a  defense  to  an  action  against  him  Ala.  741  ;  Black  River,  etc.,  R.  R.  Co. 
therefor  upon  his  subscription.  The  v.  Clarke,  25  N.  Y.  208  ;  Haywood,  etc., 
only  effe4*t  of  such  a  failure  ordinarily  Plank  road  Co.  v.  Bryan,  6  Jones'  L. 
would  be,  to  enable  the  company  to  82.  And  where  an  article  in  the  by- 
decline  to  recognize  the  subscription,  laws  of  a  corporation  provided  that 
unless  such  payment  is  made  as  re-  "  ten  per  cent  shall  be  payable  upon 
quired.  Vicksburgh,  etc.,  R.  R.  Co.  subscription,  or  the  subscription  shall 
V.  McKean,  12  La.  Ann.  638;  Wight  be  void,"  it  was  held  that  a  subscrip- 
v.  Shelby  R.  R.  Co.,  16  B.  Monr.  4.  tion  made  without  paying  any  thing 
And  in  New  York,  under  the  general  was  not  void,  but  voidable  only  at  the 
railroad  law  of  1850,  prescribing  that  election  of  the  company.  Piscataqua 
no  subscription  to  the  stock  shall  be  Ferry  Co.  v.  Jones,  89  N.  H.  491.  See, 
taken  without  a  payment  of  ten  per  also,  holding  a  similar  doctrine,  Smith 
cent  on  the  amount  in  money, it  is  not  v.  Plankroad  Co.,  30  Ala.  650  ;  McRea 
necessary  that  the  payment  should  be  v.  Russell,  10  Ired.  224.  . 
made  at  the  same  time  with  the  sub- 


Members  —  Stockholders  and  Stock.  117 

No  possible  benefit  then  arising  from  the  future  emohiments  of 
the  company  transactions  can  be  considered  as  a  consideration 
for  the  promise ;  and  if  it  could,  none  such  is  stated  on  the  rec- 
ord." ^  But  tliere  seems  to  be  no  question  but  tliat  the  right 
of  membership,  of  itself,  affords  a  sufficient  consideration  for  a 
subscription  to  the  stock  of  a  corporation,^  and  an  agreement  to 
take  a  certain  number  of  shares  of  stoc}?:  subscribed  for  previously 
to  the  formation  or  incorporation  of  the  company  is  at  least  suffi- 
cient to  support  an  implied  promise  to  pay  all  calls  upon  the 
same  after  the  corporation  is  formed/  Of  course  a  subscription/ 
to  stock  before  the  corporation  is  formed  is  a  mere  proposition 
or  agreement  to  take  the  number  of  shares  named  in  the  subscrip- 
tion when  the  corporation  is  legally  formed,  and  is  revocable  at 
any  time  hefore  the  latter  event  occurs,  but  not  afterward,*  and, 
after  the  corporation  is  legally  formed,  a  subscriber  is  liable  upon 
hjs  subscription,  although  he  has  not  complied  in  all  respects  with 
its  conditions.  Thus,  where  a  note  was  given  in  lieu  of  the 
amount  required  by  the  incorporating  act  to  be  paid  at  the  time 
of  a  subscription,  it  was  held  that  the  note  was  given  upon  suffi- 
cient consideration  and  was  valid  in  the  hands  of  the  corporation, 
though  executed  before  the  completion  of  the  organization.^  And 
it  has  been  held  by  the  supreme  court  in  Kentucky  that  the  fail- 
ure of  a  subscriber  for  railway  stock,  to  pay  the  amount  required 
by  the  charter  to  be  paid  at  the  time  of  the  subscription,  does  not 
exonerate  him  from  his  liability  for  his  subscription,  as  it  would 
be  his  duty  to  pay  it,  and  he  should  not  be  permitted  to  take  ad- 

'  See,  also,  same  doctrine  in  Hibernia  ^  Eastern  Plaukroad  Co.  v.  Vaughn, 
Turnp..Co.  v.  Henderson,  8  S.  &  R.  14  N.  Y.  546;  Rensselaer,  etc.,  Plank- 
219.  But,  in  a  dissenting  opinion  in  road  Co.  v.  Barton,  16  id.  457;  Penob- 
tliis  case,  Duncan,  J.,  said  :  "If  this  scot  R.  R.  Co.  v.  Dummer,  40  Me.  172; 
defendant  had  obtained  a  receipt  from  Gleaves  v.  Brick  Church  Turnpike 
the  commissioners  and  had  given  his  Co.,  1  Sneed,  491  ;  Johnston  v.  Ewing 
note  to  the  company  for  the  money  to  Female  University,  35  111.  518  ;  John- 
be  paid  in  advance,  it  could  be  recov-  son  v.  Wabash,  etc.,  R.  R.  Co.,  16 
ered.     Has  he  not  done  this?     For  the  Ind.  889. 

subscription    includes   this,  and   is  a  ■•  Poughkeepsie,  etc.,  Plankroad  Co. 

note  for  five  dollars  payable  on  de-  v.    Griffin,    24   N.    Y.    150;    Burt    v. 

mand  ;  and  the  company  could  have  Farrar,  24  Barb.  518. 

recovered    though  no    note  had  been  ^Vermont  Central  Ry.  Co.  v.  Clayes, 

given."  21  Vt.  80.     See,  also.  People's  Ferry 

«  Lake  Ontario  R.  R.  Co.  v.  Mason,  Co.   v.   Balch,  8  Gray,  314  ;  Troy   R. 

16N.Y.  451  ;  Buffalo  &  N.  Y.  R.  R.  Co.  v.  Newton,  id.  596.     But  see,  also, 

Co.  v.  Dudley,  14  id.   336  ;  Selma  &  Lexington    R.    Co.    v.    Chandler,    13 

Tenn.  R  R.  Co.  v.  Tipton,  5  Ala.  787.  Mete.  311. 


1 


118  PiiivATE  Corporations. 

vantage  of  his  own  wrong.'  So,  in  Louisiana,  a  stock  subscriber, 
who  had  not  paid  tlie  five  per  centum  on  the  amount  of  his  stock 
at  the  time  of  subscribing,  as  required  by  the  charter  of  the  com- 
pany, it  was  held,  could  not  avail  himself  of  such  a  defense,  for  it 
was  his  duty  to  make  the  payment,  and  that  to  sustain  such  a 
defense  would  be  to  permit  him  to  avail  himself  of  an  advantage 
from  his  own  wrong.'' 

Sec.  G8.  Special  liabilities  created  by  charter. —  The  liabilities  of 
the  subscribers  may  depend  upon  other  conditions  imposed  by 
the  charter  or  act  of  incorporation.  Thus,  when  by  the  act  under 
which  the  corporation  was  created,  it  was  provided  that  the  cap- 
ital stock  should  be  divided  into  five  thousand  shares,  of  not  ex- 
ceeding $100  each,  and  that  after  one  thousand  sliares  should  be 
subscribed  for,  a  meeting  of  the  subscribers  might  be  called  for 
the  purpose  of  organizing  the  corporation,  and  providing  for  the 
management  of  its  affairs ;  it  was  held,  by  the  supreme  court  of 
Massachusetts,  that  no  call  for  the  payments  of  subscription  could 
lawfully  be  made  for  the  general  objects  of  the  corporation  until 
the  five  thousand  shares  had  been  subscribed  for,  although  a  call 
might  be  made  before  that  time  to  defray  the  expenses  incurred 
in  effecting  the  incorporation.^ 

Sec.  69.      Conditions  must  be  complied  with It    may  be   stated  as 

the  general,  if  not  the  universal  rule  in  this  country,  that  where 

J  Wight   V.  Shelby   Ry.  Co.,  16  B.  ^  gaiem  Mill-dam  Corp.  v.  Ropes,  6 

Mour.  4.     See,  also,  under  provisions  Pick.  23. 

of  the  Ohio  statute,  Cliamberlain  v.  But  if,  by  the  charter,  a  bank  is  re- 
Painesville,  etc.,  R.  Co.,  15  Ohio  St.  stricted  from  operation  until  a  certain 
225  ;  Ashtabula,  etc.,  R.  Co.  v.  Smitli,  amount  of  stock  is  subscribed,  a  sub- 
id.  328.  sequent  purchaser  of  tlie  stock  could 

-  Vicksburgh  R.  Co.  v.  McKean,  12  not  be  prejudiced  by  the  fact  that  a 

La.  Ann.  638.  certain  amount  of  the  stock  was  fraud- 

And  where  in  lieu  of  a  cash  pay-  ulent  and  fictitious,  and  secured  by 
raent,  required  by  the  charter  on  the  collusion  between  the  original  sub- 
first  installment,  the  subscriber  gave  scribers  and  the  commissioner,  for  the 
his  promissory  note,  this  was  held  a  purpose  of  evading  the  limitations  of 
sufficient  compliance.  McRae  v.  Rus-  the  law,  provided  the  purchase  was 
sell,  12  Ired.  224;  Selma  &  Tenn.  R.  botia  fide,  and  without  notice  of  the 
Co.  v.  Tipton,  5  Ala.  787;  Tracy  v.  fraud.  Minor  v.  Mechanics'  Bank,  1 
Yates,  18  Barb.  152;  Greenville  &  Col.  Pet.  46;  Walker  v.  Devereaux,  4 
R.  Co.  v.  Woodsides,  5  Rich.  145 ;  Paige,  229 ;  Johnston  v.  South  West 
Mitchell  V.  Rome  R.  Co.,  17  Ga.  574.  R.  Bank^.  3  Strobh.  Eq.  263  ;  Ang.  & 
See,  also,  Everhart  v.  West  Chester  Am.  on  Corp.,  i^  146. 
Phil.  R.  Co.,  28  Penn.  St.  339. 


1 


Membeks  —  Stockholdeks  and  Stock.  119 

the  constating  instruments  fix  the  number  of  shares  or  the  amount 
of  the  capital  stock  to  be  subscribed,  or  the  sum  which  must  be 
paid  tliereon,  before  the  corporation  can  enter  upon  the  business 
for  which  it  was  organized,  these  conditions  must  be,  in  good 
faith,  complied  with."  Thus,  in  a  California  case,^  an  agreement 
to  take  sliares,  etc.,  and  that  "  as  soon  as  $150,000  of  the  capital 
stock  of  the  company  has  been  secured  "  *  *  *  'f  the  company 
will  be  organized,"  was  held  not  to  be  binding  where  the  company 
was  organized  on  a  subscription  of  only  $130,000.  In  an  Oregon 
case,^  articles  were  filed  under  the  general  incorporation  law,  to  in- 
corporate the  OregonCentral  Railroad  Company  with  a  capital  stock 
of  $7,250,000,  divided  into  seventy-two  thousand  five  hundred 
shares  of  $100  each.  Six  persons  subscribed  for  one  share  each, 
and  the  seventh  subscription  w^as  as  follows :  "  Oregon  Central  Ilail- 
road  Company,  by  G.  L.Wood,  chairman,  seventy  thousand  shares, 
$7,000,000,"  and  it  was  held  that  an  organization  effected  under 
these  subscriptions  was  a  nullity.  So,  under  an  English  act  of 
incorporation  which  provided  that  the  sum  of  £100,000  should 
be  subscribed  before  any  of  the  powers  and  provisions  of  the  act 
should  be  considered  in  force,  it  was  held  that  the  full  sum  re- 
quired should  be  subscribed  before  any  call  could  be  made  on  the 
subscri23tion.^ 

This  doctrine  has  been  frequently  recognized  in  this  country.* 
The  condition  imposed  in  such  cases  is  a  condition  precedent ; 
and  no  authority  to  act  is  conferred,  until  it  isfully  complied  with. 

*  As  bearing  on  these  propositions,  115;  Shurtz  v.  Schoolcraft, etc. ,  R.  Co., 

consult    opinion   of   Parker,    J.,    in  9  Mich.  269;  Oldtown,  etc.,  R.   Co.   v. 

Schenectady,  etc.,  R.  Co.  v.  Thatcher,  Veazie,  39  Me.  571  ;  Penobscot  R.  Co. 

11  N.  Y.  102.     See,  also,   Salem  Mill-  v.  Dummer,  40  id.  173;  Penobscot  R. 

dam  Co.  V.    Ropes,   6  Pick.  23;  9  id.  Co.   v.   White,  41  id.   513;  Littleton 

187;  Central  T.  Co.   v.    Valentine,  10  Maniif.  Co.    v.    Parker,  14  N.  H.  543 ; 

id.  143;  Stoneham  Branch  R.  Co.  v.  Con toconk  Valley  R.    Co.    v.    Barker, 

Gould,  9  Gray,  277  ;  Troy,  etc.,  R.  Co.  33  id.  363  :  New  Hampshire,  etc.,  R. 

V.   Newton,   8   id.    596;    Cabot,   etc.,  Co.  v.  Johnson,  30  id.  390. 

Bridnje    Co.    v.   Chapin,  6    Cusli.  50  ;  '■^  Santa  Cruz  R.  R.  Co.  v.  Schwartz, 

Worcester,  etc.,  R.  Co.  v.  Hinds,  8  id.  53  Cal.  106. 

110  ;  Atlantic  Cotton  Mills  v.  Abbott,  =*  jjoHaday  v.  Elliott,  8  Oregon,  84. 

9  Cusli.  423;  Lexington,  etc.,  R.  Co.  *  Norwich,   etc.,  Co.   v.  Theobald,  1 

V.   Chandler,    13  Mete.  311;    Harlem  Moo.  &  Mai.  151. 

Canal  Co.  v.  Seisas,  3  Hall,  504  ;  Rens-  *  Salem  Mill-dam  Corp.  v.  Ropes,  9 

selaer,  etc.,  R.  Co.  v.  Wetsel,  21  Barb.  Pick.  187  ;    Central   Turnpike  Co.   v.  " 

56  ;  Haun  v.  Mulburv,  etc.,  R.  Co.,  33  Valentine,  10  id.  142  ;  Worcester,  etc., 

Ind.  103  ;  Haiu  v.  N."W.  G.  Co.,  41  id.  R.  Co.  v.  Hinds,  8Cush.  110  ;  Littleton 

196  ;  Fox  V.  Allensville  Co.,  46  id.  31;  Manuf.  Co.  v.  Parker,  14  N.  H.  543. 
Peoria,  etc.,  R.  Co.  v.  Preston,  35  Iowa, 


120  Private  Coeporations. 

But  where  the  charter  of  a  railroad  company  provided  for  certain 
commissioners  to  receive  subscriptions,  and  that  they  should  "re- 
ceive no  subscriptions  to  said  stock  unless  five  per  centum  thereof 
in  cash  should  be  paid  to  them  at  the  time  of  subscribing,  and 
should  they  receive  subscriptions  to  said  stock  without  payment, 
they  shall  be  personally  liable  to  pay  the  same  to  said  corporation 
when  organized,"  it  was  held  that  this  clause  was  not  a  condition 
precedent  to  the  organization  of  the  company,  but  a  mere  per- 
sonal liability  imposed  on  the  commissioners/  Kot  only  is  it 
necessary  that  the  requisite  amount  of  stock  should  be  subscribed, 
but,  also,  where  more  than  the  amount  required  is  subscribed  for, 
and  an  allotment  is  made  which  excludes  certain  subscribers,  the 
company  cannot,  by  increasing  the  amount  of  the  capital  stock, 
bind  the  subscribers  so  excluded  to  take  the  stock  subscribed  for 
by  them.  Thus,  in  a  recent  Massachusetts  case,'^  A.,  with  others, 
signed  a  paper  which  recited  that  a  certain  corporation  had  been 
incorporated,  the  capital  stock  of  which  was  fixed  at  $50,000,  and 
by  the  terms  of  which  the  subscribers  agreed  with  each  other  and 
with  the  corporation  to  take  the  number  of  shares  affixed  to  their 
respective  names,  and  to  pay  therefor  $100  a  share.  Opposite 
A.'s  name  was  a  certain  number  of  shares.  The  whole  number 
of  shares  subscribed  for  exceeded  $50,000.  At  a  meeting  called 
for  the  purpose  of  organization,  a  committee  was  appointed  to  re- 
port the  names  of  the  subscribers  to  the  original  capital  stock  of 
$50,000.  The  committee  reported  a  list  of  names  not  including 
A.'s.  The  meeting  then  voted  to  increase  the  stock  to  $100,000, 
and  that  all  the  subscribers  be  admitted  to  the  company  with  the 
rights  and  privileges  of  stockholders  under  the  agreement.  A. 
subsequently  paid  three  assessments  on  his  stock.  It  was  held 
that  an  action  against  him  on  the  original  paper,  for  a  subsequent 
assessment,  could  not  be  maintained,  even  if  he  knew  of  these 
votes  before  paying  his  assessments. 

Sec.    to.     Conditional  subscriptions.— Conditions    also,   affecting 
the  liability  of  subscribers,  may,  of  course,  be  expressly  provided 

1  Blair  v.  Rutherford,   31   Tex.  465        ^  Katama  Land  Co.  f.  Jernegan,  126 
(1868) ;  Coram,  v.  West  Chester  R.  Co .     Mass.  155. 
3  Grant's  Cas.  200  ;  Mitchell  v.  Rome 
R.  Co.,  17  Ga.  574. 


Members — Stockholdees  and  Stock.  121 

for  in  the  contract ;  and  unless  tliej  violate  the  fundamental  law 
of  the  corporation,  or  are  manifestly  fraudulent,  or  must  result  in 
the  prejudice  of  innocent  parties,  they  will  be  upheld.  Thus, 
where  a  subscription  was  made  to  the  capital  stock  of  a  corpora- 
tion upon  the  express  condition  that  the  company  should  not  be 
organized,  or  should  not  enter  upon  the  object  of  its  organization, 
until  a  certain  amount  of  its  capital  stock  should  be  subscribed  for, 
the  supreme  court  of  Maine  held  that  such  a  condition  was  a  con- 
dition precedent,  and  that  the  company  was  not  authorized  to  en- 
force the  collection  of  such  a  subscription  until  the  conditions 
were  complied  with  by  the  company.'  And  where,  on  the  organi- 
zation of  a  corporation,  the  number  of  shares  of  the  capital  stock 
and  the  sum  to  be  j)aid  on  each  are  fixed  by  vote,  and  inserted  in 
the  agreement  of  subscription,  the  organization  is  not  bound  to 
proceed,  and  the  subscribers  may  refuse  to  pay  any  part  of  their 
subscriptions  until  the  requisite  number  of  shares  are  subscribed 
for,  as  fixed  by  vote." 

And  where  stock  was  subscribed  for  on  condition  that  the  citi- 
zens of  a  certain  town  should  take  a  certain  amount  of  stock,  it 
was  held  that  no  assessment  could  be  properly  made  on  the  sub- 
scriber until  the  condition  was  complied  with.'  When  the  con- 
dition imposed  is,  that  a  certain  number  of  shares  shall  be  sub- 
scribed for,  it  is  not  competent  for  the  subscriber  to  show  that  the 
number  has  not  been  subscribed  for  by  persons  pecuniarily  re- 
sponsible, or  that  the  subscribers  are  insolvent,  unless  it  appears 
that  the  corporation  has  acted  in  bad  faith.* 

'  Penobscot,  etc. ,    R.    Co.    v.  Dunn,  private  arrangements  with  subscribers 

39    Me.    589;     Chamberlain  v.  Ashta-  giving  tliem  peculiar  advantages  over 

bula,  etc.,  E.   R.  Co.,  15  Ohio  St.  225  ;  others,  would  be  null  and  void.    Rob- 

Ashtabula,  etc.,  R.  R.  Co.  v.  Smith,  inson  v.  P.  &  C.  R.  Co.,  33  Penn.  St. 

id.  328.  334  ;  Bavington  v.  P.  &  S.  R.  Co.,  34 

^  Cabot,  etc,  Bridge  Co.  v.  Chapin,  id.  3^8;  New  Albany,  etc.,  R.  Co.   v. 

6  Cash.  50.  Fields,  10  Ind.  187  ;  Downie  v.  White, 

^Ticonic  Water  Power  Co.  v.  Lang,  12  Wis.  170  ;  White  Mountains  R.  Co. 

68  Me.  480.  v.  Eastman,  34  N.  H.  124;  Mann  v. 

*  Penobscot  R.  Co.  v.  White,  41  Me.  Cooke,  20  Conn.  178  ;  Mann  v.  Currie, 

512  ;   Salem  Mill-dam  Co.  v.  Ropes,  9  2  Barb.  294. 
Pick.  187.  But  Mr.  Redfield  observes  :"  Where 

If    the    corporation    acts    in    good  subscriptions  are  made  under  an  agree- 

faith  and  parties  are  apparently  able  meut  tbat  they  are  not  to  be  binding 

to  pay,  and  they  finally  fail  and  are  unless  a  specified  sum  is  subscribed,  it 

unable  to  pay,  this  will  not  render  the  is  essential  that  there   should  be  no 

organization    illegal.     Id.;     Penobscot  conditions  as  to  the  liability  of  any  of 

R.  Co.  V.  Dummer,  40  Me.  172.     But  the  subscribers  not  applicable  to  all. 

16 


]22  Pkivate  Corporations. 

Sec.  Y1.  Company  may  accept  payment  in  labor,  etc.—  I^J  an  act  01 
the  legislature  of  Pennsylvania,  conmiissioners  were  apppointed 
to  receive  subscriptions  to  stock,  for  the  purpose  of  constructing  a 
railroad  ;  and  it  was  provided,  that  no  subscription  should  be  valid 
unless  $5  should  be  paid  on  each  and  every  share  at  the  time  of 
the  subscription  ;  that  when  a  certain  number  of  shares  should  be 
subscribed  for,  and  the  $.5  paid  on  each,  the  same  should  be  cer- 
tified to  the  governor,  who  should  thereupon  issue  letters  incor- 
porating the  subscribers  andtliose  who  might  thereafter  subscribe. 
The  letters  wore  issued  and  the  company  organized.  It  was  held 
that  a  condition  annexed  to  a  subscription  that  it  should  be  bind- 
ing only  when  a  cei'tain  amount  of  stock  has  been  subscribed  for 
was  valid,  and  that  a  party  subscribing  on  that  condition  could  not 
be  held  liable  until  it  was  shown  that  the  condition  had  been  com- 
plied with,  and  that  the  installments  were,  subsequently,  called  in 
before  suit  brought ;  but  that  the  company  had  a  right  to  accept 
payment  for  stock  in  labor  or  materials  or  damages,  or  any  other 
liability  of  the  company,  provided  the  transaction  was  bona  fide} 
But  it  has  been  held  in  North  Carolina  that  a  corporation  can  take 
nothing  but  money  in  payment  for  stock  subscribed  tor,  unless 
the  charter  so  provides,'*  and,  in  any  event,  it  would  seem  that 
the  right  to  accept  any  thing  but  money  must  legally  depend 
upon  the  object  and  purposes  for  which  the  corporation  is  foi-med, 
and  upon  the  circumstance  whether  it  can  be  hona  fide  regarded 
as  an  equivalent  for  money. 

Confidential   subpcriptions,  made    for  New  York  Exch.  Co.  v.  De  Wolf,  31 

the  purpose  of  making  up  tlie  required  N.  Y.  273. 

sum,  are  a  fraud  upon  the  other  sub-  Wliere  there  is  a  subscription,  upon 
scribers,  and  should  not  be  treated  as  the  condition  that  no  calls  shall  be 
valid  subscriptions.  Where,  by  de-  made,  until  work  should  be  com- 
ducting  such  confidential  subscrip-  menced  upon  a  particular  section  of 
tions,  the  required  sum  is  not  sub-  the  line,  and  the  subscriber  gave  his 
scribed,  the  contract  of  subscription  note  for  the  amount  on  the  false  rep- 
does  not  become  operative  so  as  to  bind  resentatiou  of  the  agents  of  the  com- 
the  subscribers.  Parol  evidence  is  pauy  that  the  work  had  been  com- 
admissible  to  show  that  certain  of  the  menced,  it  was  held  that  the  company 
subscriptions  were  confidential  in  could  not  recover  upon  the  note.  Tay- 
character,  and,  therefore,  fraudulent."  lor  v.  Fletcher,  15  lud.  80. 

'  Philadelphia,  etc.,  R.  Co.  v.  Hick-  in    materials,   it  becomes    payable    in 

man,  28  Penn.  St.  318.   See,  also,  Vaw-  money,  unless  the  materials  are  fur- 

ter  V.  Ohio,  etc,  R.  Co.,  14  Ind.  174.  nished   on  reasonable  demand.      Hay- 

'^  Neuse  River  Nav.  Co.  v.  Cominis-  wood,  etc.,  Plankroad  Co.  v.  Bryan,  6 

sioners  of  Newbern,  7  Jones'  L.  275,  id.  83. 
But  where  a  subscription  is  payable 


Members  —  Stockholders  and  Stock.  123 

Sec.  Y2.  The  conditions  may  be  waived.—  Where,  liowever,  there 
is  a  conditional  subscription  wliich  is  vaHd,  subscribers  may,  by 
their  acts,  waive  tlie  same,  and  tliereby  become  liable  as  though 
no  condition  had  been  imposed  upon  the  company.  Thus,  where 
there  was  a  condition  in  a  subscription  to  the  capital  stock  of  a 
corporation  that  other  stock  to  a  given  amount  should  be  taken,  it 
was  held  that  this  was  waived  by  the  conduct  of  the  party,  in  pay- 
ing the  first  installment  on  the  subscription,  voting  the  whole 
stock  at  an  election  for  officers,  and  acting  as  an  officer  of  the  cor- 
poration.' So,  where  a  person  who  made  a  subscription  of  land 
to  the  stock  of  a  railroad  company,  on  a  condition  precedent,  it 
was  held  that  he  waived  such  condition  by  delivering  an  absolute 
deed  of  the  land  to  the  company,  and  receiving  his  stock.' 

And  where  the  subscribers  to  the  stock  of  a  railroad  gave  their 
notes  for  the  amounts  of  their  suljscriptions,  paj'able  when  the 
road  should  be  completed  ;  but  were  subsequently  induced  to  take 
np  these  conditional  notes  and  give  new  ones,  to  enable  the  com- 
pany to  carry  out  acontractfor  the  completion  of  the  road,  payable 
in  four  years,  within  which  time  it  was  confidently  and  honestly 
stated  and  believed  by  the  officers,  at  the  time,  that  the  road  would 
be  completed,  it  was  held  that  the  subscribers  were  liable  upon 
the  new  notes,  although  the  road  was  abandoned  before  any 
thing  was  done  upon  it,  and  the  road  never  completed.'  So, 
where  a  person  participated  in  the  proceedings  creating  a  corpo- 
ration, and  to  increase  its  stock  and  for  making  calls  on  the  stock 
subscriptions,  both  as  stockholder  and  director;  in  a  suit  against 
him  to  compel  payment  of  his  installment  due  and  payable  under 
such  calls,  it  was  held  that  he  was  estopped  from  denying  the 
validity  of  the  proceedings.^ 

Sec.  73.  When  the  condition  is  void,— Cor]iorations  organized 
under  ^le  act  of  the  leo;islatnre  of  Pennsylvania,  of  February  19, 
1849,  could  receive  no  conditional  subscriptions;  and  a  subscrip- 
tion made  to  the  commissioners  under  the  act,  conditional  on  the 

'  Dayton,  etc.,  Railway  Co.  v.  Hatch,  ^  Poiir  Mile  Vallev  R.  Co.  v.  Bailey, 

IDis.  (0.)84.      See,  also,  Garlin^  V.  18  Ohio  St.  208. 

Baechtel,  41  Md.   305;  Ossipee  Manf.  ''Kansas  City  Hotel   v.    Harris,    51 

Co.  V.  Canney,  54  N.  H.  295.  Mo.  4G4. 

'Parks  V.  Evansville,  etc.,  K.  Co., 
23Iud.  567. 


124:  Pkivate  Corporations. 

location  of  tlio  road  ou  a  special  route,  was  lield  to  be  void  so  far 
as  related  to  the  condition,  and  was  treated  as  an  unqualified  sub- 
scription.' But  where  the  contract  with  the  subscriber  contained 
a  condition  tliat  interest  on  sums  assessed  and  paid  in  by  sub- 
scribers should  be  allowed  him,  from  the  time  of  payment  until 
the  road  should  be  put  in  operation,  it  was  held  that  such  a  con- 
dition did  not  avoid  the  subscription,"  and,  generally,  it  may  be 
said  that,  unless  prohibited  by  the  charter  or  general  law,  a 
subscription  may  be  made  conditional.  Thus,  a  subscription  to 
the  stock  of  a  railroad  company  that  the  subscriber  will  take  a 
certain  number  of  shares  of  the  road,  if  it  is  located  on  a  specified 
line,  is  valid,"  and,  upon  a  substantial  performance  of  the  condi- 
tion, the  subscription  becomes  enforceable.  Thus,  where  a  sub- 
scription was  given  for  a  certain  number  of  shares  in  a  railroad 
company,  provided  the  road  was  located  on  a  given  route,  and  a 
freight-house  and  depot  located  at  a  given  point,  it  was  held  that 
the  subscription  became  enforceable  after  the  road  was  perma- 
nently located  according  to  the  terms  proposed,  and  that  the  pro- 
vision in  relation  to  the  erection  of  the  buildings  was  not  a  con- 
dition precedent  to  the  right  to  collect  the  subscription,  but  a 
mere  stipulation,  the  performance  of  which  was  not  necessary  to 
fix  the  riglit  of  the  company  to  recover  the  subscription.*  The 
fact  that  a  condition  is  annexed  to  the  subscription  will  not  pre- 
vent a  recovery,  unless  it  is  a  condition  precedent.  Thus,  a  per- 
son subscribed  for  shares  in  the  stock  of  a  railroad  company'  on 
the  express  condition  that  the  company  should  locate  and  con- 
struct their  raih-oad  along  a  specified  route,  and,  having  paid  one 
installment  and  part  of  the  second,  delayed  the  payment  of  the 
balance  as  the  calls  were  made,  until  tlie  company,  as  the  road 

'  Pittsburgli,  etc.,  R.  Co.  v.  Biggar,  'Martin   v.  Pensacola,   etc.,    R.  R. 

34  Penn.  St.  455.     See,  also,  Erie,  etc.,  Co.,  8  Fla.  370;  Evansville,   etc.,  R. 

P.  R   Co.  V.  Brown,  25  id.  156;  Phil-  R.  Co.  v.  Sheaver,  10  lud.  244.     And 

adelphia,  etc.,  R.   Co.  v.  Hickman,  28  the  subscription  becomes  payable  only 

id.  318  ;  Bavington  v.  Pittsburgh,  etc.,  upon   a  substantial    compliance  with 

R.  Co.,  34  id.  358;  Bedford  R.  Co.  v.  the     condition.       Chapman     v.     Mad 

Bowser,  48  id.  29.  River,  etc.,  R.  R.  Co.,  6  Ohio  St.   119 ; 

'^Rutlaijd,  etc.,  R.  Co.  v.  Thrall,  35  Jewett  v.  Lawrenceburgh,  etc.,  R.  R. 

Vt.  536.     The  subscription  cannot  be  Co.,  10  Ind.  539. 

rescinded  so  as  to  affect  the  rights  of  ''Chamberlain    v.  Painesville,    etc., 

innocent  and  bona  fide  creditors,  while  R.  R.  ('o.,  15  Ohio  St.  325. 
the  corporation  is  insolvent.     Putnam 
V.  New  Albany,  4  Biss.  365  (1869). 


Members  —  Stockholders  and  Stock.  125 

was  constructed  along  tlie  route  mentioned,  suspended  operations  ; 
after  which  payment  was  refused  on  the  ground  that  though  the 
road  had  been  located  by  the  company,  they  had  not  constructed 
it  according  to  the  condition  in  the  subscription.  In  an  action 
for  the  subscriptions,  it  was  held  that  the  promise  of  subscription 
being  precedent  to  that  of  construction  upon  the  part  of  the  com- 
pany, the  defendant  could  not  insist  upon  performance  by  the 
railroad  company  while  he  refused  performance  on  his  part ;  and 
that  the  road,  having  been  located  as  stipulated,  and  completed  so 
far  as  the  means  of  the  company  would  allow,  it  was  a  compliance 
with  the  condition,  and  that  the  plaintiffs  were  entitled  to  re- 
cover.^ 

Sec.  74.  Conditions  which  will  avoid  the  whole  contract. —  It  is 
evident  that  there  may  be  conditional  subscriptions,  which  could 
not  be  justl}'^  enforced  against  the  subscriber  without  a  compliance 
with  the  precedent  conditions  for  which  he  has  stipulated,  and 
when  the  conditions  could  not  be  enforced  Mnthout  great  injustice 
to  the  company  and  others.  Contracts  of  this  character  would 
be  against  public  policy  and  entirely  void.  Thus,  in  an  action 
by  a  plankroad  company  against  a  subscriber  to  the  stock  of  the 
corporation,  the  facts  were  as  follows:  The  plaintiff  was  duly 
incorporated  under  the  general  laws  of  New  York,  providing  for 
incorporation  of  turnpike  and  plankroad  companies;^  and  its 
articles  of  association  thereunder  were  duly  filed. 

One  ai-ticle  provided  as  follows :  "  For  the  purpose  contem- 
plated by  these  articles,  the  undersigned  have  severally  subscribed 
for  the  number  of  shares  of  the  ca]3ital  stock  of  this  association 
placed  opposite  their  respective  signatures  hereto,  and  they  sever- 
ally agree,  to  and  with  each  other,  to  pay  to  the  said  Fort  Edward 
and  Fort  Miller  Plankroad  Company  their  respective  subscrip- 
tions for  said  capital  stock,  whenever  called  for  by  said  directors 
or  their  successors  in  office." 

The  defendant  did  not  subscribe  the  articles ;  but  subscribed 
an  instrument,  in  writing,  which,  after  reciting  that  at  a  meeting 
of  the  directors  of  the  company,  it  was  resolved  that  the  directors 

1  Miller  v.  P  &  0.  R.  R.  Co. ,  40  Penn.         '^  Act  of  May  7,  1850. 
St.  287. 


126  Private  Corporations. 

adopt  and  establish  a  terminus  of  tlieir  road,  some  convenient 
point  at  or  near  Saratoga  Bridge,  commonly  called  Fort  Miller 
J^ridge,  in  the  town  of  Greenwich,  and  that  the  directors  cause  to 
he  constructed  the  whole  of  their  road,  extending  from  Fort 
Edward  Village  to  said  bridge,  proceeded  as  follows :  "  Now  we, 
the  undersigned,  subscribe  for  the  number  of  shares  to  the  Fort 
Edward  and  Fort  Miller  Plankroad  Company,  set  opposite  our 
respective  names,  upon  condition  that  the  road  is  extended  to 
Fort  Miller  Bridge,  so  as  to  make  that  its  southern  termination." 
This  instrument  was  written  in  a  book  of  the  company,  follow- 
ing the  record  of  its  articles  of  association.  The  company  was 
oi'ganized  to  construct  a  road  from  the  village  of  Fort  Edward  to 
the  village  of  Fort  Miller,  a  distance  of  about  eight  miles,  with 
the  privilege  of  extending  it  to  a  point  near  Saratoga  Bridge, 
about  two  and  one-half  miles  further.  The  suit  was  brought  for 
the  recovery  of  the  defendant's  subscription,  the  directors  having 
made  the  calls  for  the  payment  of  the  w'hole  amount  of  subscrip- 
tions to  stock,  and  given  the  recpiisite  notices  thereof,  pur- 
suant to  the  act.  Judo-ment  was  rendered  against  the  defendant 
for  the  amount  of  the  subscription.  On  ajDpeal,  Bowen,  J., 
said:  "I  think  the  instrument  signed  by  the  defendant  is 
wholly  void  by  reason  of  tlie  condition  therein  contained.  It 
was  intended  as  a  subscription  to  the  capital  stock  of  the  company. 
The  act  under  which  the  plaintiff  was  incorporated  prescribes  the 
manner  of  subscribing  for  the  stock,  and  only  authorizes  absolute 
subscriptions.  This  case  cannot  be  distinguished  in  principle 
from  Butternuts,  etc.,  Turnpike  Co.  v.  North.^  It  w^as  held  in 
that  case  that  to  allow  subscriptions  to  the  stock  of  such  a  corpora- 
tion to  be  received,  conditioned  that  a  particular  location  of  the 
proposed  road  should  be  adopted,  would  be  contrary  to  public 
polic}^  as  by  such  means  improper  influences  might  be  brought  to 
bear  upon  the  question  of  the  location.  The  object  had  in  view 
by  the  legislature,  in  authorizing  the  formation  of  these  corpora- 
tions, was  the  benefit  to  the  public  generally  by  providing  for  the 
construction  of  safe  and  commodious  highways,  so  located  as  to 
be  most  convenient  and  beneficial.  If  the  interest  of  the  stock- 
holders in  such  a  company  is  allowed  to  control  the   question, 

•  1  Hill,  518. 


Members  —  Stockholders  and  Stock.  127 

such  a  location  and  such  a  termination  of  the  proposed  road  will 
almost  invariably  be  adopted  as  will  best  subserve  the  public 
interest,  when,  if  in  order  to  procure  the  requisite  amount  of 
capital,  subscriptions  are  allowed  to  be  taken,  conditioned  that  a 
particular  location  or  terminus  be  adopted,  public  convenience 
will  frequently  be  sacrificed  to  individual  interest.  By  the  articles 
of  association  of  this  compau)^  their  road  was  to  be  constructed 
from  Fort  Edward  to  Fort  Miller,  a  distance  of  eight  miles,  with 
the  privilege  of  extending  it  to  Saratoga  Bridge,  two  and  one-half 
miles  further,  and  a  large  majority  of  the  stockholders  became 
such  by  subscribing  the  articles  which  left  it  optional  with  the 
directors  whether  the  road  should  be  extended.  These  stock- 
holders had  the  right  not  only  to  expect  but  to  require  that  it 
should  not  be  extended,  unless  the  interest  of  the  company  would 
be  thereby  promoted ;  but  by  receiving  these  conditional  sub- 
scriptions the  directors  were  obliged  to  extend  the  road,  although 
every  dollar  expended  for  that  purpose  will  be  a  total  loss  to  the 
corporation,  and  none  be  benefited  thereby  except  those  at  whose 
instance  it  was  done."  ' 

Sec.  75.  Conditional  subscriptions  continued.—  In  other  cases  of  a 
similar  character  the  courts  have  held  conditional  subscriptions, 
where  not  expressly  pi'ohibited  by  law,  in  the  nature  of  a  propo- 
sition to  the  company,  and  not  binding  as  a  contract,  until  ac- 
cepted. Thus,  when  a  subscription  was  made  for  stock  payable 
in  certain  land  at  a  specific  price,  and  conditioned  that  in  case  the 
company  declined  to  take  the  land  at  the  j)rice  named  the  sub- 
scription should  be  void,  it  was  held  that  the  subscription  was  a 
mere  proposition,  and  until  accepted  by  the  company  was  not 
binding  upon  the  subscriber,  and  that  the  acceptance  could  be 
made  by  the  directors  or  other  authorized  agents."  If  subscrip- 
tions to  the  stock  of  a  corporation,  organized  to  construct  a  road 
from  one  place  to  another,  are  made  conditional  upon  the  route 

'  Fort  Edward,  etc.,  Co.  v.  Payne,  15  '^Junction,  etc.,  R.  Co.  v.  Reeve,  15 

N.  Y.  583.     See,  also,  Middlesex  Turn  Ind.  236.     See,  also,  Bedford  R.  Co.  v. 

pike  Corp.    v.    Swau,    10   Mass.    38-4 ;  Bowser,  48  Penn.  St.  29. 

Same  v.  Locke,  8  id.  268  ;  La  Grauije,  When  accepted   under  such  circum- 

etc. ,  Plank    R.  Co.    v.    Mays,   29   Mo.  stances   they    become    absolute.     See 

64;  Troy  &  Boston  R.  Co.   v.   Tibbits,  Chamberlain  v.   Painesville,    etc.,    R. 

18  Barb.  297.  Co.,  15  Ohio  St.  225  ;  Penobscot,  etc., 

R.  Co.  V.  White.  41   Me.  512. 


128  Private  Corporations. 

or  tcninni,  if  any  cliauge  is  made  by  the  act  or  procurement 
of  the  company,  the  subscriptions  are  no  longer  binding,^ 
The  subscriptions,  in  tlie  absence  of  other  provisions  as  to  time 
and  mode  of  payment,  imj^ort  a  promise  to  pay  on  demand, 
or  in  such  manner  as  the  directors  might  indicate,  and  on  giving 
the  notice  required  by  law."  Where  a  person  subscribed  for  stock 
upon  conditions  other  than  those  named  in  the  articles  of  incor- 
poration, and  subsequently  paid  live  per  cent  thereon,  in  an  action 
by  the  company  to  recover  the  balance  of  installments  due  on  the 
subscriptions^  and  the  defense  was  a  want  of  mutuality,  and  that 
the  condition  on  which  the  subscription  was  made  had  not  been 
performed,  it  was  held  that  there  was  such  a  concurrence  in  the 
new  conditions  as  to  bind  the  parties,  and  to  constitute  sufficient 
mutuality,  so  as  to  authorize  a  recovery.^  When  the  charter  of  a 
company  requires  that  certain  things  shall  be  done  within  a 
certain  time  or  the  franchise  shall  be  void,  a  subscription  to  the 
stock  ceases  to  be  enforceable  if  tlie  things  are  not  done  as  re- 
quired. Thus,  where  the  charter  of  a  hotel  required  that  it  should 
be  completed  in  four  years,  otherwise  that  the  franchise  sliould 
be  null  and  void,  it  was  held  that  upon  the  failure  to  complete 
the  hotel  within  the  time  the  subscribers  were  released  from  their 
subscription,^  although  the  legislature  subsequently  extended  the 

'  Plankroad  Co.  v.  Arndt,  31  Penn.  to  increase  the  same  to  $500,000.     The 

St.  317.    See,  also,  McCully  v.  Railroad  business  of  the   company  was  to  be 

Co.,  83  id.  25.  managed  by  thirteen  directors.   Power 

'^Dexter  Plankroad  Co.   v.  Millerd,  also  was  given  to  borrow  such  sums  of 

3  Mich.  91,     See,  also,  Goshen  Turn-  money  as  should  be  necessary  for  the 

pike  Co.  V.  Hurtiu,  9  Johns.  218.     The  purchase  of  lands  and  the  construction 

Duchess  Manuf.  Co.   v.  Davis,  14  id.  of  a  suitable    building.     Section  7  of 

238  ;  Plankroad  Co.  v.  Arndt,  31  Penn.  the  act  provided  that  the  corporation 

St.  317.  shall  commence  the  work  of  construct- 

^  Nichols  v.  Burlington,  etc.,  Plank-  ing  such  hotel  within  two  years  from 

road  Co.,  4  Green  (Iowa),  42.  the  passage  of  the  act,  and  complete 

■*  Union  Hotel  Co.  v.  Hersee,  15  Hun,  the  same  within  four  years  from  the 

373.  time  of  commencing  the  construction 

The  facts  as  well  as  the  rule  of  law  thereof  ;  it  further  provided  in  said 
adopted  in  this  case  are  stated  in  the  section,  "  if  this  section  be  not  corn- 
opinion  of  NoxON,  J.,  as  follows  ;  plied     with,    the     franchise     hereby 

"  The  plaintiff  was  incorporated  un-  granted  shall  become  null  and  void," 
der  an  act  of  the  legislature,  passed        Section  8   provided  the  act  should 

April  12, 1871  (chap.  432),  as  a  body  cor-  take   effect   immediately.      The   said 

porate  under  the  name  of  the  "  Union  section    7    was    amended   by   an    act 

Hotel  Company,"  with  power  to  pur-  passed  March  24, 1873  (chap.  123),  as  fol- 

chase  real  and  personal  property  for  lows:   "  Section  7.     Such  corporation 

the  construction  of  a  hotel  in  the  city  shall  commence  the  work  of  construct- 

of    Buffalo.       The    capital   stock    was  ing  such  hotel  within  five  years  from 

$200,000,  with  power  to  the  directors  the  passage  of  this  act,  and  complete 


Members  —  Stockholders  and  Stock. 


129 


time  for  the  completion  of  the  liotel,  the  court  holding  that 
this  could  not  affect  the  defendant's  subscription,  because,  being 
in  the  nature  of  a  contract,  the  legislature  had  no  power  to 
alter  it  without  his  assent.  But  a  subscriber  may  waive  the  con- 
dition, and  such  waiver  may  be  implied  from  the  acts  of  the  sub- 
scribers, after  the  performance  of  the  condition  is  no  longer  pos- 
sible.^    A  condition  in  a  subscription  to  be  operative,  must  be  a 


the  same  within  four  years  from  tlie 
time  of  commeucing  the  construction 
thereof.  If  tliis  section  be  not  com- 
plied with,  the  franchise  hereby 
granted  shall  become  null  and  void," 
and  it  was  provided  in  said  amended 
act  that  the  same  shall  take  eflFect  im- 
mediately By  the  provisions  of  the 
original  act  the  time  to  commence  the 
work  of  constructing  such  hotel  ex- 
pired April  13.  1873,  and  by  the 
amended  act  such  time  expired  March 
28,  1878.  The  proofs  in  the  case  show 
that  the  lands  were  bought  by  con- 
tract, upon  which  lands  a  hotel  was  to 
be  built,  and  that  subsequently  such 
lands  by  authority  and  resolution  of 
the  board  of  directors,  passed  February 
2,  1876,  was  sold  back  to  the  parties 
of  whom  the  land  was  bought.  The 
president  of  the  said  hotel  company 
testified,  on  the  trial  had  March  2, 
1877  :  "  The  project  of  building  a  hotel 
haa  been,  I  suppose,  substantially 
abandoned.' ' 

The  time  designated  for  the  com- 
mencement of  the  construction  of  said 
hotel  having  expired  under  the  act  of 
1871,  is  an  important  question  bearing 
on  the  liability  of  the  defendant  in 
this  action.  The  action  in  this  case 
was  commenced  on  the  9th  of  Feb- 
ruary, 1876.  At  that  time  the  period 
in  which  the  plaintiff  was  bound  to 
commence  the  work  of  construction  of 
the  hotel  had  not  expired  under  the 
amended  act,  and  at  that  time  no  pro- 
vision of  the  acts  operated  to  make  the 
franchise  null  and  void.  There  is  no 
evidence  before  the  court  from  which 
it  appears  that  the  commencement  of 
the  construction  of  a  hotel  by  such 
corporation  had  not  been  commenced 
prior  to  March  24, 1878.  If  such  proof 
was  before  the  court,  under  the  au- 
thority of  a  number  of  leading  cases 


in  the  court  of  appeals,  judgment 
could  not  be  ordered  by  this  court  in 
favor  of  the  plaintiff  and  upon  the  ex- 
ceptions sent  to  this  court  to  be  argued. 
If  the  corporation  is  null  and  void,  and 
in  the  eyes  of  the  law  dead,  any  order 
for  judgment  in  favor  of  the  plaiutifi 
would  be  absolutely  void.  The  point, 
therefore,  taken  by  the  defendant, 
that  the  plaintiff  has  no  standing  in 
this  court,  is  not  available  here. 

Another  question  raised  is  upon  the 
liability  of  defendant  upon  his  sub- 
scription, upon  which  the  action  is 
brought.  The  defendant  signed  a  con- 
ditional subscription  to  take  $5,000  of 
stock  in  the  company.  The  condition 
was  that  ,$200,000"  should  be  sub- 
scribed  by  the  citizens  of  Buffalo.  The 
act  under  which  the  subscription  was 
made  provided  that  the  company 
should  commence  the  work  of  con- 
structing the  hotel  within  two  years 
from  the  passage  of  the  act  and  com- 
plete the  same  in  five  years  from  the 
time  of  commencement  of  construction 
thereof.  The  fact  was  admitted  on 
the  trial,  that  plaintiff  did  not  com- 
mence the  work  of  constructing  the 
hotel  within  two  years,  and  did  not 
complete  the  same  in  four  years  from 
the  passage  of  the  act  of  incorporation. 
The  defendant's  subscription  was  upon 
the  terms  and  conditions  provided  by 
the  act  and  the  subscription. 

The  amendment  passed  in  1873  in 
no  manner  affected  the  dtifendant's 
subscription,  which  was  in  the  nature 
of  a  contract  which  could  not  be 
altered  without  his  assent,  and  there 
is  no  evidence  of  his  assent.  The  mo- 
tion for  a  nonsuit  should  have  been 
granted  on  the  ground  alone  that  the 
construction  of  the  hotel  had  not  been 
commenced  within  two  years  after  the 
passage  of  the  act." 


>  Dayton,  etc.,  R.  R.  Co.  v.  Hatch,  1  Dis.  (Ohio)  84  ;  O'Donald  v.  Evansville, 
etc.,  E.  R.  Co.,  14  Ind.  259. 

17 


130  Private  Coeporations. 

part  of  the  contract,  and  a  mere  parol  condition  is  inoperative.^ 
If  the  charter  or  general  law  provides  that  no  conditional  sub- 
scriptions shall  be  made,  a  condition  contained  therein  is  inopera- 
tive and  the  subscriber  is  liable  thereon  the  same  as  though  no 
condition  had  been  inserted  therein."''  A  change  in  the  name  of  a 
corporation  by  the  legislature  does  not  affect  the  validity  of  a 
subscription,  as  it  does  not  alter  the  terms  of  the  contract,'  but,  if 
one  corporation,  under  power  conferred  by  statute,  sells  its  fran- 
chise and  stock  subscription  to  another  corporation,  the  latter 
does  not  acquire  the  right  to  enforce  the  subscriptions.* 

Sec.  76.  Fraudulent  subscriptions.  —  If  a  subscription  is  fraudu- 
lently made,  and  by  collusion  between  the  subscriber  and  the 
directors,  the  subscriber  will  not  be  permitted  to  take  advantage 
of  such  fraud  to  defeat  the  rights  and  interests  of  hona  fide 
holdei's  of  stock  or  creditors  of  the  corporation.^  And  in  Pennsyl- 
vania it  has  been  held  that  a  subscription  is  not  only  an  under- 
taking to  the  company,  but  Math  all  other  subscribers  ;  and  even 
if  fraudulent,  and  made  for  the  purpose  of  inducing  subscriptions, 
it  is  to  be  enforced  for  the  benefit  of  the  others  in  interest,  and 
a  subscriber  will  not  be  permitted  to  set  up  as  a  defense  that  the 
subscription  was  a  feigned  and  fraudulent  one,  and  that  the 
company  was  a  party  to  the  fraud. °  AndAvhen  a  person  sub- 
scribes for  stock,  he  cannot  exonerate  himself  from  liability  to' the 
company  therefor,  by  assignment  of  the  same  to  another  with- 
out the  consent  of  the  company,  unless  authorized  so  to  do  by 
statute  or  the  articles  of  association,  and  he  is  liable  for  all  assess- 
ments legally  made  on  the  shares,"  as  the  capital  stock  of  a 
corporation  is  treated  as  a  trust  fund  for  the  benefit  of  its  creditors, 

'Cunningham   v.   Edgerfield,    etc.,  *  Graff  v.  Pittsburgh,  etc.,  R.  Co.,  31 

R.  R.  Co.,  2  Head.  (Tenn.)  28.  Penn.  St.  489. 

'•'Pittsburgh,    etc.,    R.    R.    Co.    v.  ■»  Buckfield,  etc.,  R.  Co.  v.  Irish,  39 

Biggar,  84  Penn.  St.  455.  Me.  44  ;  Fay   v.    Lexington,  etc.,   R. 

3  Bucksport,  etc.,  R.  R.  Co.  v.  Buck,  Co.,  2  Mete.  (Ky  )  314  ;  City  Hotel  v. 
68  Me.  80.  Dickinson,  6  Gray,  586  ;  Buffalo,  etc., 

4  West  End  R.  R.  Co.  v.  Dameson,  R.    Co.    v.    Dudley,   14   N.    Y.   336; 

4  Mo    App.  414.  Dayton  v.  Borst,  31  id.  435  ;  Northern 
^  Minor  v.  Mechanics'  Bank,  1  Pet.     R.'Co.  v.  Miller,  10  Barb.  260;  Fort 

46;  Walker  v.   Devereaux,  4  Paige's  Edward,    etc.,  v.    Payne,   17  id.  567; 

Ch.  229  ;  Selma,  etc.,  R.  Co.  v.  Tipton,  Merrimac    Mining   Co.    v.    Levy,    54 

5  Ala.    787  ;    Hayne   v".    Beauchnmp,  Penn.  St.  227. 
13  Miss.  515. 


Members  —  Stockholders  and  Stock. 


131 


and  no  transfer  thereof  can  be  made  by  whicli,  as  to  tlie  creditors 
of  the  company,  a  stockholder  can  relieve  himself  from  liability 
for  subscriptions  to  stock,  and  substitute  that  of  another  person.' 

Sec.  77.  Subscriptions  in  contemplation  of  incorporation A  sub- 
scription to  articles  of  association,  setting  forth  amount  of  capital 
stock  of  the  proposed  company,  and  the  number  of  shares,  im- 
ports that  the  subscriber  will  take  and  pay  for  the  number  of 
shares  set  opposite  his  name.*  xlnd  if  made  in  cojitemplation  of 
a  charter  of  incorporation,  it  is  valid  and  may  be  enforced  by  the 
company  after  it  has  become  incoi'porated.'  It  constitutes  a  legal 
obligation  of  the  subscriber,  and  can  usually  be  enforced  by  action 
or  by  forfeiture  of  the  shares  or  both,  depending  upon  the  con- 
stating instruments  or  articles  of  agreement.*     If  he  subscribes 


iRe  Bacbaui,  13  Bankr.  Reg.  223. 
And  iu  case  a  corporation  is  being 
■wound  up,  and  its  affairs  are  in  the 
hands  of  a  receiver,  a  sbareliolder, 
who  is  also  a  creditor  under  another 
contract,  is  not  entitled  to  set  off  the 
debt  due  to  him  thereon  against  calls 
made  by  the  receiver  on  his  stock,  nor 
to  set  off  anticipated  dividends  against 
such  calls.  See  Brice's  Ultra  Vires, 
553  ;  Ex  parte  Henry  Winsor,  3  Story, 
411  ;  Cutler  v.  ^Middlesex  Fac.  Co., 
14  Pick.  483  ;  McLaren  v.  Pennington, 
1  Paige,  102;  Osgood  v.  Ogden,  4 
Keyes,  70. 

^Rensselaer,  etc.,  R.  Co.  v.  Barton, 
16  N.  Y.  457. 

"Hamilton,  etc.,  Plankroad  Co.  v. 
Rice,  7  Barb.  157;  Tonica,etc..  R.  Co. 
V.  McNeely,  21  111.  71  ;  Johnson  v. 
tlwiug  Uuiver.,  35  id.  518.  Unless 
the  subscriber  expressly  dissents  be- 
fore the  incorporation  is  completed. 
Gleaves  v.  Turnpike  Co.,  1  Sueed, 
491  ;  Dorris  v.  French,  6  T.  &  C.  581  ; 
4  Huu,  292. 

^Battersball  v.  Davis,  13  Barb.  323. 
See,  also,  Athol  Music  Assoc,  v.  Carey, 
116  Mass.  471  ;  Palmer  v.  Lawrence, 
3  Saudf.  161,  where  DuER,  J.,  said: 
"  The  law  must  be  considered  settled, 
that  the  obligation  of  actual  payment 
is  created  in  all  cases  by  subscription 
to  capital  stock,  unless  the  terms  of 
the  subscription  are  such  as  to  plainly 
exclude  it."  Chester  Glass  Co.  v. 
Dewey,  16  Mass.  94  ;  Spear  v.  Craw- 


ford, 14  Wend.  20,  where  Suther- 
land, J.,  observes  :  "  The  promise  of 
the  defendant  and  the  other  sub- 
scribers, although  in  form  to  take  the 
shares  subscribed  by  them  respect- 
ively, is,  undoubtedly  (when  taken  in 
connection  with  what  precedes  it,  and 
with  the  act  of  incorporation  which  is 
there  referred  to  and  in  part  recited), 
a  promise  not  only  to  take  the  shares, 
but  to  pay  for  them  ;  to  take  them 
upon  the  terms  and  conditions  set 
forth  iu  the  subscription  paper." 

And  when  shares  are  payable  on  a 
call  of  the  directors,  they  are  also  in 
like  manner  payable  on  the  call  of  a 
duly  appointed  receiver.  Sagory  v. 
Dubois,  3  Sandf.  Ch.  466. 

But  in  a  recent  case  in  Maine  where 
the  subscribers  simply  agreed  to  take 
the  amount  of  shares  set  against  their 
respective  names,  it  was  construed  as 
imposing  no  personal  obligation  to 
pay  for  the  shares  ;  and  that  the  con- 
struction of  the  agreement  was  not 
affected  by  a  provision  in  the  charter 
of  the  corporation  purporting  to  ren- 
der tlie  subscriber  liable  for  the 
balance  remaining  due  after  a  sale  of 
his  shares.  Belfast,  etc.,  R.  Co. 
v.  Moore,  60  Me.  561  (1862);  John- 
son V.  Wabash,  etc.,  Co.,  16  lud. 
889  ;  Kidwelly  Canal  Co.  v.  Raby,  2 
Price,  93,  in  which  Baron  Richards 
said  :  "  If  Raby  [the  defendant]  had 
not  endeavored  to  withdraw,  there 
would   have   been    no    doubt    of   his 


132  Private  Corporations. 

for  stock  upon  preliminary  articles  he  may  refuse  to  sign  second 
articles  of  association,  when  such  are  |)rovided  for  and  re- 
quired to  be  signed  and  recorded  under  the  provisions  of  the 
statutes  for  incorporation.  But  he  cannot  in  any  case  with- 
draw his  subscription  for  stock  without  tlie  consent  of  his  co-sub- 
scribers/ unless  authorized  so  to  do  by  tlie  act  of  incorporation 
or  by  the  terms  of  the  contract  itself.^ 

Sec.  78.  Fraud  in  relation  to  subscription.  —  "When  a  bank  was  in- 
corporated under  a  lawful  charter  in  Connecticut,  but  the  parties 
who  effected  the  organization  fraudulently  induced  a  person  to 
subscribe  for  a  portion  of  the  stock  by  representing  to  him  that 
his  subscription  would  be  merely  nominal,  and  that  he  would  not 
be  required  to  pay  for  the  stock  ;  and  the  bank  afterward  issued 
a  large  amount  of  bills  but  soon  failed  and  went  into  the  hands 
of  a  receiver  for  the  benefit  of  its  creditors,  in  an  action  by  the 
receiver  against  the  subscriber,  it  was  held  that  he  could  not,  as 
a  defense  to  the  claim  for  the  amount  of  the  subscription,  show 
the  fraud  or  misrepresentation  under  which  he  had  been  induced 
to  subscribe,  as  he  and  his  associates  constituted  the  bank,  and  he 

liability  ;  then  the  question  becomes  And  when  under  the  New  York  act 
whether  he  has  in  fact  withdrawn,  of  1850,  it  was  required  that  the  sub- 
and  I  think  he  has  not,  iiiaaiimch  as  scriber  should  pay  the  directors  ten 
he  could  not  do  so  without  the  consent  per  cent  on  the  amount  subscribed  by 
of  all  those  with  whom  he  had  be-  him  at  the  time  of  subscribing,  and 
come  engaged  in  the  undertaking."  that  no  subscription  should  be  re- 
See,  also,  Selma  V.  Tennessee  R.  Co.,  ceived  without  the  payment  of  such 
5  Ala.  786  ;  Turnpike  Co.  v.  Philips,  sum,  it  was  held  in  the  court  of  ap- 
2  Penr,  &  Watts,  184.  peals  of  that  state  when  ten  per  cent 
Under  the  railroad  law  in  New  on  the  subscription  was  not  paid  at  the 
York,  of  1848,  a  person  could  not  ren-  time  of  subscription,  but  forty  per 
der  himself  liable  by  subscribing  a  cent  was  afterward  paid,  that  this 
preliminary  paper  previous  to  the  or-  made  the  subscription  a  valid  one. 
ganization  of  the  company,  unless  he  Black  River  R.  Co.  v.  Clarke,  25  N. 
subsequently  subscribed    the  articles  Y.  208. 

of  association,  or   subscribed   to   the  And  when  the  subscriber  gave  his 

capital  stock  in  the  books  directed  by  note  for  the  ten  per  cent  instead  of 

statute  to  be  opened  after  the  corpo-  paying  the  money,  and  the  company 

ration  is  formed.     TroyR.  Co.  v.  Tib-  afterward  received  the  money  on  the 

bits,  18  Barb.  297.     See,  also,  Pough-  note,  it  was  held  that  the  subscriber 

keepsie  P.  R.  Co.  v.  Griffin,  24  N.  Y.  was  liable  as  such.     Ogdensburgh  R. 

150  ;  Erie  R.  Co.  v.   Owen,  32  Barb.  Co.  v.  Wolley,  1  Keyes,  118.     But  see 

616;  Lake  Ontario  R.  Co.  v.  Mason,  North  Stafford  Steele  Co.  v.  Warth, 

16N.  Y.  451.  L.  R.  Ex.  172. 

'  Bordentown,  etc.,  T.  Co.  v.  Imlay,  4  N.  J,  L.  285. 


Members  —  Stockholdees  and  Stock. 


133 


was  a  party  ^vitli  them  in  the  fraud  of  the  bank  on  tlie  i^ublic* 
So,  it  has  been  held  in  lUinois,  that  stock  subscribed  for  must  be 
paid,  notwithstanding  the  giving  of  a  note  therefor  was  induced 
by  the  misrepresentations  of  the  agents  of  the  company  as  to  the 
amount  of  stock  then  subscribed  and  the  time  witliin  which  the 
road  would  be  completed.^  And  when  a  secret  agreement  was 
entered  into  between  the  directors  of  a  i-ailroad  company  and  a 
subscriber,  that  he  might  within  a  specified  time  reduce  the 
number  of  shares  subscribed  for,  the  subscription  being  made  to 
appear  honafide  for  the  purpose  of  inducing  others  to  subscribe  ; 
in  an  action  by  the  corporation  for  such  subscription,  it  M'as  held 
that  the  full  amount  might  be"  recovered,  as  the  stipulation  to 
reduce  the  amount  was  a  fraud  on  the  other  subscribers."  But 
the  general  rule  is  that  subscriptions  obtained  b}"-  fraud  cannot  be 
enforced  against  the  subscribers,  and  that  although  the  rule  of 


1  Litchfield  Bank  v.  Church,  29 
Conn.  137;  Southern  Plankroad  Co. 
V.  Hixon  5  Ind.  166. 

^  Goodrich  v.  Reynolds,  31  111.  490  ; 
Johnson  v.  Crawfordsville,  etc.,  R. 
Co.,  11  Ind.  280  ;  Andrews  v.  Ohio, 
etc.,  R.  Co.,  14  id.  169;  Hardy  v.  Mer- 
riweather,  id.  203;  Thornburgh  v. 
Newcastle,  etc.,  R.  Co.,  id.  499  ;  Dynes 
V.  Shaffer,  19  id.  165.  But  see  Wert 
V.  Crawfordsville,  etc.,  R.  Co.,  id.  242. 

»  White  Mt.  R.  Co.  v.  Eastman,  34 
N.  H.  124.  See,  also,  Downie  v.  White, 
12  Wis.  176  ;  Crawford  v.  Pittsburg, 
etc.,  R.  Co.,  32  Penn.  St.  141  ;  Robin- 
sou  V.  Same,  id.  334.  When  a  charter 
has  been  obtained  by  means  of  ficti- 
tious subscriptions  for  part  of  the  stock , 
and  a  fraud  has  been  committed  on  a 
bona  fide  subscriber  by  which  he  has 
sustained  or  might  sustain  injury,  no 
action  can  be  maintained  against  him 
by  the  corporation  for  the  amount  of 
his  subscription,  unless  such  sub- 
scriber has  accepted  the  charter  and 
by  his  own  acts  has  assisted  in  putting 
it  in  operation  ;  in  that  case  he  cannot 
avail  himself  of  the  fact  that  part  of 
the  stock  was  fictitious.  And  if  a 
stock  company  lets  off  a  part  of  its 
subscribers  and  returns  them  their 
money,  other  subscribers,  not  consent- 
ing thereto,  are  discharged  from  all 
liability  growing  out  of  their  original 
subscription.  If  a  person  is  induced 
to  subscribe  for  stock  by  means  of  rep- 


resentations which  are  not  fulfilled,  it 
has  been  held  that  he  is  not  bound  to 
take  the  stock.     See,  relating  to  the 
effect  of    fictitious  stock,   Center   T. 
Co.  V.  McConahy,   16  S.    &  R.    140; 
Thorpe  v.  Hughes,  3  Mylne  &  Cr.  742  ; 
Crump  V.  U.   S.  Mining   Co.,  7  Gratt. 
352;  Southern  P.  R.  Co.  v.  Hixon,  5 
Ind.  166.     But  when  a  subscriber  dis- 
covers such  frauds  he  must  renounce 
all  benefits  derived  from  his  subscrip- 
tion or  he  will   be  responsible.     De- 
posit Ass.  Co.  V.  Ayscough,  6  E.  &  B 
761.     See,  also.  County  of  Crawford 
V.  Pittsburgh  R.  Co.,  32  Penn.  St.  141 
Pittsburgh,  etc.,  R.  Co.  v.  Graham,36 
id.  77;  Same   v.    Stewart,  41  id.  44 
Connecticut  R.  Co.  v.    Baxter,  32  Vt 
805  ;  Central  R.  Co.  v.  Kisch,  L.  R.,  2  H 
L.  99 ;  Smith's  case,  L.,R.,  2  Ch.  604  ; 
Heyman  v.  European  R.  Co.,  L.  R.,  4 
Eq.  154. 

If  the  prospectus  contains  a  ma- 
terial misrepresentation  or  misstate- 
ment of  facts,  the  subscription  induced 
thereby  may  be  rescinded.  Smith  v. 
Reese  Riv.  Co.,  L.  R.,  2  Eq.  264 ;  Ross 
v.  Estates  Investment  Co.,  L.  R.,  3  Eq. 
122  ;  L.  R.,  3  Ch.  682  ;  Waterhouse  v. 
Jamieson,  L.  R.,  2  H.  L.  Sc.  29.  But 
the  misrepresentation  must  be  in  ref- 
erence to  a  material  matter.  Lenton 
V.  McNeil  L.  R.,  Eq.  352  ;  Hallows  v. 
Ternie,  L.  R.,  3  Ch.  467;  Jackson  v. 
Turquand,  L.  R.,  4  H.  L.  305. 


134 


Pkivate  Corporations. 


evidence  is  tliat  parol  representations  cannot  be  permitted  to  vary 
the  terms  of  a  written  agreement,  still  this  rule  will  not  exclude 
parol  evidence  to  show  such  fraud  as  would  be  allowed  to  vitiate 
any  other  contract.'  In  order  to  relieve  himself  from  liability 
upon  his  subscription,  not  only  must  actual  fraud  be  shown,  but 
he  must  also  show  tliat  he  acted  upon  the  false  statements  of  the 
agents  of  the  corporation  in  respect  to  matters  of  fact  material  to 
the  value  of  the  enterprise,  and  not  upon  the  mere  speculation  of 
the  directors,  or  upon  his  own  exaggerated  ideas  of  the  prospective 
success  and  value  of  tlie  business.^     The  rule  that  parol  evidence 


1  See  Blodgett  v.  Morrill,  20  Vt.  509; 
Coun.,  etc.,  R.  Co.  v.  Bailey,  24  id.  465; 
Same  v  Baxter,  33 id.  805  ;  Burrows  v. 
Smith,  10  N.  Y.  550  ;  New  York  Ex- 
change Co.  V.  De  Wolf,  31  id.  273  ;  S. 
C,  5  Bosw.  593  ;  Coil  v.  Pittsburgh 
Female  Coll.,  40  Penn.  St.  439  ;  Ken- 
nebec R.  Co.  V.  Waters,  34  Me.  369  ; 
Piscataqua  Ferry  Co.  v.  Jones,  39  N. 
H.  491 ;  Martin  v.  Pensacola  Coal  Co., 
8  Fla.  370 ;  Rives  v.  Railroad  Co.,  30 
Ala.  93  ;  Smith  v.  Same,  id.  650  ;  Hes- 
ter V.  Memphis  R.  Co.,  32  Miss.  378  ; 
Walker  v.  Mobile  R.  Co.,  34  id.  245  ; 
Ellison  V.  Same,  36  id.  572  ;  Henderson 
V.  Railroad  Co.,  17  Tex.  560;  La 
Grange  R.  Co.  v.  Mays,  29  Mo.  64. 
The  general  rule  of  evidence  is  that 
parol  statements  and  representations, 
or  agreements  made  at  the  time  of  the 
execution  of  a  written  contract,  and 
inconsistent  with  the  written  terms  of 
the  same,  are  inadmissible  and  void, 
unless  fraud  is  shown.  Thornburgh 
V.  Newcastle  R.  Co.,  14  Ind.  499: 
Johnson  v.  Crawfordsville  R.  Co..  11 
id.  280  ;  Hardy  v.  Merriweather,  14 
id.  203;  Kennebec  R.  Co.  v.  Waters, 
34  Me.  369  ;  Wight  v.  Shelbv  R.  Co., 
16  B.  Monr.  4  ,  New  York  Exch.  Co. 
V.  De  Wolf,  5  Bosw.  593 ;  Mississippi 
R.  Co.  V.  Cross,  29  Ark.  443;  Smith 
V.  Plankroad  Co..  30  Ala.  650. 

Oral  evidence  is  inadmissible  to  vary 
the  terms  of  a  subscription  to  the 
stock  of  a  corporation,  unless  it  tends 
to  show  fraud  or  mistake.  But  where 
the  subscriber  is  really  misled,  and  in- 
duced to  subscribe  for  stock  upon  the 
representation  of  a  state  of  facts  in  re- 
gard to  essential  matters  made  by 
those  who  take  up  the  subscription, 
and  in  good  faith  and  upon  proper  in- 
quiry and  the  exercise  of  reasonable 


discretion,  believed  by  the  subscriber, 
and  which  constitutes  the  prevailing 
motive  and  consideration  for  the  sub- 
scription, and  which  proves  false,  it 
would  seem  that  the  contract  of  sub- 
scription should  be  held  void,  both  in 
law  and  equity.  Wight  v.  Shelby  R. 
Co..  IfrB.  Monr.  5  ;  Blodgett  v. Morrill, 
20  Vt.  509  ;  Kennebec  &  Port.  R.  Co. 
V.  Waters,  34  Me.  369  ;  Henderson  v. 
Railway  Co.,  17  Tex.  500.  But  if  the 
location  of  a  railroad  is  different  from 
that  provided  in  the  charter,  it  has 
been  held  that  the  subscriber  may 
lose  his  right  to  object  thereto,  and  to 
paying  his  subscription  on  the  ground, 
unless  he  resorts  to  mandamus  or  in- 
junction at  the  earliest  convenient 
time,  looker,  ex  parte,  18  Ark.  338; 
Brownlee  v.  Ohio,  Ind.  &  111.  R.  Co., 

18  Ind.  68. 

2  Jennings  v.  Broughton,  22  L.  J.  (N. 
S.)  Ch.  585.  A  false  statement  by  an 
agent  of  the  company  soliciting  stock 
subscriptions  that  the  company  al- 
ready had  enough  subscriptions  to 
finish  the  road  in  a  specified  time,  and 
sought  others  from  persons  living  on 
the  line  of  the  road  only  as  evidence 
of  friendliness,  was  held  to  bear 
merely  on  matters  of  expectation  and 
opinion,  and  not  to  suffice  to  void  the 
subscription.  Bish  v.  Bradford,  17 
Ind.  490  ;  Brownlee  v.  Ohio,  etc.,  R. 
R.  Co.,  18  id.  68  ;  Parker  v.  Thomas, 

19  id.  213  ;  Hardy  v.  Merriweather,  14 
id.  203. 

The  defendant,  sued  on  his  subscrip- 
tion for  stock  in  a  turnpike  company, 
answered  that  he  was  illiterate  and 
could  not  read,  and  did  not  hear  the 
articles  of  association  read  ;  but  a 
party  to  them,  interested  in  obtaining 
subscriptions,    induced    him    to   sub- 


Members  —  Stockholdees  and  Stock. 


135 


cannot  be  admitted  to  alter  or  deny  tlie  terms  of  a  written  con- 
tract has  no  application  where  it  is  merely  sought  to  establish 
substantial  fraud  inducing  the  party  to  enter  into  the  contract.^ 


scribe  by  his  false  representation  that 
the  articles  did  not  require  a  payment 
of  subscription  until  $20,000  had  been 
pubscribed.  It  was  held  that  these 
avermeuls  set  up  a  sufficient  ground 
of  defense.  Wert  v.  ('rawfordsville, 
etc.,  Co.,  19  Ind.  243.  But  parol 
declarations  made  by  otBcers  of  a 
company  on  public  occasions,  if  ad- 
missible at  all  to  invalidate  a  subscrip- 
tion for  stock,  cannot  avail  a  sub- 
scriber who  does  not  show  that  such 
declarations  amounted  to  fraud  on  the 
part  of  the  company  inducing  error  on 
Ms  own  part  token  lie  subscribed.  Vicks- 
burgh  Railroad  v.  McKean,  12  La. 
Ann.  688. 

Representations  as  to  the  value  of 
the  land  given  to  the  company  by  the 
United  States,  and  as  to  the  probable 
cost  and  profit  of  the  road,  and  the 
nieaus  of  the  company,  are  but  the 
opinions  of  the  agent,  which  the  sub- 
scriber has  no  right  to  rely  on,  the 
falsity  of  which  is  no  ground  for 
avoiding  the  contract;  Walker  v. 
Mobile,  etc.,  R.  R.  (_'o.,  34  Miss.  245; 
and  in  the  same  case  it  was  held  that 
a  colorable  subscription  by  a  person 
of  influence,  shown  to  the  defendant  to 
induce  him  to  subscribe,  does  not 
avoid  his  subscription,  unless,  relying 
on  it,  he  was  thereby  induced  to  sub- 
scribe. 

Fraudulent  representations  by  an 
officer  of  a  corporation  at  a  public 
meeting,  in  presence  of  a  majority  of 
the  directors,  not  in  pursuance  of  any 
authority  from  their  board,  will  not 
discharge  a  subscriber  to  stock.  Buf- 
falo, etc  ,  R.  R.  Co.  V.  Dudley,  14  N. 
Y.  336. 

A  fraudulent  representation  by  an 
agent  to  obtain  subscriptions  to  the 
stock  of  a  company  avoids  the  sub- 
scription, but  an  unperformed  promise 
to  obtain  for  the  subscriber  stock  in 
another  company,  or  an  honest  mis- 
take as  to  the  probable  expense  of  the 
improvement,  will  not.  Grossman  v. 
Penrose  F,  B.  Co.,  26  Peun.  St.  69 


When  an  agent  of  a  corporation,  for 
the  purpose  of  selling  its  stock,  made 
certain  representations  of  the  company 
and  its  prospects,  which  subscribers 
said  were  false  and  fraudulent,  and 
were  beyond  what  was  stated  in  the 
prospectus,  and  reports  of  the  com- 
pany, it  was  held,  in  an  action  by  the 
company  against  a  subscriber  to  re- 
cover his  subscription,  that  evidence 
of  the  fraudulent  and  false  representa- 
tions of  the  agent  were  admissible  on 
the  part  of  the  defendant,  and  that  it 
was  a  question  of  fact  for  the  jury 
whether  or  not  the  subscriber,  from 
all  tile  circumstances  in  the  case,  was 
deceived  by  the  agent,  and  where  a 
corporation  issued  a  prospectus  and 
reports  of  its  condition  for  the  pur- 
pose of  selling  its  stock,  it  was  held 
that  if  there  were  any  false  statements 
contained  in  such  proposals,  as  to  ma- 
terial facts,  lohich  misled  purchasers  to 
their  injury,  and  in  which  the  pur- 
chasers trusted  to  the  agents  of  the 
corporation,  the  contract  of  sale  was 
void,  whether  the  corporation  did  this 
knowingly  or  not.  The  same  rule  was 
applied  to  the  concealment  of  material 
facts.  Crump  v.  U.  S.  Mining  Co.,  7 
Gratt.  (Va.)  353. 

A  corporation  is  liable  for  false  and 
fraudulent  material  representations 
made  by  its  agents  who  are  engaged 
in  soliciting  stock  subscription  and 
representations  by  such  agents  that 
the  company  was  in  good  condi- 
tion and  repute,  earning  on  the  com- 
pleted portion  of  its  road  four  and 
one-half  per  cent  on  the  entire  cost  of 
the  road,  etc.,  etc.,  when  it  was  a  fact 
known  to  these  agents  that  the  road 
was  on  the  verge  of  bankruptcy,  with- 
out credit,  and  its  stock  and  bonds  of 
little  value,  was  held  sufficient  ground 
for  the  rescission  of  subscriptions 
made  on  the  strength  of  such  repre- 
sentations. Waldo  V.  Chicago,  etc. , 
R.  R.  Co.,  14  Wis.  575. 


'New  Orh^ans,  etc.,  R.  R.  Co.  v, 
Williams,  16  La  Ann.  315  ,  Crump  v. 
United  States  Mining  Co.,  7  Gratt. 
352  ;  Henderson  v    R.  R.  Co.,  17  Tex, 


560  ;  Rives  v.  Plankroad  Co  ,  30  Ala. 
93;  Wert  V.  Crawfordville,  etc.,  Co., 
19  Ind.  243. 


136  Pkivate  Corporations. 

But  in  no  case  can  a  party  be  permitted  to  prove  that  certain 
fraudulent  representations  or  agreements  were  made  which  are 
inconsistent  with  the  tertns  of  the  svhscrijption^  '  nor  as  to 
the  effect  of  the  agreement,  or  what  it  contains,'  as  a  party 
is  bound  to  know  the  contents  of  an  instrument  which  he 
signs,  and  its  effect,  and  has  no  right  to  rely  upon  the  repre- 
sentations or  judgment  of  the  other  party  in  that  regard,  and  if 
parol  evidence  was  admissible  to  override  an  agreement  upon 
this  ground,  greater  mischiefs  would  result  than  could  possibly 
ensue  from  holding  a  party  up  to  strict  liability  where  he  has 
been  misled  as  to  the  effect  of  his  contract  by  relying  upon  the 
statement  or  judgment  of  the  other  party.  In  order  to  relieve  a 
party  from  liability  on  the  ground  of  fraud,  misrepresentations 
as  to  matters  which  are  not  matters  of  judgment  or  opinion,  as  to 
existing  facts  not  affecting  the  terms  of  the  contract  itself,  must 
be  shown,  and  it  is  not  competent  to  show  that  the  officers  of  the 
company  or  the  persons  procuring  the  subscriptions  represented 
that  the  company  would  do  certain  things  which  it  has  not  done 
and  did  not  intend  to  do,"  or  as  to  the  future  prospects,  and 
value  of  the  enterprise '  or  as  to  the  probable  expenses  of  the 
company.'  Nor  can  a  subscriber  for  stock  be  relieved  from  the 
payment  on  the  ground  of  a  fraud  to  which  he  was  a  party,'  nor 
if  he  has  been  guilty  of  ladies  in  asserting  the  fraud.'' 

Sec.  79.  Rules  depend  upon  the  statutes  or  constating  instruments.  — 
In  regard  to  the  liability  of  subscribers  for  subscriptions  to  capital 
stock,  it  is  difficult  to  lay  down  general  or  universal  principles 
applicable  to  all  cases,  as  it  usually  depends  upon  the  charter 
or  act,  or  articles  of  association  ;  and  these  vary  in  the  same  as  well 
as  different  states.     In  order  to  determine  the  various  questions 

1  Blodgett  V.  Morrill,  20  Vt.  509;  13  Ind.  477;  Mississippi,  etc.,  R.  K. 
Conn.  &  P.  R.  Co,  v.  Bailey,  24  id.     Co.  v.  Cross,  20  Ark.  443. 

465  ;  Johnson  v.  Crawford ville  R.  R.  "^  Vawter  v.  Ohio,  etc.,  R.  R.  Co.,  14 
Co.,   11   Ind.    280;    Piscataqua  Ferry  Ind.  174;    Salein  Mill    Dam  Corpora- 
Co.  V.  Jones,    39  N.    H,   491  ;  Smith  tion  v.  Ropes,  9  Pick.  187. 
V.  Plankroad  Co.,  30  Ala.  650.  ^  Walker  v.  Mobile,  etc.,  R.  R.  Co., 

2  Thornburgh  v.  Newcastle,  etc.,  34  Miss.  245  ;  Ogilvie  v.  Knox  Ins.  Co., 
R.  B.  Co. ,  14  Ind.  499.  22  How.  (U.  S.)  380. 

3  Martin  v.  Pensacola,  etc.,  R.  R.  ^  Graff  v.  Pittsburgh,  etc.,  R.  R.  Co., 
Co.,  8Fla,  370;  Vicksburgh,  etc.,  R.  31  Penn.  St.  489;  Southern  Plank- 
R,  Co.  V.  McKean,  12  La.  Ann.  638  ;  road  Co.  v.  Hixon,  5  Ind.  165 ;  Litch- 
Carlisle  v.  Evansville,  etc.,  R.  R.  Co.,  field  Bank  v.  Church,  29  Conn.  137. 

""  Dynes  v    Shaffer,  19  Ind.  165. 


Members  —  Stockholders  and  Stock.  *  137 

relating  to  tlio  subject  which  may  arise,  it  is  necessary  to  consult 
the  organic  and  fundamental  laws  of  the  institution  ;  and  although 
some  illustration  of  rules  of  construction  of  the  corporate  con- 
tract, and  of  the  relations  of  the  subscriber  to  the  company,  may 
be  obtained  from  adjudications  in  other  states  imder  similar  laws, 
yet  it  frequently  happens  that  the  questions  presented  only  occur 
and  are  adjudicated  in  the  state  where  the  corporation  is  created.' 

Sec.  80.  Defense  to  subscription  on  other  grounds.  —  It  is  a  general 
rule  that  a  corporation  seeking  to  recover  a  subscription  must 
show  a  strict  compliance  with  the  requirements  of  the  laws  under 
which  it  was  constituted,  where  a  defense  is  made  on  the  ground 
of  its  failure  in  this  respect.''  But  in  some  cases  a  compliance 
will  be  presumed,  and  in  others  it  will  be  treated  as  waived  by 
the  subscriber.  Thus,  the  payment  of  installments  on  the  stock 
subscribed  for  would  usually  be  considered,  as  we  have  noticed, 
a  waiver  of  the  failure  of  stiict  performance  of  a  conditional  sub- 
scription and  a  recognition  of  the  legal  organization  and  existence 
of  the  corporation  by  the  subscriber,  so  as  to  enable  the  company 
to  recover  the  balance  of  the  subscription.^  And  -where  a  party 
subscribed  for  stock  in  and  assisted  in  organizing  a  plankroad 
company,  it  was  held  that  he  could  not  avoid  the  payment  of 
the  stock  subscribed  for  on  the  ground  of  a  failure  of  the  com- 
pany to  strictly  conform  to  the  law  in  completing  its  organiza- 
tion.* If  a  subscription  to  the  stock  of  a  railroad  company  is 
made  upon  condition  that  the  road  shall  be  permanently  located 
over  a  certain  route,  if  it  is  so  located,  the  condition  is  met,  and 
the  completion  of  the  road  is  not  a  condition  precedent  to  a  right 
to  recover  the  subscription.*  It  is  no  defense  to  an  action  for  an 
assessment  that  a  certificate  has  been  issued  to  him,  reciting  that 
it  is  "  non-assessable,"  as  that  is  merely  a  stipulation  against  as- 
sessments after  the  subscription  is  paid.*  Nor  is  a  stockholder  re- 
leased from  his  subscription  because  the  directors  have  purchased 
from  themselves  or  their  friends,  property  for  the  use  of  the  cor- 

'  1  Redf.  on  Rail.,  §32.  Mo.  359;  Lane  v.  Brainerd,   30  Conn. 

2  Nelson  v.  Blakey,  47  Ind.  38.  5G5. 

^  Maltby  v.  North  Western  R.  Co.,  '  Berryman  v.  Cincinnati   Southern 

IG  Md.  422.  Ry.  Trustees,  14  Bush,  755. 

^  Central  Plankroad  v.  Clemens,  16  «  Upton  v.  Trebilcock   91  U.  S.  45. 

IS 


138  Private  Corporations. 

poration  at  exaggerated  prices  in  fraud  of  tlie  company.^  In  tlie 
case  last  cited,  the  defendant  signed  a  paper,  with  others,  whereby 
he  and  they  agreed  to  unite  in  tlie  formation  of  a  company  for 
the  exchisive  use  and  sale  of  a  patent,  called  Noyce's  patent  for 
preserving  fruit,  each  agreeing  to  take  a  certain  number  of 
shares.  Afterward  the  defendant  and  nine  others  executed  and 
acknowledged  tlie  certificate  of  incorporation  required  by  law. 
The  company,  having  failed  to  exercise  its  privileges  within  a  year 
after  its  incorpoi'ation,  was  dissolved,  and  a  receiver  was  appointed, 
and  in  action  by  him  against  the  defendant  to  recover  the  amount 
due  upon  his  subscription,  he  defended  upon  the  ground  that  the 
directors,  in  fraud  of  the  stockholders,  purchased  the  patent  at  a 
greatly  exaggerated  price ;  also  because  he  was  not  a  stockholder, 
and  that  the  company  was  never  legally  incorporated.  As  to  the 
last  two  grounds  of  defense,  the  court  held,  according  to  the  uni- 
versal rule,  that  a  corporation,  when  foi-med,  may  enforce  pay- 
ment of  a  subscription  made  hefore  the  corporation  had  a  legal 
existence.'*  As  to  the  defense  that  the  defendant  was  released 
because  of  the  fraud  of  the  directoi-s,  the  court,  in  denying  the 
validity  of  the  defense,  by  Gilbert,  J.,  said :  "  Among  the  de- 
fenses pleaded,  one  was  that  some  of  the  promoters  of  the  com- 
pany, who  signed  the  certificate  of  incorporation  and  were  named 
therein  as  trustees,  were  intrusted  with  the  duty  of  purchasing 
the  j)atent  right,  under  which  the  business  of  the  company  was 
conducted ;  that  they  purchased  it,  in  fact,  of  themselves  and 
their  associates,  for  the  corporation,  for  the  price  of  $50,000, 
whereas  the  real  price  was  $16,000,  and  that  the  difference  was 
divided  between  them  and  their  associates.  This,  if  true,  was  a 
gross  fraud,  and  no  proof  of  an  actual  intent  to  cheat,  beside  the 
matter  itself,  in  such  a  case,  is  requisite  to  invalidate  the  transac- 
tion. The  persons  who  undertook  the  duty  of  purchasing  the 
patent  thereby  became  agents  of  the  corporation  for  that  pur- 
pose. The  same  principles  are  applicable  to  them,  as  govern  the 
relation  of  trustee  and  cestui  que  trust.  They  were  bound  not 
to  do  any  thing  which  could  place  them  in  a  position  inconsistent 
with  the  interest  of  their  principal.     Agents  are  not  permitted  to 

'  Don-is  V.  French.  4  Hun,  292.  20  N.  Y    161 ,  Burr  v.    Wilcox,   22  id. 

2  Buffalo,  etc  ,  R.  R.   Co.    v.   Hatch,    551  ;  Strong  v.  Wheaton,  38  Barb.  623. 


Members  —  Stockholders  and  Stock.  139 

become  secret  vendors  of  property  wliich  tliey  are  authorized  to 
hny  for  their  principals,  or  indeed  to  deal  validly  with  their  prin- 
cipals in  any  case,  except  -where  there  is  the  most  entire  good 
faith  and  full  disclosure  of  all  facts  and  circumstances,  and  an 
absence  of  all  undue  influence,  advantage  or  imposition.  Nor 
will  an  agent,  employed  to  purchase,  be  permitted,  unless  by  plain 
and  express  consent  of  his  principal,  to  make  any  profit  out  of 
the  transaction.^  If  those  who  made  the  purchase  for  $16,000 
were  at  the  time  acting  as  projectors  or  promoters  of  the  com- 
pany, they  can  make  no  profit  at  the  company's  expense  by  a  pur- 
chase and  resale.'  The  injury  occasioned  by  the  alleged  fraud, 
however,  was  done  to  the  corporation,  and  not  to  the  defendant. 
It  constitutes  no  defense  to  an  action  at  law,  brought  by  the  cor- 
poration or  its  receiver,  to  recover  his  subscription  to  the  capital 
stock.  The  only  mode  of  making  it  available  to  the  defendant 
would  be  by  a  bill  in  equity  in  which  the  persons  accused  of 
fraud,  as  well  as  the  coii^oration,  would  be  necessary  parties." 
The  fact  that  the  directors  have  released  some  of  the  subscribers 
from  their  subscription  does  not  necessarily  discharge  others, 
although  circumstances  may  exist  which  wiU  have  that  effect.^ 
The  failure  of  the  agent  of  a  corporation  to  deliver  to  it  the 
original  subscription  ])aper  does  not  discharge  those  who  sub- 
scribed,^ nor  that  the  commissionei'S  appointed  to  receive  sub- 
scriptions failed  to  obey  the  provisions  of  the  charter  requiring 
them  to  exact  a  certain  per  cent  in  cash  from  each  subscriber,*  nor 
that  a  greater  amount  of  subscriptions,  in  the  aggregate,  have 
been  received  than  is  authorized,*  or  that  the  corporate  property 
has  been  seized  on  execution,  or  by  the  state.' 

Sec.  81.  Changes  in  charter.  —  Changes  made  in  the  charter  by  pro- 
curement of  a  corporation  and  acted  upon  by  it,  that  affect  the 

'  Story's  Eq.   Jur.,  ^  315  ;   Dally   v.  livan,  57  Ga.  240  ,  Macon,  etc.,  R.  R. 

Woahaib,    3o    Beav.    154  ;  Bentley  v.  Co.  v.  Vasou,  id.  314. 

Craveu,  18  id.  75  ;  Tyrrell   v.  Bank  of  ■*  Pickering    v.    Templeton,    2     Mo. 

London,  10  H.    L.    C'as.    2G  ;    Ueck    v.  App.  424. 

Kantorowitz,  3  K.  &  J.  230.  ^  Blair  v.  Rutherford,  81  Tex.   465; 

■^  Foss    V.    Ilarbottle,   2  Hare,    489;  Garrett  v.  Dillsburgh,  etc.,  R.  R.  Co. 

Deusniore    Oil    Co.  v.     Densmore,    64  78  Penn.  St.  465. 

Penu.  Si.  49;  McElhennv's  Appeal,  61  ^  Oler  v.  Baltimore,  etc.,  R.  R.    Co., 

id.  188.                               ■  41  Md.  583. 

•5  MempUis  Branch  R.  R.  Co.  v.  Sul-  ''  Mullins  v.  North,  etc..  R.   R.  Co., 

54  Qa.  580. 


140  Pkivate  Corporations. 

entire  objects  and  purposes  for  which  it  was  instituted,  where 
there  is  no  provision  in  the  fundamental  law  for  so  doing,  would 
release  the  subscribers  to  the  original  stock  from  liability  for  the 
same.' 

The  rule  may  be  said  to  be  that,  if  the  name  and  fundamental 
purposes  of  a  corporation  are  changed,  under  sucli  circumstances 
that  it  can  be  said  to  operate  as  a  fraud  upon  the  subscribers  to 
the  original  stock,  they  are  thereby  released  from  their  subscrip- 
tions. Thus  by  the  supplement  to  an  act  incorporating  an  iron  and 
railroad  company,  tlie  name  of  the  company  was  changed,  and 
authority  was  given  to  purchase  and  cancel  the  original  stock,  and 
the  main  purpose  of  the  new  company  was  to  be  that  of  a  general 
transportation  company.  It  was  held  to  be  a  fair  question  for 
the  jury,  whether  a  combination  to  change  the  fundamental  pur- 
pose of  the  original  act  by  the  supplement,  and  divert  the  stock 
of  an  original  subscriber  to  this  new  end,  was  not  a  fraud  upon 
him ;  and  if  they  so  found,  that  an  action  upon  the  original  sub- 
scription could  not  be  sustained.^  But  a  change  in  the  act  of  in- 
corporation enlarging  tlie  powers  of  the  company,  but  not  author- 
izing a  material  departure  from  the  original  design  for  which  it 
was  instituted,  would  not  release  those  who  have  subscribed  for 
the  stock,' 

A  subscriber  to  the  capital  stock  of  a  corporation  agrees  to  be 
subject  to  tlie  reasonable  rules  and  regulations  which  may  from 
time  to  time  be  adopted,  and  he  cannot  avoid  payment  of  his 
subscription  because  the  charter  has  been  amended  on  the  applica- 
tion of  the  directors,  and  the  amendment  accepted  by  them, 
reducing  the  number  of  days'  notice  of  the  call  for  subscription.* 

And  where  the  law  under  which  a  company  is  instituted 
authorizes  consolidation  of  the  corporation  with  others,  the  exer- 
cise of  this  power  will  nut  discharge  a  subscriber  from  his  obliga- 

'  Burrows  v.  Smith,  10  N.  T.  550  ;  *  Southern  Penn.  Iron  Co.  v.  Stevens, 

McCray  v.  Junction  R.  Co.,  U  Ind.  359 ;  87  Penn.  St.  190. 

Booe  V.  Same,  10  id.  93  ;  Union  Locks  ^  Pacific  R.  v.  Hughes,  23  Mo.  291. 

&  Canals  v.Towne,  1  N.H.  44  ;  Thomp-  A  change  in  the  name  of  a  corporation 

son    V.  Guion,  5   Jones  (S.  Car.),  113  ;  does  not  aflPect  the  validity  of  a  stock 

Marietta,    etc.,  R.    Co.  v.    Elliott,    10  subscription.      BucksiJort,   etc.,    II.  R. 

Ohio  St.  57  ;  Woodhouse  v.  Common-  Co.  v.  Buck,  08  Me.  SO. 

vpealth  Ins.  Co.,  54  Penn.  St.  307.  *  Illinois  River,  etc.,  R.  Co.  v.  Beers, 

27  111.  185. 


Members  —  SxocKnoLDERS  and  Stock.  141 

tion.^  So,  a  grant  of  additional  powers  to  a  corporation  by  an 
amendment  of  the  charter,  if  accepted,  is  not  always  sucli  an 
invasion  of  the  contract  of  subscription  as  will  relieve  a  subscriber 
from  his  liability  to  pay.^ 

A  subscription  to  joint  stock  is  not  only  an  undertaking  with 
the  company-,  but  also  with  all  the  other  subscril^ers,  and  for  this 
reason,  if  for  no  other,  a  subscriber  cannot  be  permitted  to  set  up 
a  secret  parol  agreement  with  the  agents  of  the  company  by  which 
he  may  be  released  from  his  subscriptions,  while  the  other  sub- 
scribers continue  to  be  bound,'  nor  can  a  person  who  is  appointed 
to  receive  subscriptions  for  stock,  wlio  has  himself  subscribed  for 
stock  and  taken  the  subscrijjtions  of  others,  release  himself  from 
liability  thereon  by  erasing  his  name  from  the  subscription  lists 
defore  turning  it  over  to  the  corporation/ 

Sec.  82.  Assessments  and  calls  for  payments.  —  Power  is  usually 
vested  in  the  corporation  or  the  directors  to  make  assessments  and 
calls  on  the  subscribers  for  the  capital  stock  subscribed  by  them. 
The  organic  law  of  the  corporation,  or  the  by-laws,  usually  pro- 
vide for  the  time  and  mode  of  payment  of  subscriptions,  and  that 
a  certain  amount  or  per  centum  of  the  whole  shall  be  paid  at 
stipulated  times,  or  on  a  call  therefor,  made  by  the  proper  agents, 
and  on  notice  thereof  given  to  the  subscribers.  These  provisions 
are  also  frequently  incorporated  in  the  written  contract  of  sub- 
scription, or  made  a  part  of  it. 

The  rights  and  liabilities  of  subscribers  must  depend  upon  the 
nature  of  the  engagement,  the  express  promise  made,  or  the 
statute  or  articles  and  by-laws  of  the  corporation.^ 

'  Bisli  V.  Johnson,  21  Ind.  299  ;  Han-  Mass.  495  ;  Palmer  v.    Ridge   Mining 

na  V.  Cincinnati,  etc.,  R.  Co.,  20  id.  Co.,  34  Penn.  St.  288  ;  Littleton  Manu- 

30.     See  on  the  subject  of   consolida-  facturlng  Co.  v.  Parker,  14  N.H.  543  ; 

tion,  post,  chap.  16.  Knowles   v.   Beatty,    1    McLean,    41 ; 

^  Gray  v.  Monongahela  Nav.  Co.,  2  Small  v.  Herkimer  Manufacturing  Co. 

W.  &  S.  156.     See,  also,  Terre  Haute,  2  Corast.    330;  Worcester   T.   Co.    v. 

etc.,  R.  Co.  V.  Earp,  21  HI.  291.     But  Willard,  5  Mass.  80  ;  AndoverT.  Co., 

see  Supervisors  v.  Mississippi  R.  Co.,  v.  Gould,    6   id.  40  ;  Atlantic   Delaine 

id.  338,  where  subscribers  were  held  Co.  v.  Mason,  5  R.    L   463  ;  Odd  Fel- 

released.  lows'   Hall   Co.   v.    Glazier,   5     Harr. 

3  Miller  V.  Hanover  Junction  &  S.  R.  (Del.)  172.     But  a  statute  authorizing 

R.  Co.,  87  Penn.  St.  95.  a  corporationtolevy  assessments  upon 

■*  Clieraw,  etc.,  R.   R.  Co.  v.  White,  its  stockholders    who   have    paid    the 

10  S.  C.  155.  full    amount   of    their    subscriptions, 

*  See,  also,   Tippets  v.    Walker,    4  and  who  are  not  otherwise  liable,    is 


142  Privatp:  Corporations. 

SeO.  83.   Promise  to  pay.     Effect  of.     By  whom   calls  should  be  made. 

—  A  promise  to  pay,  without  liniitatioii  or  qiialilicatioii  in  the 
manner  referred  to,  would  make  the  subscriber  liable  on  demand 
by  the  proper  agent.'  But,  in  order  to  render  such  a  promise 
binding,  the  call  must  be  valid  and  made  by  the  proper  officials, 
unless  at  the  time  it  was  made  the  stockholders  knew  of  its  in- 
validity, or  was  an  active  participant  in  procuring  it  to  be  made,* 
in  M^hich  case  he  is  estopped  from  setting  up  an  objection  that 
the  call  was  not  duly  made. 

On  the  subject  of  calls  Mr.  Brice  observes  :  "  Companies  hav- 
ing their  capital  divided  into  shares  have,  as  incident  thereto,  the 
powder  to  make  calls.  It  is  purely  a  question  oi"  internal  arrange- 
ment, in  whom  this  power  is  vested.  It  will  generally  be  in  the 
directors  ;  and  where  it  is  so,  a  call  made  by  those  who  are  actiially 
directors  and  not  yet  removed  will  be  good.^  But  if  made  by 
persons  not  having  the  j^ower,*  or  not  acting  at  a  board  meeting 
when  tliis  is  required,  the  call  will  be  simply  nugatory.^  Calls 
must  in  all  respects,  both  as'  to  times  and  amounts,  be  made, 
whether  by  the  company  in  general  meeting  or  the  directors,  in 

unconstitutional.  Ireland  v.  Pales-  of  the  constating  instruments,  or  the 
tine  T.  Co.,  19  Ohio  St.  369  But  if  agreement  as  it  must  be  interpreted 
the  legislature  has  a  reserved  right  to  by  them.  See  Penobscot  R.  Co.  v. 
amend,  alter  or  repeal  a  charter,  it  has  Bartlett,  13  Gray,  244  ;  Franklin  Glass 
been  held  that  they  could  authorize  a  Co.  v.  Alexander,  2  N.  H.  880  ;  Port- 
corporation  to  assess  stockholders  to  land  R.  Co.  v.  Graham,  11  Mete.  1; 
make  up  losses,  although  the  original  Kennebec  R.  Co.  v.  Kendall,  SI  Me. 
charter  provided  that  no  stockholder  470.  But  an  agreement  to  '•  pay  and 
should  be  liable  beyond  the  amount  of  fill"  shares  in  a  railroad  company  has 
his  shares  for  any  loss  sustained  by  been  held  to  include  an  agreement  to 
the  company,  or  any  debt  due  on  the  pay  all  assessments  legally  made, 
shares.  Gardner  v.  Hope  Ins.  Co.,  9  Buckfield  R.  Co.  v.  Irish,  39  Me.  44; 
R.  I.  194.  Penobscot  R.  Co.  v.  Dunn,  id.  587  ;  Pe- 
The  liability  may  depend  upon  either  uobscot  R.  Co.  v.  Dummer,  40  id.  172; 
the  express  agreement  entered  into,  Penobscot  R.  Co.  v.  Bartlett,  12  Gray, 
or  the  agreement  and   the    provisions  244. 

'  Taunton  Turnpike  Co.  v.  Whiting,  ^  Swansea  Dock  Co.  v.  Levien,  20  L. 

10   Mass.    327  ;    Worcester   Turnpike  J.  Ex.    447.      Compare    Southami)ton 

Co.  V.  Willard,  5  id.   80  ;  Salem   Mill  Dock  Co.    v.  Richards,  1  Man.  &  Gr. 

Dam  Co.  V   Ropes,  an<e;  Boston,  Barre  448.     See,  also,  York,  etc.,    R.    Co.  v. 

«&  Gardner  R.   R.   Co.    v.    Wellington,  Ritchie,  40  Me.  425  ;  Roberts  v.  Ohio, 

113  Mass.  79;  City  Hotel  v.  Dickinson,  etc.,  R.   Co.,    .32  Miss.  373;    Hays   v. 

6  Gray,  586.  Pittsburgh,   etc.,  R.    Co.  38  Penn.  St. 

'•'  Ossepee  Manuf.  Co.  v.  Canney,  54  81  ;  Ross  v   Lafayette,  etc.,  R.    Co.,  G 

N.  H.  295;    Macon,  etc.,  R.   R.  Co.  v.  Ind.  297. 

Vason,  57  Ga.  314;   Kansas  City  Hotel  ^  Howbeach  Coal  Co.  v.  Teague,5  H. 

V.    Harris,    51    Mo.    464;     Willamette  &  N.  151. 

Freighting  Co.  v.   Stamns,  4  Oregon,  ^  j^ji-^  y  B^f]^  iq  q_  b  290. 
261. 


Members  — -  Stockholders  and  Stock.  143 

such  a  way  as  to  press  equally  upon  all.^  And  for  the  furtherance 
of  corporate  purposes,  i.  e.,  iorthQho7ia  Jide-purpo&ooi  obtaining 
capital,  and  not  to  enable  any  particular  members  to  escape  or  to 
lessen  their  liabilities.^  Of  course,  calls  can  be  made  only  for  pur- 
poses not  tdtra  vires  of  the  corporation.  If  it  is  intended  to 
devote  the  proceeds  to  other  purposes,  the  call  imposes  no  liability 
either  at  law  or  in  chancery  upon  a  shareholder."  '■* 

Sec.  84.    Diversion  of  capital  to  other  purposes.  —  In  this  country  it 

has  been  universally  held,  that  no  majority  of  either  the  corpora- 
tors or  of  the  directors  can  divert  the  capital  stock  of  a  corpora- 
tion to  any  purpose  not  consistent  with  the  original  purposes  of 
the  organization  ;  that  the  business  of  the  corporation  cannot  be 
changed,  abandoned  or  sold  without  the  consent  at  least  of  all 
the  corporators ;  that  when  a  person  takes  stock  in  a  corporation, 
he  enters  into,  at  least,  an  implied  contract  with  the  company  that 
his  interest  in  the  corporation  shall  be  subject  to  the  direction 
and  control  of  its  proper  managers  in  the  legitimate  prosecution 
of  the  business  for  which  the  corporation  was  created ;  *  but  not 

^  Preston  v.  Grand  Coll.    Dock   Co.,  Where  an  illegal  contract  or  transac- 

11  Sim.  827.  tion  is  only  partially  performed,  there 

2  Richmond  and   Painter's   cases,    4  is  a  locus  penitentm,  and  either  party 

K.  &  J.  305;  Gilbert's  case,  L.    R.,    5  may  rescind  the  contract.     Thus  in  a 

Ch.  559.  case  where  A.  subscribed  for  shares  in 

^  Green's  Brice's   Ultra   Vires,  150.  the  capital  stock   of  a   corporation,  in 

See,  also,  South  Eastern  R.  Co.  v.  Heb-  increase  of  its  stock,  and  the  proceed- 

ble white,  12  A.  &  E.  497  ;  Shropshire,  ing  was  illegal,  because  in  contraven- 

etc,  R.  Co.  V.   Anderson,    3   Ex.  401  ;  tion  of  the  statute  under  which  the 

Welland  R.  Co.  v.  Blake,  6  H.   &  N.  corporation   was   organized,    and     he 

410.  paid  a  certain  sum   as   an  installment 

*  Kean  v.  Johnson,  1  Stockt.  401  ;  on  his  subcription,  on  the  first  call. 
Black  V.  Delaware,  etc.,  R.  Co.,  7  C.  E.  and  by  the  subscription  he  was  to  for- 
Green,  130  ;  S.  C,  9  id.  455  ;  Zabriskie  feit  all  he  had  paid  if  he  failed  to  pay 
V.  Hackensack,  etc.,  R.  Co.,  3  id.  178  ;  subsequent  calls ;  and  he  so  failed, 
Clearwater  v.  Meredith,  1  Wall.  25  ;  and,  after  the  corporation  had  de- 
Hartford,  etc.,  R.  Co.  v.  Crosswell,  5  clared  his  rights  to  be  forfeited,  but 
Hill,  383  ;  McCray  v.  Junction,  etc.,  before  any  scrip  had  been  issued  for 
R.  Co..  9  Ind.  358;  Winter  v.  Musco-  the  new  stock,  the  corporation  abau- 
gee,  etc.,  R.  Co.,  11  Ga.  438  ;  Middle-  doned  the  plan  of  increasing  the  stock, 
sex  T.  Co.  V.  Locke,  8  Mass.  268  ;  In  an  action  by  him  against  the  corpo- 
Sprague  v.  111.,  etc.,  R.  Co.,  19  111.  177;  ration  to  recover  back  the  sum  paid  by 
Union  Locks  Co.  v.  Towne,  1  N.  H.  44:  him  as  such  installment,  held,  that  he 
Stevens  V.  Rutland,  etc,  R.  Co.,  29  was  entitled  to  recover  it.  Knowlton 
Vt.  545  ;  Danbury,  etc.,  R.  Co.  v.  v.  Congress  Savings  Co.,  14  Blatchf. 
Wilson,  22  Conn.  435;  Hartford,  etc.,  (U.  S.  C.  C.)  364.  The  articles  of  a 
R.  Co.  v.  Croswell,  5  Hill,  383;  Dela-  manufacturing  company  created  by  the 
ware,  etc.,  R.  Co.  v.  Irick.3  Zabr.  321  ;  Pennsylvania  act  of  1865,  p.  387,  pro- 
Kenosha,  etc.R.  Co.  v.  Marsh,  17  Wis.  vided  that  the  capital  stock  should  be 
13;  Hays  V.  Railroad  Co.,  61   111.   422.  $140,000,  divided   into   two   thousand 


14A 


Private  Cokporations. 


that  lie  must  submit  to  assessments   or  calls  made  to  carry   out 
purposes  foreign  to  its  original  objects. 

A  court  of  chancery  will  interfere  to  restrain  calls  that  are  already 
made  for  an  illegal  object ;  but  will  not  when  the  application 
of  the  proceeds  is  within  the  scope  of  the  authority  of  the  cor- 
poration, or  of  those  authorized  to  make  the  call.'  But  where 
the  purpose  of  those  who  make  the  call,  and  in  whom  this  power 
is  vested,  for  legitimate  purposes,  is  to  devote  the  proceeds  to 
purposes  not  authorized  by  law,  it  imposes  no  obligation  upon  the 
shareholders  either  in  law  or  equity.''  The  articles  of  incorpora- 
tion frequently  provide,  that  when  the  capital  stock,  or  a  certain 
portion  of  it,  shall  have  been  subscribed,  the  directors  shall  have 
authority  to  call  in  the  capital  stock  at  such  times  as  to  them  may 
seem  best  for  the  interest  of  the  company,  not  exceeding  a  certain 


eight  hundred  shares  of  $50  each, 
and  that  the  subscribers  should 
give  their  notes,  without  interest, 
for  the  amounts  respectively  sub- 
scribed, which  notes  should  not  be 
liable,  at  any  time,  to  an  assessment 
for  more  than  fifty  per  cent  of  their 
face,  nor  to  an  assessment  of  more 
than  twenty  per  cent  within  eighteen 
months  from  the  organization  of  the 
company.     It  was  held; 

1.  That  the  legal  meaning  of  this 
provision  was  that,  with  ultimate  re- 
lation to  creditors,  the  capital  was  of 
the  full  residuary  amount  of  $140,- 
000,  but  such  calls  for  payments  on  the 
stock  as  might  from  time  to  time  be 
made  by  the  corporate  authorities,  in 
the  course  of  the  active  business  of 
the  company,  as  a  solvent  concern, 
should  not  exceed  one-half  of  that 
amount.  Accordingly  stockholders 
were  not  absolved  from  liability  to 
creditors  for   so   much   of  the    whole 


),000  as  might  be  required  for  the 
payment  of  the  debts. 

2.  That  the  operation  of  the  articles 
as  to  creditors  could  not  be  altered  by 
inserting  a  provision  in  the  notes 
given  by  the  stockholders  in  payment 
of  the  stock  subscribed,  that  all  divi- 
dends should  be  credited  proportion- 
ately upon  it  until  its  full  amount, 
by  reason  of  credits  by  assessments 
and  dividends,  should  be  paid,  when 
the  same  should  be  returned,  and  in 
lieu  thereof  a  paid-up  certificate  of 
stock  be  issued. 

3.  That  on  the  bankruptcy  of  the 
company,  and  the  deficiency  of  other 
assets  exceeding  the  whole  unpaid 
amount  of  the  $140,000,  the  stock- 
holders were  liable  to  the  assignee  in 
bankruptcy  for  their  respective  pro- 
portions of  such  unpaid  amount. 
Wilbur  V.  Glen  Iron  Works,  18  Bankr. 
Reg.  178. 


•  See  Green's  Brice's  Ultra  Vires, 
153,  and  notes. 

2  Mann  v.  Prentz,  2  Sandf.  Ch.  258; 
Sagory  v.  Dubois,  3  id.  466  ;  Everhart 
V.  West  Chester,  etc.,  R . Co.,  28  Penn.  St. 
339  ;  Graff  v.  Pittsburgh,  etc.,  R.  Co., 
31  id.  489  ;  Hays  v.  Pittsburgh,  etc.,  R. 
Co.,  38  id.  81;  Hartford,  etc.,  R.  Co. 
V.  Boorman,  13  Conn.  530.  In  Pennsyl- 
vania a  subscription  conditioned  for 
the  prosecution  of  the  construction  of 
a  railroad    will  be  barred,  unless  the 


condition  be  performed,  and  a  call 
made  within  six  years.  Pittsburgh, 
etc.,  R.  Co.  V.  Graham,  36  Penn.  St. 
77.  But,  where  no  time  is  fixed  for 
payment,  and  the  same  is  left  subject 
to  call,  the  statute  only  begins  to  run 
from  the  date  of  each  call.  Pittsburgh, 
etc.,  R.  R.  Co.  V.  Plummer,  37  Penn, 
St.  413  ;  Western  R.  R.  Co.  v.  Avery, 
64  N.  C.  491  •  Wood  on  Limitation  of 
Action,  326. 


Members  —  Stockholders  and  Stock.  145 

per  centum  thereof,  at  or  witliin  a  certain  time,  and  to  give  notice 
thereof,  in  some  manner,  to  the  subscribers. 

The  remedy,  for  a  faihire  to  pay,  may,  by  virtue  of  stipulations 
or  pi-ovisions  of  the  constating  instruments,  be  confined  to  a  for- 
feiture or  sale  of  the  shares  of  the  delinquent  ^Jarty,  or  the  sum 
paid  thereon  ;  or  it  may  be  against  the  subscriber  personally  ;  or, 
the  company,  by  virtue  of  the  contract,  may  be  entitled  to  either 
or  all  of  these  remedies.  If  power  is  conferred  on  a  corporation 
to  sell  the  stock  of  a  subscriber  in  default  of  payment  of  his 
subscription,  it  has  been  held  that  this  is  not  exclusive  of  the 
usual  remedy  by  suit,  to  recover  the  amount  due. ' 

Sec.  85.  Forfeiture  of  stock.  —  The  general  doctrine  is,  that  a 
subscriber  cannot  rescind  his  contract  by  suffering  a  forfeiture  of 
his  stock  for  non-payment,  or  of  the  sums  paid  thereon,  but  that 
the  right  of  forfeiture  belongs  exclusively  to  the  corporation,  and 
can  only  be  exercised  by  it.  It  may  usually  waive  the  right  to 
forfeiture,  and  resort  to  the  common-law  remedy  of  action  on  the 
express  contract  to  pay  the  amount  of  the  subscription,  unless  it 
is  otherwise  provided. 

If  the  remedy  of  strict  forfeiture  is  pursued,  this  would  usually 
be  considered  satisfaction  of  the  claim  and  a  bar  to  a  suit  for  the 
amount  due  on  the  subscription  contract.  But  whether  it  is  a 
bar  or  not  would  depend  upon  the  provisions  of  the  contract  with 
the  company,  or  the  provisions  of  the  act  or  articles  of  incorpora- 
tion. It  might  be  a  cumulative  remedy  in  a  larger  sense  than  a 
mere  choice  of  remedies.  Tlie  fundamental  law  of  the  corpora- 
tion might  undoubtedly  provide  for  a  sale  of  stock  of  delinquent 
subscribers  to  satisfy  the  unpaid  dues.''     But  unless  the  power  to 

'See  post,  cliap.  16,   on  Execution  company -to  sell  the  stock  and  pursue 

and    the   Appointment   of   Receivers,  the  stockholder  for  the  balance,  or  as 

Goshen    Turnpike   Co.   v.   Huutin,   9  to  whether  it  may   do   both,  or  only 

Johns.  217  ;  Troy  &  Rutland  R.  R.  Co.  sell  the  stock,  depends  upon  the  char- 

V.  Kerr,  17  Barb.  (N.  Y.)  581  ;  North-  ter  or  law  under  which  it  was  formed, 

em   R.   R.  Co.   v.  Miller,  10   id.  260  ;  Sparta    v.    Lebanon,    etc.,    Turnpike 

Selma  &  Tennessee  R.  R.  Co.  v.  Tip-  Co.,  6  Humph,  241 ;  Jay  Bridge  Corpo- 

ton,  5  Ala.  787  ;  Kennebec  &  Portland  ration  v.  Woodman,  31  Me.  573  ;  New 

R.  R.  Co.  V.  Palmer,  34  Me.  366.     The  Bedford,  etc.,  Co.  v.  Adams,  8 'Mass. 

right  of   forfeiture  belongs   with  the  138. 

company.     Turnpike  Co.  v.  Imlay,  4  221^5^  y   Alton,  etc.,  R.  Co.,  13  111. 

N.  J,  L.  285  ,  Sleevant  v.  Anglo-Cali-  514  ;  Merrimac,  etc.,  Co.  v.  Bagley,  14 

fornia  Gold  Mining  Co.,  17  Jur.  257.  Mich.  501.     The  remedy  provided  by 

But  the  question  as  to  the  right  of  a  the  charter,  of  forfeiture  of  stock,  is 

19 


146 


Private  Coeporations. 


pass  a  by-law  providing  for  forfeiture  of  the  stock,  or  the  amount 
paid  by  a  subscriber  thereon,  m  ease  of  a  faihire  to  pay  the  full 
amount  subscribed,  is  confen-ed  by  the  organic  law  of  the  corpora- 
tion, such  by-law  would  be  of  no  effect.^  If  the  language  of  the 
charter  or  organic  law  of  the  corporation  provides  that  the  com- 
pany may  sue,  or  declare  the  shares,  or  the  sum  paid  thereon,  for- 
feited, the  corporation  may  adopt  either  remedy,  but  cannot 
adopt  one  and  then  resort  to  the  other.  And  if  there  has  been 
a  strict  forfeiture  without  a  sale  of  the  shares,  when  such  course 
is  authorized  by  the  fundamental  law  of  the  corporation,  courts 
of  equity  will  not  interfere  by  granting  relief  against  such  for- 
feiture.'' 

But  the  general  rule  seems  to  be  that  the  obligation  of  actual 
payment  is  created  by  subscription  to  the  capital  stock,  unless  the 


only  cumulative,  and  the  company 
may  elect  to  sue  at  law  for  the  sub- 
scription dues.  Freeman  v.  Winches- 
ter, 18  Miss.  577;  Ogdensburgh,  etc.. 
R.  Co.  V.  Frost,  21  Barb.  541 ;  Herki- 
mer, etc.,  Co.  V.  Small,  21  Wend.  273  ; 
Troy,  etc.,  Co.  v.  McChesney,  id.  296. 
But  see  Small  v.  Herkimer  Manuf. 
Co.,  2  N.  Y.  380.  The  option  of  for- 
feiture is  with  the  company.  Railroad 
Co.  V.  Rodrigues,  10  Rich.  (S.  C.)278; 
Spear  v.  Crawford,  14"  Wend.  20  ;  Sa- 
gory  V.  Dubois,  3  Sandf.  Ch.  4G6  ;  Tar 
Riv.  Nav.  Co.  V.  Neal,  3  Hawks.  520  ; 
Dutchess  Cotton  Mill  Manuf.  Co.  v. 
Davis,  14  Johns.  238  ;  Beene  v. 
Cahawba,  etc.,  R.  Co.,  3  Ala.  660; 
Gratz  V.  Redd,  4  B.  Monr.  178;  Lon- 
don, etc.,  R.  Co.  V.  Graham,  1  A.  &  E. 
270  ;  Bristol,  etc.,  R.  Crf.  v.  Locke,  id. 
25  ;  Gray  v.  Turnpike  Co.,  4  Rand. 
(Va.)  578. 

In  England,  under  a  statute  which 
authorizes  the  company  to  sue  for  un- 
paid calls,  and  also  authorizes  the 
company  to  forfeit  stock  on  which 
calls  are  unpaid,  whether  they  have 
sued  or  not,  the  remedies  are  not  al- 
ternative, and  after  commencing  a  suit 
the  company  may  declare  a  forifeiture 
and  also  prosecute  the  action  until  the 
claim   is  satisfied.       Great   Northern 


Railw.  Co.  V.  Kennedy,  4  Exch.  417. 
The  rule  is  otherwise  where  the  two 
powers  are  expressed  in  the  alterna- 
tive. Exch.  1848,  Giles  v.  Hutt,  3 
Exch.  18.  By  the  private  act  of  the 
company,  power  was  given  to  cancel 
any  forfeited  shares  where  the  market 
was  not  sufficient  to  realize  a  sum 
equal  to  the  arrears  of  the  calls,  and 
to  issue  so  many  new  shares,  and  of 
such  nominal  amount  as  they  might 
think  fit,  provided  the  capital  to  be 
represented  by  such  new  shares  should 
not  in  the  whole  exceed  the  capital 
represented  by  the  unpaid  portion  of 
the  shares  which  should  be  so  canceled. 
It  was  held,  that  the  remedy  given 
by  this  latter  provision  was  cumula- 
tive, and  that  an  action  for  calls  was 
maintainable,  notwithstanding  that 
the  shares  had  been  forfeited  and  can- 
celed ;  and  that  it  was  no  answer  to 
the  action,  to  say  that  new  shares  had 
been  issued  and  sold  in  lieu  of  the 
canceled  shares,  which  realized  a  sum 
greater  than  the  unpaid  portion  of  the 
canceled  shares  ;  but  that  the  original 
shareholders  would  be  entitled  to 
the  benefit  of  payments  made  in  re- 
spect of  the  new  shares.  Inglis  v. 
Great  Northern  Railway  Co.,  16  Jur. 
895. 


■  Small  V.  Herkimer  Manuf.  Co.,  2 
N.  Y.  330  ;  Matter  of  Long  Island  R. 
Co.,  19  Wend.  37. 

'^  Story's  Eq.  Jur. ,  §  1325.     See,  also. 


Sparks  v.  Proprietors,  etc.,  13  Ves. 
433  ;  Pendergast  v.  Turton,  1  Y.  &  C. 
98. 


Members  —  Stockholders  and  Stock. 


147 


contrary  is  plainly  expressed  by  the  conditions  of  the  subscriptions, 
and  that  the  right  of  forfeiture  and  sale  of  shares,  on  the  failure 
of  payment  of  subscriptions,  is  not  an  exclusive  but  a  cumulative 
remedy,  unless  otherwise  provided  by  the  terms  of  the  subscrip- 
tion or  the  provisions  of  the  constating  instruments.^  But  in 
some  cases  it  has  been  held  that  the  corporation  must  elect  which 
remedy  it  will  pursue,  and  that  when  it  has  a  choice  of  remedies, 
it  cannot  pursue  both;  and  that  where  there  is  a  right  of  forfeit- 
ure, but  no  express  power  to  use  both  remedies,  the  election  of  the 
right  of  forfeiture  precludes  the  right  of  ordinary  action.  Thus, 
under  a  charter  containing  such  provisions,  where  an  action  was 


'  See  Glass  Co.  v.  Alexander,  3  N.H. 
380  ;  White  Mountains  R.  Co.  v.  East- 
man, 34  id.  147  ;  Spear  v.  Crawford,  14 
Wend.  20  ;  Troy  Turnpike  Co.  v.  Mc- 
Chesney,21  id.  296  ;  Mann  v.  Currie,2 
Barb.  294  ;  Northern  R.  Co.  v.  Miller, 
10  id.  260  ;  Troy,  etc.,  R.  Co.  v.  Kerr, 

17  id.  581  ;  Troy,  etc.,  R.  Co.  v.  Tibbits, 

18  id,  297;  Ogdensburo;h,  etc.,  R.  Co.  v. 
Frost,  21  id.  541  ;  Goshen  T.  Co.  v.  Hur- 

.tin,  9  Johns.  217  ;  Dutchess  Cotton  M. 
Co.  V.  Davis,  14  id.  238  ;  Harlem  Canal 
Co.  V.  Seixas,  2  Hill,  504  ;  Delaware 
Canal  Co.  v.  Sansoni,  1  Binn.  70  ;  Tar 
Riv.  Nav.  Co.  v.  Neal.  3  Hawks,  520  ; 
Greenville,  etc.,  R.  Co.  v.  Smith,  6 
Rich.  91  ;  Charlotte,  etc.,  R.  Co.  v. 
Blakely,  3  Strobli.  245  ;  Selma,  etc.,  R. 
Co.  V.  Tipton,  5  Ala.  787  ;  Gayle  v.  Ca- 
hawba,  etc.,  R.  Co.,  8  id.  586;  Free- 
man v.  Winchester,  10  S.  &  M.  577  ; 
Elysville  Co.  v.  Okisko,  1  Md.  Ch.  392; 
Gratz  v.  Redd,  4  B.  Monr.  178  ;  Barnet 
V.  Alton,  etc.,  R.  Co.,  13  111.  504; 
Klein  v.  Alton,  etc.,  R.  Co.,  id.  514; 
Ryder  v.  Same,  13  id.  516  ;  Peoria,  etc., 
R.  Co.  V.  Ettino-,  17  id.  429  ;  Essex 
Bridge  Co.  v.  Tattle.  2  Vt.  393  ;  City 
Hotel  Co.  V.  Dickinson,  6  Gray,  586  ; 
Lexington,  etc.,  R.  Co.  v.  Chandler, 
13  Mete.  311  ;  Hart,  etc.,  R.  Co.  v. 
Kennedy,  12  Conn.  499  ;  Ward  v.  Gris- 
woldville  M.  Co.,  16  id.  593;  Mann  v. 
Cooke,  20  id.  178.  On  this  subject 
Mr.  Redfield  observes  :  "  But  where 
the  stock  of  the  company  is  defined  in 
its  charter,  and  is  divided  into 
shares  of  a  definite  amount  in  money, 
a  subscription  for  shares  is  justly  re- 
garded as  equivalent  to  a  promise  to 
pay  calls,  as  they  shall  be  legally  made 
to  the  amount  of  the  shares.  This 
may  now  be  regarded  as  settled,  both 


in  this  country  and  in  England,  and 
that  the  power  given  the  company  to 
forfeit  and  sell  the  shares,  in  cases 
where  the  shareholders  fail  to  pay 
calls,  is  not  an  exclusive,  but  a  cumu- 
lative remedy,  unless  the  charter  or 
general  laws  of  the  state  provide  that 
no  other  remedy  shall  be  resorted  to 
by  the  company."  1  Redf.  on  Rail., 
§  49.  See,  also,  Hartford  &  N.  H.  R. 
Co.  v.  Kennedy,  12  Conn.  499  ;  Mann 
V.  Cooke,  20  id.  178  ;  Dayton  v.  Bors;, 
31  N.  T.  435  ;  Piscataqua  Ferry  Co.  v. 
Jones,  39  N.  H.  491  ;  Goshen  Turnp. 
Co.  V.  Hurten,  9  Johns.  217  ;  Dutchess 
Man.  Co.  v.  Davis,  14  id.  238  ;  Troy 
Turnp.  Co.  v.  McChesney,  21  Wend. 
296;  Northern  R.  Co.  v.  Miller,  10 
Barb.  260  ;  Plaukroad  v.  Payne,  17 
id.  567 ;  Troy  &  Bost.  R.  Co.  v.  Tib- 
bits,  18  id.  297;  Ogdensburgh  R.  Co 
V.  Frost,  21  id.  541  ;  Herkimer  M.  & 
H.  Co.  v.  Small,  21  Wend.  273  ;  S.  C, 
2  Hill,  127  ;  Sagory  v.  Dubois,  3  Sandf. 
Ch.  466  ;  Mann  v.  Currie,  2  Barb.  294; 
Ward  v.  Griswold  Manuf.  Co.,  16 
Conn.  593;  Lexington  &  W,  C.  R.  Co. 
V.  Chandler,  13  Mete.  311  ;  Klein  v. 
Alton,  etc.,  R.  Co.,  13  111.514;  Palmer 
V.  Lawrence,  3  Sandf.  161  ;  Greenville, 
etc.,  R.  Co.  v.  Smith,  6  Rich.  91; 
Freeman  v.  Winchester,  10  S.  &  M. 
577;  Selma  R.  v.  Tipton,  5  Ala.  787  ; 
Troy,  etc.,  R.  Co.  v.  Kerr,  17  Barb. 
581. 

But  if  the  stockholder  is  only  made 
liable  after  a  sale  of  stock,  the  statute 
must  be  pursued,  and  he  would  only 
be  liable  for  a  deficiency  after  the  sale. 
Grays  v.  Turnp.  Co.,  4  Rand.  578; 
Essex  Bridge  Co.  v.  Tuttle,  2  Vt.  393. 
See,  also,  Rensselaer  &  W.  Plank  R. 
Co.  V.  Barton,  16  N.  Y.  457. 


148 


Private  Cokpokations. 


commenced  against  a  subscriber,  to  recover  certain  installments, 
and  the  stock  was  afterward  forfeited  for  the  non-payment  of  a 
subsequent  and  last  call,  a  plea  of  such  forfeiture  in  bar  of  the 
further  prosecution  of  the  action  was  sustained.' 

Sec.  86.  Assessments ;  niles  in  relation  to.  —  Assessments,  in  con- 
nection with  corporate  stocks,  is  understood  to  mean  a  rating  by 
the  members  or  the  board  of  directors  of  a  corporation,  by  install- 
ments, of  which  notice  is  usually  required  to  be  given  ;  and  after 
such  assessment  and  the  requisite  notice  is  given,  and  the  period 
for  payment  has  passed,  then  an  action  will  lie  for  the  amount  of 


>  Small  V.  Herkimer  Manufg.  Co.,  2 
N.  Y.  330;  overruling  Herkimer 
Manufg.  Co.  v.  Small,  31  Wend.  273, 
and  2  Hill,  177.  See,  also,  Kennebec 
&  Port.  R.  Co.  V.  Kendall,  31  Me.  470 ; 
Allen  V.  Montgomery  R.  Co.,  11  Ala. 
437.  If  in  such  cases  the  company 
fail  to  exercise  their  power  of  forfeit- 
ure, as  the  successive  defaults  occur, 
until  all  the  defaults  for  payment  of 
calls  occur,  it  loses  its  remedy  by  sale. 
Stokes  V.  Lebanon,  etc.,  R.  Co.,  6 
Humph.  241  ;  Harlem  Can.  Co.  v. 
Seixas,  2  Hall,  504 ;  Delaware  Canal 
Co.  V.  Sausom,  1  Binn.  70.  A  power 
conferred  by  the  legislature  on  a  cor- 
poration to  sell  the  stock  of  a  sub- 
scriber for  default  of  payment  of  an 
installment  by  him  does  not  exclude 
the  common-law  remedy  to  recover 
the  amount ;  but  he  is  still  liable  in 
an  action  of  assumpsit  on  his  promise 
by  the  subscription.  The  penalty  of 
forfeiture  is  cumulative;  and  the 
company  may  waive  it,  and  proceed  in 
personam  on  the  promise.  London 
Grand  Junction  R.  W.  Co.  v.  Graham, 
1  Q.  B.  271 ;  Birmingham,  Bristol  & 
Thames  R.  W.  Co.  v.  Locke,  1  Q.  B. 
256  ;  Highland  Turnpike  Co.  v.  Mc- 
Kean,  11  Johns.  109  ;  1817,  Dutchess 
Cotton  Mfg.  Co.  V.  Davis,  14  id. 
238;  1835,  Spear  v.  Crawford,  14 
Wend.  20  ;  1839,  Troy  Turnpike  &  R. 
R.  Co.  V.  McChesney,  21  id.  296  ; 
Sagory  v.  Dubois,  3  Sandf.  Ch.  466 ; 
Harlem  Canal  Co.  v.  Seixas,  2  Hall, 
504 ;  Stokes  v.  Lebanon  &  Sparta 
Turnpike  Co.,  6  Humph.  241;  Eastern 
Plankroad  Co.  v.  Vaughaii,  20  Barb. 
155  ;  Klein  v.  Alton  &  Sangamon  R.  R. 
Co.,  13  HI.  514;  Hartford  &  New 
Haven  R.  R.  Co.  v.  Kennedy,  12  Conn. 


499 ;  Instone  v.  Bridge  Co.,  2  Bibb. 
577;  Grays  v.  Turnpike  Co.,  4  Rand. 
578  ;  Rockville  &  Washington  Turn- 
pike Road  V.  Maxwell,  2  Cranch's  C.  C. 
451.  In  this  respect  there  is  nothing 
to  distinguish  the  case  of  an  assignee 
from  that  of  an  original  stockholder. 
See  Mann  v.  Currie,  2  Barb.  294.  The 
rule  is  the  same,  although  the  sub- 
scription promise  upon  pain  of  for- 
feiture, etc.  The  company  may  sue  as 
upon  an  absolute  promise.  Troy 
Turnpike  &  R.  R.  Co.  v.  McChesney, 
21  Wend.  296.  That  the  forfeiture 
can  only  be  enforced  on  a  full  com- 
pliance with  the  provisions  of  the  act, 
see  Eastern  Plankroad  Co.  v. 
Vaughan,  20  Barb.  155.  Where  the 
statute  was,  that  "the  directors  may 
order  the  treasurer  to  sell,"  they  can- 
not delegate  the  power  of  ordering 
sales  to  a  committee,  and  an  order  to 
the  treasurer  must  be  absolute  and 
not  in  the  alternative.  See  York  & 
Cumberland  R.  R.  Co.  v.  Ritchie,  40 
Me.  425  ;  Small  v.  Herkimer  Mfg.  Co., 
3  N.  Y.  330  ;  Troy  &  Rutland  R.  R. 
Co.  V.  Kerr,  17  Barb.  581  ;  Troy  & 
Boston  R.  R.  Co.  v.  Tibbits,  18  id. 
297  ;  1856,  Ogdensburgh,  Rome  and 
Clayton  R.  R.  Co.  v.  Frost,  21  id.  541  ; 
Mann  v.  Cooke,  20  Conn.  178;  City 
Hotel  V.  Dickiuson,  6  Gray,  586  ;  1803, 
Delaware  &  Schuylkill  Canal  Co.  v. 
Sansom,  1  Binn.  70 ;  Tar  River  Navi- 
gation Co.  V.  Neal,  3  Hawks,  520 ; 
Beene  v.  Cahawba,  etc.,  R.  R.  Co.,  3 
Ala.  660  ;  Gratz  v.  Redd,  4  B.  Monr. 
178  ;  Peoria  &  Oquawka  R.  R.  Co.  v. 
Elting,  17  111.  429  ;  1860,  Raymond  v. 
Caton,  24  id.  123 ;  Hightower  v. 
Thornton,  8  Ga.  486. 


Members  —  Stockholders  and  Stock.  149 

the  subscription  due.'  "Where  the  charter  of  a  railroad  corpora- 
tion contained  a  pr6 vision  that  the  capital  stock  shonld  be  of  not 
less  than  a  certain  number  of  shares,  it  was  held  that  assessments 
laid  before  the  requisite  number  of  shares  had  been  subscribed 
were  invalid.*  This  was  in  the  absence,  of  course,  of  any  provis- 
ion autliorizing  assessments  where  a  less  amount  was  subscribed. 

Sec.  87.  Power  to  lay  cannot  be  delegated.  —  If  the  power  to  lay 
assessments  is  vested  exclusively  in  the  corporation,  it  cannot  be 
delegated  to  the  directors  f  but  if  authority  is  given  to  a  corpora- 
tion, by  an  act  of  the  legislature,  to  raise  a  fund  in  addition  to 
their  capital  stock  by  assessment  on  the  stockholders,  the  corpora- 
tion may  confer  the  power  on  the  directors  to  lay  assessments  for 
this  purpose." 

And  where  the  articles  of  incorporation  of  a  railway  company 
restricted  the  installments  of  stock  that  might  be  called  for  in 
any  one  year,  by  the  board  of  directors,  to  twenty-five  per  centum 
of  the  whole  amount,  and  also  provided  for  a  change  in  the  arti- 
cles by  the  votes  of  the  directors,  and  a  change  was  so  made  in 
compliance  with  the  general  statutes  on  that  subject,  by  which  the 
directors  were  authorized  to  assess  five  per  centum  per  month,  it 
was  held  that  such  change  was  binding  upon  the  stockholders  who 
subscribed  previous  to  such  alteration.* 

In  this  case  the  supreme  court  of  Iowa  say  :  "  The  charter  of 
the  company,  plaintiff  in  this  case,  provides  that  the  articles  of 
incoi-poration  are  formed  and  adopted  under  and  in  pursuance  of 
the  forty-third  chapter  of  the  Code  of  Iowa  (1851),  which  pro- 
vides for  changes  in  the  charter,  which  when  recorded  and  pub- 
lished, as  the  original  articles  are  required  to  be,  are  valid.  In 
view  of  this  provision  of  the  law  and  the  articles  of  the  charter, 
which  authorizes  changes  to  be  made  by  the  board  of  directors, 
or  by  the  stockholders,  we  do  not  think  the  defendant  can,  with 

'  Spangler  v.  Indiana,   etc.,  R.  Co.,  5  Iowa,  409;  Soutli  Bay, etc., Co.  v.  Gray 

21  111.  276.  30  Me.  547.     But  see,  when  the  char- 

^  Oldtown,  etc.,  R.  Co.  v.  Veazie,  39  ter  is  amended  after  subscription,  but 

Me   571.  before    completing   the    organization 

^  Ex  parte  Winsor,  3  Story,  411.  reducing   the   number   of  shares    re- 

'' Marlborough  Manuf.  Co.  V.  Smith,  quired   to  be  taken  before   organiza- 

2  Conn.  579  ;  Middletown,  etc.,  Turnp.  tion,     Oldtown,  etc.,  R.  Co.  v.  Veazie, 

Co.  V.  Watson,  1  Rawle,  830.  39  Me.  571. 

'Burlington,  etc.,  R.  Co.  v.  White, 


160  Private  Corporations. 

justice,  allege  that  his  liability  has  been  increased  or  changed  with- 
out his  consent.  He  consented  to  the  change  being  made,  and 
authorized  the  company  to  call  for  payment  of  his  subscription 
stock,  at  the  rate  of  five  per  centum  per  month,  by  becoming  a 
member  of  the  corporation."  ' 

Sec.  88.  statutory  power  must  be  foUowed.  ^-  Under  a  Statute 
which  authorized  the  directors  of  a  company  to  require  "payment 
from  subscribers  to  the  capital  stock,  of  the  sums  subscribed  by 
them,  at  svich  times  and  in  such  proportions  and  on  sucli  conditions 
as  they  shall  see  fit,"  it  was  held  that  the  directors  were  invested 
with  full  discretionary  power  as  to  time  and  manner  of  payment, 
and  that  they  might  require  the  whole  subscription  to  be  paid  at 
one  time  or  in  installments.''  But  a  general  resolution  of  a  rail- 
road company  forfeiting  stock  for  non-payment  of  installments, 
must  declare  to  the  stockholder  that  they  claim  to  forfeit  his  spe- 
cific stock,  or  it  will  not  be  valid.''  And  where  the  capital  stock 
is  to  be  paid  at  such  times  and  in  such  proportions  as  required  by 
the  president  and  directors,  though  the  shareholders  will  be  liable 
to  third  persons  for  their  subscriptions  whether  called  in  or  not, 
yet  the  call  being  an  uncertain  event  forms  a  condition  which,  as 
between  the  subscribers  and  the  corporation,  suspends  the  obliga- 
tion to  pay  until  called  in.^ 

OEC.  89.  Several  assessments  may  be  laid  at  one  time,  when.  — 
Where  the  terms  of  the  subscription  required  that  assessments 
should  not  exceed  five  dollars  on  each  share  at  any  one  time,  it 
was  held  that,  if  no  greater  sum  was  payable  at  one  time,  several 
assessments  might  be  voted  at  one  time,  and  that  the  records 
of  the  corporation  are  competent  evidence  to  show  who  were 
the  corporators,  and  number  of  shares  that  had  been  taken 
at  the  time  of  the  one  assessment,  unless  some  proof  be  intro- 
duced to  destroy  their  effect.*     So,  where  an  act  of  incorporation 

1  See   same  doctrine   in  Mowrey  v.  ^  Purton  v.  N.  O.,  etc.,  R.  Co.,  3  La. 

Indianapolis,  etc.,  R.  Co.,  4  Bias.  78.  Ann.  19. 

^  Haun  V.  Mulberry,  etc.,  R.  Co.,  33  *  Penobscot,  etc.,  R.  Co.  v.  Dummer, 

Ind.  103.  40  Me.  173.       But  a  contrary  doctrine 

^Johnaon  v.   Albany,   etc.,  R.  Co.,  seems  to  be  held  in  Span^lerv.  ludi- 

40  How.  Pr.  193.                                     .  ana,  etc.,  R.  Co.,  21  111.  276. 


Membeks  —  Stockholders  and  Stock.  151 

provided  that  the  members  might  divide  the  capital  stock  into  as 
many  shares  as  they  might  think  proper,  and  by  a  written  agree- 
ment, they  fixed  the  capital  stock  at  $50,000,  and  divided  it  into 
five  hundred  shares  of  $100  each,  but  only  one  hundred  and 
thirty-eight  shares  were  taken,  it  was  held  that  no  assessment  for 
the  general  purposes  of  the  corporation  could  be  legally  made 
until  all  the  shares  were  taken.'  And  if  the  proper  officers  of  an 
insolvent  corporation  have  neglected  to  call  in  unpaid  subscriptions 
due  to  the  company  from  solvent  stockholders,  in  a  proper  pro- 
ceeding in  chancery  by  a  judgment  creditor  of  such  company 
against  the  company  and  such  stockholders,  the  court  may  decree 
payment  by  such  stockholders  to  such  judgment  creditor,  to  the 
extent  of  such  amounts  of  subscription  as  remain  unpaid." 

Where  the  charter  of  a  railroad  company  provided  that,  if  any 
stockholder  should  omit  for  the  space  of  six  months  to  pay  any 
installments  on  his  shares  which  might  be  called  for,  the  managers 
of  the  company  might  declare  such  shares  forfeited  ;  and  the 
defendant  paid  two  installments  on  his  shares  when  called  for, 
after  which  the  company  made  a  general  assignment  for  the  bene- 
fit of  its  creditors,  and  a  call  for  a  third  installment  was  made  at 
the  proper  time  by  the  managers  without  the  approval  or  disap- 
proval of  the  assignee,  it  was  held  that  the  managers  had  the 
authority  to  declare  the  defendant's  shares  forfeited  for  the  non- 
payment.^ 

Sec.  90.  Notice  of  assessments  or  calls.  —  Notice  of  the  assessment 
or  call  is  usually  provided  for  by  the  act,  or  articles  of  association, 
or  the  by-laws  of  the  corporation,  to  be  given  personally  or  by 
publication  to  dehnquent  subscribers  before  proceedings  can  be 
taken  to  recover  the  same  by  suit  at  law,  or  by  forfeiture  of 
shares  or  sums  paid  on  them.  The  mode  and  manner  of  pro- 
ceeding and  the  length  of  notice  is  generally  thus  provided  for, 
and  of  which  provisions  the  stockholders  would  be  bound  to  take 
notice. 

But,  whatever  be  the  requirement   of  the   corporation  in  this 

Littleton  Manuf.  Co.  v.  Parker,  14         ^Bassettv.  St.  Albans,  etc.,  R.  Co. 
N.  H.  543  ;  Contoocook,  etc.,  R.  Co.  v.     47  Vt.  313. 

Barker,  33  id.  363.  ^  Germantown,  etc.,  R.  Co.  v.  Fitler, 

GO  Penn.  St.  134. 


X52  Private  Corporations. 

respect,  it  should  be  strictly  followed  in  order  to  entitle  it  to  the 
remedies  provided  in  case  of  the  neglect  or  default  of  the  sub- 
scriber to  attend  to  the  call,  and  make  the  payment  required ; 
and  especially  when  there  is  authority  in  the  company  to  forfeit 
the  shares.'  But  a  judgment  for  an  installment  on  a  subscription 
was  sustained,  where  it  did  not  appear  that  the  defendant  had 
any  notice  of  a  call  for  the  same,  as  it  did  not  appear  that  the 
charter  required  notice  to  be  given.^ 

Sec.  91.  Sufficiency  of.  —  The  notice,  when  required,  in  case  of 
authority  to  sell  by  virtue  of  a  power  in  the  company  for  that 
purpose,  should  express  the  time  and  place  of  sale,  and  should  be 
reasonably  sufficient  in  the  absence  of  provisions  as  to  the  length 
of  notice,  for  the  purposes  for  which  it  is  required  or  intended. 
Thus,  it  was  held  in  Massachusetts,  that  a  notice  that  shares  in  a 
railroad  company  would  be  sold  for  non-payment  of  assessments 
on  a  day  fixed,  and  by  an  auctioneer  named,  who  was  and  long 
had  been  an  auctioneer  in  the  place  at  which  the  notice  bore  date, 
was  held  to  be  insufficient,  as  it  did  not  express  the  place  of  sale  ; 
and  three  days'  notice  of  the  time  and  place  of  sale  was  held  to 
be  unreasonably  short,  and,  therefore,  insufficient,  where  the 
owner  resided  at  a  distance.^ 

Where  a  by-law  of  a  corporation  provided  for  a  notice  to  be 
given  of  sales  of  shares  for  non-payment  of  assessments,  by  adver- 
tisement, designating  the  time  and  place  thereof  and  the  shares  to 
be  sold,  it  was  held  that  any  description  sufficing  to  show  clearly 

^  Cornwall  G.  C.  M.  Co.  v.  Bennett,  been,    in    some    cases,   considered  as 

5  H.   &   N.    423 ;  Anglo-California   G.  directory  only ;  and  it  has  been  held 

M.  Co.  V.  Lewis,  6  id.  174.  that  notice  may  be  given  in  a  diHerent 

2  Wilson  V.  Wills  Valley  R.  Co.,  33  manner,  if  tlie  subscriber  can  sustain 
Ga.  466.  If  installments  are  regularly  no  injury  thereby  ;  as  for  instance,  a 
assessed  in  accordance  with  the  terms  personal  notice  to  the  subscriber, 
provided  in  the  subscription,  no  notice  where  one  by  publication  is  prescribed, 
of  the  assessment,  or  of  time  and  See  Lexington  R  Co.  v.  Chandler,  13 
place  of  payment  of  the  same,  is  re-  Mete.  311  ;  Mississippi  R.  Co.  v.  Gas- 
quired.  See  Lake  Ontario  R.  Co.  v.  ter,  30  Ark.  455.  But  see  Lewey's 
Mason,  16  N.  Y.  451  ;  Smith  v.  Indi-  Lsland  R.  Co.  v.  Bolton.  48  Me.  451  ; 
ana,  etc.,  R.  Co.,  12  Ind.  61 ;  Eakright  Rutland  R.  Co.  v.  Thrall,  35  Vt.  547. 
V.  Logansport,  etc.,  R.  Co.,  13  id.  404  ;  Where  the  fundamental  law  prescribes 
New  Albany  R.  Co.  v.  McCormick,  10  a  certain  length  of  notice  before  suit 
id.  499  ;  Breedlove  v.  Martinsville  R.  can  be  brought,  such  notice  must  be 
Co.,  13  id.  114  •,  Eppes  v.  Mississippi,  given.  Id. 

etc.,    R.   Co.,    35   Ala.    33;  Smith  v.  ^Lexington    R.    Co.    v.    Staples,   5 

Plankroad  Co.,  30  id.  650.     The  man-  Gray,  520. 
ner  prescribed   for  giving  notice  has 


Members  —  Stockholders  and  Stock.  153 

what  shares  were  intended  to  be  subject  of  sale  M'as  sufficient ;  * 
and  where  a  charter  provided  that  for  non-payment  of  assessments 
"  the  directors  may  order  the  treasurer  to  sell  such  shares  at  auc- 
tion, *  *  *  and  the  delinquent  subscriber  shall  be  held 
accountable  for  the  balance,  if  the  shares  sell  for  less  than  the 
assessments,"  and  the  directors  voted  that  the  president  and 
treasurer  be  a  committee  to  collect  arrearages,  and  enforce  such 
collections  by  sales  or  otherwise,  it  was  held  that  a  sale  under  this 
vote  was  void ;  that  the  directors  could  not  delegate  the  power  of 
ordinary  sales  to  a  committee  ;  and  that  the  order  to  the  treasurer 
must  be  absolute  and  not  in  the  alternative." 

And  when  the  charter  authorizing  a  sale  of  the  stock  of  delin- 
quent subscribers  required  notice  of  the  assessment  to  be  given 
thirty  days  before  the  order  of  the  directors  for  the  sale  of  the 
shares,  and  that  the  treasurer  should  give  to  the  subscriber  the 
notice  in  hand,  signed  by  the  treasurer,  or  by  a  director,  on  his 
behalf,  it  was  held  that  a  notice  of  the  assessment  thirty  days 
before  the  sale,  or  a  notice  to  the  subscriber  in  hand  not  signed 
by  the  treasurer  or  a  director,  was  insufficient.^ 

But,  when  an  act  of  incorporation  requires  that  the  place  of 
payments  of  stock  shall  be  designated  in  the  notice  requiring 
payment,  a  notice  requiring  payment  to  be  made  to  a  certain  per- 
son residing  in  a  certain  city  is  priincc  facie  a  compliance  with 
the  statute.*  And  notice  to  pay  instalhnents  of  a  subscription 
to  the  treasurer  of  a  company  implies  that  it  should  be  made  to 
him  at  his  office,  and  is  sufficient  designation  of  the  place  of  pay- 
ment.^ 

Sec.  92.  Rights  of  stockholders  to  dividends.  —  It  will  be  manifest 
that  the  stockholder  must  have  various  rights  growing  out  of  the 

'  York,  etc.,  R.  Co.  v.  Pratt,  40  Me.  call,  will  only  give  it  effect  from  the 

447.  date  of  the  ratification."     1  Redf.  on 

3  York,  etc.,  R.  Co.  v.  Ritchie,  40  Me.  Rail.,  §  49,  par.  8.    See,  also,  id.,  §  49, 

425.  par.  10,  11. 

"The   proceedings   in  making   the  ^  Id. ;  Lewey's,  etc.,  R.  Co.  v.  Bolton, 

calls  must  have  been  substantially  in  48  Me.  451. 

conformity  with  the  charter  and  by-  "^  Troy,  etc.,  R.  Co.  v.  McChesney,  21 

laws' of  the  company  and  the  general  Wend.  296. 

laws  of  the  state  at  the  time  of  mak-  ^  jyiygj^^j^g^jj^^  ^^^^  q^^  y   Ward,  13 

ing  the  same.     Any  subsequent  ratifi-  Ohio,  120. 
cation  by  the  directors,  of  an  informal 

20 


154  Pkivate  Cokpokations. 

relation  wliicli  lio  sustains  to  the  corporation,  which  we  will  con- 
sider in  this  connection.  The  most  important  of  these,  and  usually 
the  sole  object  of  the  relation,  is  the  right  to  share  in  the  profits 
of  the  association  in  the  j^roportion  which  the  stock  he  owns  bears 
to  the  whole  capital  stock  used  in  the  enterprise  for  which  the 
corporation  was  organized. 

Among  the  regulations  which  may  be  made  by  the  corporators 
is  that  relating  to  dividends  on  the  shares  of  capital  stock  invested 
and  held  by  the  stockholders.  Dividends  are  usually  declared  by 
the  proper  officers  of  the  corporation  periodically,  as  required  by 
its  by-laws ;  and  thereupon  the  holders  of  the  shares  become 
entitled  to  the  amount  so  declared  as  their  share  of  the  profits.' 

But  the  stockholders  have  no  claim  to  a  dividend  until  it  is 
declared.  Until  that  time  the  profits  belong  to  the  corporation 
precisely'  the  same  as  any  other  property  which  the  corporation 
may  own.''  And  when  the  dividend  is, declared  and  distribution 
ordered  of  the  profit  fund,  whether  in  whole  or  in  part,  it  should 
be  distributed  between  those  who  at  the  time  were  owners  of  the 
stock,  and  in  proportion  to  the  shares  owned  by  them.'  The  com- 
pany is  bound  to  pay  the  dividends  which  may  be  declared  to  the 
true  owners  only ;  *  and  these  are  usually  determined  by  an 
inspection  of  the  proj)er  books  of  the  company.^  But  if  the  divi- 
dend is  payable  at  a  future  day,  a  sale  of  the  stock  carries  with 
it,  to  the  assignee,  the  right  to  the  dividends.'     If  a  dividend  has 

*  The  directors  of  a  corporation  have  Wiltbank'g    Appeal,    64    id.    256;   St. 

authority  to  declare  dividends  and  to  John  v.  Erie  R.  Co.,  10  Blatchf.  271  ; 

fix   the   time  and   place  of  payment,  Bradley  v.  Holduworth,  3  M.  &  W.  422. 

•with  such  limitations  as    reason  and  ^  Goodwin   v.    Hardy,    57    Me.    143 ; 

good  faith  may  require.    King  v.  Pat-  March  v.  Eastern  R.  Co..  43  N.  H.  515; 

erson,  etc.,  R.  Co.,  29  N.  J.  L.  82.  But  Gifibrd  v.  Thompson,  115   Mass.  478. 

the   acceptance    of    a    dividend   by   a  The  unpaid  dividends  are  assets  and 

stockholder  is  no  ratification  of  illegal  liable  for  the  debts  of  the  company, 

conduct  of  directors  in  relation  thereto.  Curry  v.  Woodward,  44  Ala.  305  ;  Hill 

Hilles  V.  Parish,  14  N.  J.  Eq.  3S0.     A  v.  Newichawanick  Co.,  48  How.  Pr.  427; 

corporation  is  liable  to  one  of  its  stock-  Coleman  v.  Columbia,  etc.,  R.  Co.,  51 

holders  to  whom  it  fails  to  distribute  Penn.  St.  74. 

his  proper  quota  of  a  dividend  which  *  Southwestern,  etc.,  R.Co.  v.  Thoma- 

has  been  declared.     Jackson  v.  New-  son,  40  Ga.  408. 

ark,  etc.,  Plank  R.  Co.,  31  N.  J.  L.  'Jones  v.  Terre  Haute,  etc.,  R.  Co., 

277.  17  How.  Pr.  529  ;  compare,  Currie  v. 

2  If  the  corporation  uses  its  surplus  White,  37  id.  330  ;  6  Abb.  Pr.  (N.  S.) 

to  buy  up  some  of  its  own  stock,  the  352;  Bank  of  Uticav.  Smalley,  2  Cow. 

stockholders  have  no   right  to  claim  770. 

this  pro  rata,  until  it  is  ordered  to  be  ^  Burrough  v.  North  Carolina  R.  R. 

divided    among     them.     Coleman     v.  Co.,67N.  C.  376. 
Columbia   Oil  Co.,   51   Penn.    St.  74; 


Members  —  Stockholders  and  Stock.  155 

been  declared,  when  in  fact  there  is  no  money  earned  with  which 
to  pay  it,  a  stockholder  may  maintain  an  action  to  enjoin  its  pay- 
ment.' 

It  has  been  held  that  dividends  are  to  be  considered  paid  to 
the  stockholders,  when  they  have  received  credit  on  their  stock 
notes  in  the  possession  of  the  company.^  And  a  declaration  of  a 
dividend  by  a  corporation  on  a  part  of  its  capital  stock  raises  a 
presnmption  that  the  same  is  declared  on  all,  and  it  has  been  held 
that  this  presumption  was  sufficient  basis  for  a  tax,  and  that  for 
the  purposes  of  taxation  it  might  be  assumed  that  the  same  divi- 
dend had  been  declared  on  all  the  stock.'  But  a  shareholder  has 
no  legal  right  to  the  profits  of  his  shares  until  a  division  is  made, 
and  a  contract  by  him  in  reference  to  dividends  and  profits  upon 
his  stock  includes  only  dividends  or  profits  ascertained  and  de- 
clared by  the  company  and  allotted  to  him,  and  not  profits  to  be 
ascertained  by  third  persons  or  courts  of  justice,  upon  investiga- 
tion of  the  accounts  and  transactions  of  the  company.*  When, 
however,  a  dividend  has  been  declared,  the  amount  accruing  upon 
the  stock  of  each  stockholder  is  treated  as  his  own  property,  and 
the  directors  have  no  power  to  apply  it  to  any  purpose  not  in- 
cluded in  their  charter,  without  the  consent  of  such  stockholder/ 

Sec.  93,  Right  of  purchaser  as  to  dividends.  The  general  rule  is, 
that  the  purchaser  of  stock  has  a  right  to  receive  all  dividends 
subsequently  declared  without  reference  to  the  time  they  were 

'  Carpenter   v.  N.  Y.,  etc.,  R.  R.  tion  for  its  refusal   to  pay  tliem.  See 

Co.,  5  Abb.  Pr.  (N.  S.)  277.  Bates  v.  Androscoggin,    etc.,  R.  Co., 

^Citizens,  etc.,  Ins.  Co.  v.  Lott,  45  49  Me.  491;  State  v.  Baltimore,  etc., 

Ala.  185.  R.  Co.,  6  Gill,  363  ;  Bank  of  Commerce 

^  Atlantic,  etc.,  Tel.  Co.  v.  Common-  v.  Dalrymple,  16  Md.   17;  Moss'  Ap- 

wealth,3Brewst.  (Penn)366.  See,  also,  peal,  43  Peun.  St.  23. 
as  to  the  proper  basis  of  taxation  of         ^  March   v.    Eastern  R.    R.  Co.,43 

stock,  Boston,  etc.,  R.    Co.   v.  Com-  N".  H.  515.     Where   a  dividend  was 

monwealth,  100  Mass.  399.  declared,   and   the   amount    deposited 

*  Goodwin   v.    Hardy,    57   Me.   143  ;  with  bankers  expressly  to  pay  it,  but 

Minot  V.  Paine,  99  Mass.  101  ;  Curry  before  it  was  paid  upon  all  the  stock, 

V.  Woodward,  44  Ala.  305;  Phelps  v.  the   money  was  withdrawn,  and  the 

Farmers'  Bank,  26  Conn.  269  ;  Hyatt  corporation  became  insolvent,  it   was 

V.  Allen,    56   N.    Y.  553.     See,    also,  held     that     the      stockholders     were 

Spear  v.    Hart,   3  Robt.   (N.  Y.)  420.  equitably     entitled     to     the    money. 

As  to  the  right  of  stockholders  todivi-  Matter  of  Le  Blane,  4  Abb.  N.  C.  (N. 

dends  ;    their   amount,  how   payable;  Y.)221. 
and  the  remedy  against  the  corpora- 


156  Private  Cokporations. 

earned.^  And  dividends  divisible  among  the  shareholders  must 
be  considered  as  their  property,  and  cannot  be  applied  by  the 
directors  to  any  piirjiose  not  provided  for  by  the  act  or  articles  of 
incorporation,  without  the  consent  of  the  shareholders." 

And  if  one  sells  stock  to  another,  and  is  unable  to  have  the 
transfer  registered  in  consequence  of  a  failure  of  the  corporation, 
and  he,  therefore,  remains  the  registered  owner,  he  is  entitled  to 
recover  of  the  vendee  any  assessments  he  may  have  been  obliged 
to  pay  on  the  stock  after  the  assignment.' 

In  relation  to  dividends  it  has  been  affirmed  that  they  are  pay- 
able out  of  profits,  and  that  it  is  not  necessary  that  all  outstand- 
ing liabilities  should  be  paid  off  before  they  are  declared  and  paid 
to  the  respective  shareholders.'*  But  this  proposition  should  at 
least  be  given  with  this  qualification,  viz. :  that  the  corporation 
is  solvent.  For,  according  to  principles  of  justice  in  such  cases, 
if  the  corporation  is  insolvent,  the  creditors  would  have  an  un- 
doubted right  to  insist  that  the  profits  should  first  be  apjjlied  to 
the  satisfaction  of  their  claims.^  And  it  has  been  held  that  the 
directors  may  retain  the  profits  and  invest  the  same  in  improve- 
ments ;  and,  in  lieu  of  the  dividends  which  the  stockholders  would 
otherwise  be  entitled  to,  issue  shares  of  stock,  where  the  law  or 
the  constatmg  instrument  authorized  them  to  increase  the  capital 
stock  for  any  purpose.  And  such  action,  it  has  been  held,  would 
afford  no  ground  for  an  injunction  to  restrain  them.® 

'  Marcli  V.  Eastern  R.  Co..  43  N.  H.  stock   declared   that  it  should  be  enti- 

515  ;     Foote's    Case,     22    Pick.    299  ;  tied  to  preferred  dividends  out  of  the 

Granger   v.    Bassett,   98    Mass.    462  ;  net  earnings,  not  to  exceed  a  specified 

Goodwin  v.  Hardy,  57  Me.    14.3  ;  Gif-  note    after   payment   of  mortgage  in- 

ford  V.  Tliompson,  115  Mass.  478.  terest  in  full,  and  after  the  certificate 

'^  March  v.  Eastern  R.  Co.,  aupra.  was  issued  the   corporation    borrowed 

^Grissell  v.  Bristowe,  L.  li.,  3  C.  P.  money  and  issued  bonds  therefor,  with 

112  ;  Coles  v.  Bristowe,   L.   R. ,  6  Eq.  interest,  and  also  took  a  lease  of  con- 

149  ;  L.  R.,  4  Cli.    3  ;    Hodgkinson  v.  nectiug  roads  on  rent,  it  was  held  that 

Kelly,  L.  R.,  6  Eq.  496;  Hawkins  v.  the  certificate   was  not  entitled  to  be 

Mallby,  id.   505  ;  Cruse  v.   Paine,  id.  paid  a  dividend  until  after  the  interest 

641  ;    Castellan   v.    Hobson,   L.  R.,  10  on  such  bonds  and  the  rent  under  such 

Eq.  47 ;  Bowering  v.  Shepherd,  Ij.  R.,  leases     had     been   paid.       See,    also, 

6  Q.  B.  309  ;  Shepherd  v.  Gillespie,  L.  Thompson  v.  Erie  R.  R.  Co.,  42  How. 

R.,  3Ch.  764.  Pr.  (N.  Y.)  68. 

*  Green's  Brice's  Ultra  Vires,  130.  ^  Howell  v.  Chicago  &  N.  W.  R.  Co., 

s  Scott  V.   Eagle  Ins.   Co.,  7  Paige,  51  Barb.   378;    Atkins   v.    Albree.   12 

198;  Karnes  v.  Rochester,  etc.,  R.  Co.,  Allen,  359  ;  Minot  v.  Paine,  99  Mass. 

4  Abb.   Pr.  (N.  S.)  107.     In   St.  John  101;  Boston,  etc.,  R.  Co.  v.  Common- 

V.  ErieR.  R.  Co.,  10  Blatchf .  (U.  S.  wealth,  100  id.  399;    Daland  v.  Wil- 

C.    C.)    271,   where   a   certificate     of  liaras,  101  id.  571;  Leland  v.  Ilayden, 


Membeks  —  Stockholders  and  Stock.  157 

In  a  case  heard  in  the  United  States  Circuit  Court,'  the  court 
saj  :  "  Net  earnings  are  properly  the  gi-oss  receipts,  less  the  expen- 
ses of  operating  the  road,  or  other  business  of  the  corporation. 
Interest  on  debts  is  paid  out  of  what  thus  remains,  that  is,  out  of 
the  net  earnings.  Many  other  liabilities  are  paid  out  of  the  net 
earnings.  When  all  liabilities  are  paid,  either  out  of  the  gross 
receipts  or  out  of  the  net  earnings,  the  remainder  is  the  profit 
of  the  shareholders,  to  go  toward  dividends,  wliich,  in  that  way, 
are  paid  out  of  the  net  earnings.'" 

A  recent  case  in  the  court  of  appeals  in  Kew  York  will  serve 
to  illustrate  the  legal  rights  in  such  cases.  A  stockholder  brought 
a  suit  against  a  corporation,  to  compel  it  to  declare  a  dividend. 
The  facts  were  as  follows :  The  corporation  had  on  hand,  on  de- 
posit and  securities,  $36,000.  Its  floating  debt  was  $1,000,  and 
the  funded  debt  payable  in  seventeen  years  at  six  per  centum  was 
$75,000.  The  yearly  current  expenses,  including  interest  on  the 
funded  debt,  was  about  $10,000,  and  the  corporation  had  no 
immediate  need  of  the  surplus  on  hand,  or  of  its  earnings,  except 
to  pay  the  current  expenses.  The  court  observed  :  "  The  property 
of  every  corporation,  including  all  its  earnings  and  profits,  belongs, 
primarily,  to  such  corporation,  exclusively,  and  not  to  its  stock- 
holders, individually  or  collectively.  They  have  a  certain  claim, 
it  is  true,  but  their  claims  are  always  subordinate  to  the  claims  of 
creditors,  and  the  latter  approach  much  nearer  to  the  condition  of 
ownership  than  the  former.  No  stockholder  can  entitle  himself 
to  any  dividend,  or  to  any  portion  of  the  capital  stock,  until  all 
debts  are  paid.  The  funds  on  hand,  which  the  plaintiff  asks  to 
have  divided  and  distributed  among  the  stockholders,  are  only 
about  half  sufiicient  to  pay  the  indebtedness  of  the  defendant.  It 
is  of  no  sort  of  consequence,  in  a  legal  point  of  view,  that  the 
debt  is  not  yet  due,  and  has  a  number  of  years  to  run  before  it 

102  id.  542  ;  Rand  v.  Hubbell,  115  id.  is  a  debt  that  is  payable  only  in  legal 

461 ;   Gifford   v.    Thompson,   id.  478  ;  tender  currency.  Ehle  v.  Chittenango 

Earp's  Appeal,  28Penn.  St.  368;  Wilt-  Bank,  24  N.  Y.  548.     But  see  Scott  v. 

bank's  Appeal,  64  id.  256.  A  dividend  Central,  etc.,  R.  Co.,  52  Barb.  45. 

^St.  John   V.    Erie   R.    R.   Co.,  10        ^  See,  also,  opinion  of  Bronson,  J., 

Blatchf.  271  ;  affirmed  in  the  supreme  in  People  v.   Supervisors,  4  Hill,  20 ; 

court  of  the  United  States, iu  22  Wall.  S.  C.  on  appeal,  7  id.  504. 
146. 


158  Private  Corporations. 

matures.  The  creditors  still  have  the  better  right  to  the  funds, 
which  the  defendant  holds  for  them  in  trust.  The  court  cannot 
undertake  to  say,  judicially,  that  the  future  business  of  the  corpo- 
ration will  be  prosperous,  nor  has  it  any  right  to  postpone  the 
rights  and  claims  of  creditors  to  future  earnings  and  accumula- 
tions, even  if  it  could  be  certain  they  would  accrue.  The  board 
of  directors,  in  their  discretion  and  in  view  of  all  the  facts  within 
their  knowledge,  might  do  this,  but  no  court,  I  ai3prehend,  would 
ever  undertake  to  deal  in  such  a  manner  with  the  funds  of  the 
corporation  which  was  indebted  to  an  amount  at  least  double  the 
fund  sought  to  be  distributed.  *  *  *  The  corporation  does 
not  stand  in  any  fiduciary  relation  to  its  stockholders.  *  *  * 
The  stockholders  are  in  no  sense  creditors  of  the  coi-^joration,  nor 
are  they  in  the  situation  of  partners.  They  are  constituent  parts 
of  the  corporate  body.  In  a  general  sense,  a  corporation  may  be 
regarded  as  the  trustees  of  its  creditors,  but  not  of  its  stockholders. 
The  action  has,  therefore,  no  foundation  of  a  trust  to  support  it."  * 

Sec.  94.  Effect  of  declaring  dividends. —  When  a  dividend  is  de- 
clared, it  becomes  a  debt  due  from  the  corporation  to  the  in- 
dividual stockholder,  and  if  the  corporation  deposit  the  money 
with  a  bank  for  the  benefit  of  the  stockholder,  it  does  not  thereby 
release  itself  from  liability  to  the  stockholder,  in  case  of  a  failure 
of  the  banking  company  to  pay  the  same.^  A  stockholder,  in  a 
moneyed  corporation,  has  a  perfect  ownership  over  his  stock,  and 
may,  as  we  have  seen,  sell  and  transfer  the  same  to  whom  it 
pleases,  and  the  corporation  has  no  right  to  restrain  him  in  so 
doing.  Such  stock  entitles  the  owner  to  his  proportion  of  the 
dividends,  which  may  be  from  time  to  time  declared  f  and  a  de- 
vise of  the  dividends,  without  qualification,  has  been  held  to  carry 
with  it  the  stocks  themselves.'* 


'  Karnes  v.  Rochester,  etc.,  R.  Co., 4        ^  King  v.  Paterson  R.  Co.,  5  Dutch. 

Abb.  Pr.CN.S.)107;  Uticav.  Churchill,  82,  504. 

83  N.  Y.  338.  See.  also,  People  v.  Com-        ^  Brightwell  v.  Mallory,  10  Yerg.  196; 

missioners,  35  id.  433;    S.   C,  4  Wall.  State  v.  Franklin  Bank,  10  Ohio,  90. 

244;  Waterman  v.  Troy,  etc.,  R.  Co.,  But  a   stockholder  must   prove  a  de- 

8  Gray,  433"  Cunningham  v.  Vermont,  mand  before  he  can  maintain  an  action 

etc.,   R.   Co.,  13  id.  411;  McLaughlin  for  a  dividend.     Scott  v.  Central,  etc., 

V.  Detroit,  etc.,  R.  Co.,  8    Mich.    ICO  ;  R.  Co.,  53  Barb.  45. 
City  of  Ohio  v.  Cleveland,  etc.,  R.  Co.,        *  Collier  v.  Collier,  3  Ohio  St.  374. 
6  Ohio  St.  489. 


Members  —  Stockholders  and  Stock.  159 

But  an  agreement  by  a  corporation  to  pay  annual  dividends  to 
preferred  stockholders,  witli'out  reference  to  its  ability  to  pay 
tlieui  from  its  earnings,  is  opposed  to  public  policy  and  void.' 

Sec.  95.  a  stockholder  may  sue  for  his  dividends. —  When  a  divi- 
dend is  declared  payable  at  a  certain  time  it  thereupon  becomes 
the  individual  property  of  the  stockholder,  aud  he  is  entitled  to 
receive  the  same  upon  or  after  the  day  fixed  for  payment  on  de- 
mand of  the  proper  agent.  In  such  a  case  the  dividend  is  considered 
as  a  severance  of  so  much  as  belongs  to  each  stockholder  from  the 
common  fund  of  the  corporation,  and  is  thereafter  held  in  trust 
by  the  company  for  them,  and  cannot  be  appropriated  to  other 
purposes.  It  is  a  debt  due  from  the  time  it  is  set  apart  to  the 
stockholder,  and  if  not  paid  on  demand  he  may  maintain  an  action 
therefor."  And  where  the  money  is  subsequently  withdrawn  by 
the  directors  and  the  corporation  becomes  insolvent  the  stock- 
holders have  an  equitable  lien  upon  the  fund  to  the  extent  of  their 
unpaid  share  of  the  dividend,  and  such  lien  follows  the  fund  into 
the  hands  of  the  receiver,  and  will  be  enforced  by  a  court  of 
equity.^ 

Sec.  96.  income  on  stock  in  trust.  — If  shares  of  a  capital  stock  of 
a  corporation  are  held  as  a  fund  in  trust  to  pay  the  income  to 
a  person  until  his  death,  and  then  convey  the  capital  to  another, 
the  regular  dividends  declared  and  paid  would  of  course  consti- 
tute income  to  which  the  trustee,  for  the  benefit  of  the  cesticique 
trust,  would  be  entitled,  and  also  any  dividends  on  shai-es  of 
additional  stock  distributed  as  part  of  the  net  earnings  of  the  cor- 
poration. But  he  would  not  be  authorized  to  ti-eat  the  additional 
stock  itself  as  income,  for  the  benefit  of  his  cestui  que  trust.*     A 

'  Lockhart  v.  Van  Alstyne,  31  Mich.  Co.,  29  N.  J.  L.  83;   Jackson  v.  Plank 

76.     See,  also,  St.  John  v.  Erie  R.  Co.,  R.  Co.,  31  N.  J.  L.  277;  Philadelphia, 

10  Blatchf.  271.  etc.,    R.    Co.   v.  Cowell,  28   Penn.  St. 

2Kanev.  Bloodgood,  7  Johns.  Ch.90;  329,    Marine   Bank   v.  Biays,  4   H.  & 

Carpenter  v.  New  York,  etc.,  R.  Co.,  5  J.  338  ;  State  v.  Baltimore,  etc.,R.  Co., 

Abb.  Pr.  377;  Jones   v.   Terre   Haute,  6  Gill,  363  ;  City  of  Ohio  v.  Cleveland, 

etc.,  R.  Co.,  57  N.  T.  196;  Howell  v.  etc.,  R.  Co.,  6  Ohio  St.  489 :  Le  Roy  v. 

Chicago,  etc.,   R.  Co.,  51  Barb.  378 ;  Globe  Ins.  Co.,  2  Edw.  Ch.  657. 

Granger    v.    Bassett,   98    Mass.   463;  ^  jyjatter  of  Le  Blanc,  4  Abb.  N.  C. 

Stoddard  v.   Sbetucket,  etc.,  Co.,  34  (N.  Y.)221. 

Conn.  543  ;  King  v.  Paterson,  etc.,  R.  ^Minot  v.  Paine,  99  Mass.  101. 


160  Private  Corporations. 

fund  bequeathed  in  trust  to  pay  the  income  to  one  until  his  death, 
and  then  the  capital  to  another,  included  shares  in  the  stock  of  a 
railroad  corporation.  This  corporation,  out  of  its  net  earnings 
accninulated  during  the  term  of  the  trust,  bought  in  the  market 
part  of  its  own  stock,  invested  other  earnings  to  an  amount  equal 
to  twenty  per  centum  of  the  par  value  of  the  residue  of  its  stock 
in  property,  a  large  portion  of  which  was  not  required  for  the 
use  and  improvement  of  the  railroad,  and  voted  to  create  a  num- 
ber of  new  shares  of  the  same  par  value,  to  be  issued  and  disposed 
of  as  the  directors  should  deem  proper.  The  directors  then  voted 
to  offer  to  the  individual  stockholders  the  right  to  take  part  of 
the  new  stock  at  par,  in  the  projDortion  of  twenty  per  cent  of  new 
shares  for  each  old  share  held  by  the  taker,  and  that  if  an 3'  indi- 
vidual stockholder  should  not  avail  himself  of  his  right  in  this 
respect,  they  would  dispose  of  it  as  they  might  see  fit ;  and  at  the 
same  time  they  declared  a  dividend  of-  forty  jjer  centum  on  the 
old  shares  held  by  the  individual  stockholders,  payable,  ' '  twenty 
per  cent  in  the  shares  of  the  company  which  were  purchased  and 
held  by  this  corporation  in  its  corporate  capacity,  and  twenty  per 
cent  in  cash,  derivable  from  the  shares  which  the  stockholders 
entitled  to  this  dividend  shall  respectively  pay  for  the  new  stock 
taken  by  them,  under  the  terms  of  the  preceding  vote."  On  these 
facts  the  question  presented  to  the  court  was,  what  part  of  the 
avails  of  the  stock  was  income  to  which  the  tenant  for  life  was 
entitled,  and  what  part,  if  any,  belonged  to  the  trust  fund.  The 
court  held,  that  of  the  avails  of  the  dividend  to  the  trustee,  so 
much  as  was  derived  from  the  first  twenty  per  cent  was  payable 
as  income  to  the  life  tenant,  and  so  much  as  was  derived  from 
the  second  twenty  per  cent  accrued  to  the  capital  of  the  trust  fund.' 

Sec.  97.  Money  in  hands  of  directors.  —  Money  in  the  hands  of 
the  directors  may  be  income  to  tiie  corporation,  but  it  cannot  be 
considered  income  to  the  subscribers  until  a  dividend  is  made. 
Thus,  where  the  company  invests  in  machinery,  or  in  railroad 
tracks,  depots,  I'olling  stock,  or  any  other  permanent  improvement 
for  enlarging  or  carrying  on  their  legitimate  business,  it  does  not 

1  Leland  v.  Hayden,  102  Mass.  542  (1869).  See,  also,  Wiltbank's  Ajipeal,  64 
Penn.  St.  256. 


Memhers  —  Stockholders  and  Stock.  161 

become  income  to  the  sliarelioldcrs,  but  is  accretion  to  the  capital ; 
and  it  is  the  same  whether  thej  increase  the  shares  or  the  par 
value  of  the  shares,  or  leave  the  shares  unaltered.  And  if  the 
number  of  shares  is  increased  for  purposes  merely  speculative,  it 
is  an  increase  of  capital  stock  and  not  of  income,  and  it  has  been 
suggested  that  it  would  be  practically  unwise  for  courts  to  go  be- 
hind the  action  of  the  company  and  attempt  to  ascertain  how 
they  came  by  the  funds  out  of  which  they  declare  either  their 
cash  or  their  stock  dividends.' 

The  right  to  take  new  shares  on  increase  of  the  capital  stock  is 
a  benefit  or  interest  which  attaches  to  the  stock,  and  is  not  usually 
considered  as  income  derived  from  the  prosecution  of  the  corpo- 
rate business,  but  inherent  in  the  shares ;  and  it  is  important  to 
understand  this  principle,  as  we  have  seen  in  cases  where  stock  is 
left  in  trust  to  pay  the  income  for  life  with  one  person  with 
remainder  of  the  principal  to  another.''  If  a  stock  dividend  under 
such  circumstances  is  declared,  the  trustee  would  take  it  as  capital 
for  the  remainderman,  and  not  as  income  for  the  benefit  of  the 
life  estate,  although  it  is  the  result  of  the  net  earnings  of  the  cor- 
poration. ^ 

Sec.  98.  Right  to  sell  and  assign  shares.  —  The  capital  stock  of  an 
incorporated  company  is  personal  property ;  but  the  certificate  of 
shares  thereof,  or  other  evidence  of  ownership  or  title,  has  none 
of  the  qualities  of  negotiable  or  commercial  paper.*  The  owner 
may  sell  and  assign  such  shares  like  any  other  personal  property. 
The  right  of  alienation  is  an  incident  of  such  property,  as  well  as 
any  other,  and  a  by-law  of  the  corporation  prohibiting  alienation, 
or  placing  restraints  thereon,  is  void.* 

'  Boston,    etc..    R.   Co.   v.  Common-  pany  is  property  within  the  meaning 

wealth,  100  Mass.  399.  of  the  Civil  Code  of  Kentucky.  Field  v. 

2  Atkins  V.  Albree,  13  Allen,  359.  Moutmollin,  5  Bush,   455.     And  a  by- 

2  Minot  V.  Paine,  99  Mass.  101.  See,  law,  which  imposes   restraints  on,  or 

also,  Daland  v.  Williams,  101  id.  571  ;  unreasonable  impediments   to  aliena- 

Leland  v.  Hayden,  102  id .  543  ;  Heard  tion  or  the  transfer  of  stock,  unless  the 

V.  Eldredge,  109  id.  258 ;  Rand  v.  Hub-  power  so  to  do  has  been  conferred  by 

bell,  115  id.  461;  Gifford  v.  Thompson,  the  fundamental  law  of  its  institution, 

id.  478.  would  be  void.     Sargeant  v.  Franklin 

*  Weaver  v.  Barden,  3   Lans-  338.  Ins.    Co.,    8    Pick.    90;     Quiner    v. 

See,  also,  Shaw  v.  Spencer,  100  Mass.  Marblehead  Ins.  Co.,    10   Mass.    476. 

382.  See,  also,  Robinson  v.  Chartered  Bank, 

^  Moore  V.  Bank  of  Commerce,  52  Mo.  L,  R.,  Eq.  32.     But  in  Missouri  it  has 

337.     Stock  in  an  incorporated  com-  recently  been  held  that  a  by-law  for- 

21 


162  PkIVATE    Co]tPORA.TION8. 

But  tliG  purchaser  or  assignee  of  shares  of  such  capital  stock 
acquires  no  better  right  or  title  than  tlie  seller  or  assignor  had, 
and  takes  it  subject  to  the  equitable  and  legal  rights  of  the  cor- 
poration, and  of  previous  innocent  hona  fide  purchasers.  If  tlxe 
rio'jitful  owner  has  invested  another  with  the  usual  evidence  of 
title,  or  an  apparent  anthority  to  dispose  of  the  stock,  he  will  be 
estopped  from  making  any  claim  against  an  innocent  purchaser 
dealing  upon  the  faith  of  such  apparent  ownership  or  right  of  dis- 
position.' And  to  entitle  a  party  to  the  character  of  a  hona  fide 
purchaser,  without  notice  of  a  prior  right  or  equity,  he  must  not 
only  have  obtained  the  legal  right  to  the  shares,  but  he  must  have 
paid  the  purchase-money,  or  some  part  thereof,  or  have  parted 
with  value  on  the  faith  of  the  purchase,  before  notice  of  such 
prior  right  or  equity  ;  and  the  mere  giving  of  security  to  pay  the 
purchase-money  is  not  of  itself  suiBcient  to  entitle  the  purchaser 
to  protection.^  A  delivery  of  stock  as  collateral  security  for  an 
indebtedness,  with  the  usual  power  of  attorney  indorsed  thereon, 
and  signed  by  the  owner  in  blank,  transfers  all  the  owner's  title, 
both  legal  and  equitable,  subject  only  to  the  liens  or  claims  of  the 
corporation,  and  only  the  holder  of  the  certificate,  with  power  to 
transfer  can  cause  a  transfer  on  the  books  of  the  company.^ 

Seo.  99.  Transfer  of  stock.  —  Although  certificates  of  shares  do 
not  j)ossess  the  ordinary  qualities  of  commercial  contracts  or 
negotiable  obligations,  and  assignments  of  them  may  be  subject 
to  all  legal  and  equitable  claims  of  the  company,  yet  every  reaso;i- 
able  facility  is  usually  offered  for  the  transfer  of  them  from  one 

bidding  the  transfer  of  stock,  when  of  stock  under  execution,  the  pur- 
the  owner  is  indebted  to  the  corpora-  chaser  cannot  recover  the  shares  or 
tion,  is  valid,  although  inconsistent  their  value,  where  such  a  by-law  ex- 
with  the  general  law  of  the  state  iats,  until  such  indebtedness  be  satis- 
governing  general  transfer  of  prop-  fied.  Mechanics'  Bank  v.  Merchants' 
erty  ;  and  in  case   of  a  sale  of  shares  Bank,  45  Mo.  513 

1  Weaver  v.  Barden,  49  N.  Y.  286.  ^  Id.     See,  also.  Mechanics'  Bank  v. 

If  a  hona  fide  assignee  of  bank  stock  N.  Y.  R.  Co.,  13  N.  Y.  627. 

has  a  valid   transfer  thereof   on   the  ^  Smith   v.    American  Coal    Co.,    7 

books  of  the  bank,  and  takes  the  same  Lans.  317.     The   assignee  acquires  a 

without  any  notice  of  previous  assign-  legal  title  as  against  the  assignor,  but 

ment  of  the  stock  not  entered  on  the  only  an  equitable  one  as  against   the 

transfer  book,,  he  has  a  prior  and  bet-  company.     But  the  manual  delivery 

ter  right  than  the  previous  assignee,  of   the   certificate     is   not   absolutely 

Cady  V.  Potter,  55  Barb.  463.  necessary .     Grymes  v.  Hone,    49  N. 

Y.  17. 


Membeks  —  Stockholders  and  Stock.  163 

to  another.  But,  for  tlie  protection  of  tlic  owner  and  tlie  cor- 
poration, and  to  afford  tlie  latter  knowledge  which  it  may  need 
in  giving  the  required  notice  to  members  for  certain  purposes,  it 
is  usually  provided  that  transfers  of  stock  shall  only  be  made  on 
a  book  kept  for  that  purpose  in  the  office  of  the  company,  and 
under  the  care  of  some  officer  or  agent  appointed  for  that  purpose, 
and  the  corporation  may  be  responsible  on  general  principles  for 
any  negligence  or  misconduct  on  the  part  of  such  agent  in  per- 
forming  such  duty,  whereby  injury  results  to  others.  A  trust  is 
thus  imposed  upon  the  corporation,  and  if  for  a  failure  to  perform 
its  duty  a  stockholder  is  injured,  it  is  responsible.  Thus,  where 
one  having  a  certificate  of  shares  of  stock  in  a  railroad  company 
duly  assigned  them  to  another,  and  afterward,  on  application  by 
the  assignor  and  the  presentation  to  the  company  of  an  affidavit 
that  he  had  lost  his  certificate,  procured  the  issne  of  a  new  certifi- 
cate in  its  stead  upon  giving  a  bond  "  to  save  the  company  harm- 
less from  all  loss  by  reason  of  said  second  issue  and  from  any 
liability  or  account  of  *  *  the  stock  described  in  said  affidavit ;" 
and  the  company  afterward  refused  to  allow  any  transfer  of  the 
stock  on  its  books  when  requested  by  the  holder  of  the  original 
certificates,  and  the  stock,  of  the  value  of  $Y00,  depreciated  so 
that  it  became  worthless,  in  an  action  therefor  against  the  com- 
pany and  the  assignor  it  was  held  that  an  action  would  be  sustained 
against  such  company  for  such  refusal ;  and  that,  although  the 
bond  was  general  assets  of  the  company,  the  plaintiff  could  not 
have  by  subrogation  a  right  of  action  in  equity  npon  it.*  And 
when  the  charter  provides  for  the  transfer  of  shares  only  on  the' 
books  of  the  corporation,  still  the  assignment  of  a  certificate  with 
a  written  power  to  the  assignee  to  transfer  the  stock  to  himself 
on  the  books  is  a  symbolical  delivery  affecting  those  who  have 
notice  thereof,  as  if  the  transfer  had  been  made  on  the  books  of 
the  corporation.''  And  where  one  having  sufficient  funds  in  bank 
at  the  time,  paid  by  his  check  for  certain  shares  which  were  trans- 
ferred on  the  books  thereof  to  his  credit,  but  no  certificate  was 
issued,  and  the  bank  was  afterward  notified  of  an  adverse  claim 

'  Greenleaf  v.    Ludington,  15    Wis.         *  Bank   of   America   v.    McNeil,    10 
558.  Bush,  54.     See,    also,    Hill   v.    New- 

icliawanick  Co.,  48  How.  Pr.  527. 


164  Private  Corporations. 

to  liis  deposit,  growing  out  of  previous  and  independent  frauds 
which  the  depositor  had  committed,  and  the  bank  refused  to  pay 
the  clieck,  and  the  assignor  became  a  bankrupt,  it  was  held  that 
the  assignee  'of  the  shares  could  not  maintain  a  bill  against  the 
original  owner  and  the  corporation  to  compel  a  conveyance 
thereof.^  And  generally  it  may  be  said  that  where  the  charter  of 
a  company  requires  that  its  stock  shall  be  transferred  in  a  certain 
way,  a  long  continued  and  universal  disregard  of  that  method 
estops  the  company  from  setting  up  the  charter  provisions  in  that 
respect  to  the  prejudice  of  third  persons,^  the  rule  being  that 
a  transfer  of  stock  made  according  to  the  usage  of  the  company 
is  valid,  as  against  the  company,  although  it  does  not  conform  to 
the  requirements  of  its  by-laws/  The  equitable  title  to  stock  may 
pass,  although  the  transfer  is  not  made  according  to  the  provisions 
of  the  charter  or  by-laws.*  The  provision  usual  in  charters  that 
no  transfer  of  the  stock  shall  be  effec'tual  until  entered  on  the 
books  of  the  company  is  a  regulation  designed  for  the  security 
of  the  corporation  itself,  and  of  third  persons  taking  transfers 
without  notice  of  any  prior  equitable  transfer.  It  relates  to  the 
transfer  of  the  legal  title,  and  not  of  any  equitable  interest  sub- 
ordinate to  that  title.  As  between  the  vendor  and  purchaser,  a 
transfer  not  in  conformity  to  such  provision  passes  the  equitable 
title  and  divests  the  vendor  of  his  interest,^  and  courts  of  equity 
will,  where  there  is  no  statute  to  prevent  it,  protect  this  equitable 
title  against  the  attachments  of  creditors  of  the  vendor,  who  have 
notice  of  such  transfer.     Thus  in  a  Connecticut  case,*  it  appeared 

'  Comins  v.  Coe,  117  Mass.  45.  ance.     He  said  :  "  The  attaching  credi- 

^  Bangate    v.    Shortridge,    5    H.    L.  tors,  who  are  the    real  parties    in  in- 

Cas.  297.  terest  in  this  cause,  assume  that  by  a 

^  Sargent   v.  Essex  Marine  Railway,  course    of    decisions    in    Connecticut, 

9  Pick  204;  Chambersburgh  Ins.  Co.  stock  in  a  corporation  is  held  to  be  so 

V.  Smith,  11  Penn.   St.    120  ;  Choteau  peculiar  in  its    nature    and    character 

Springs  Co.  v.  Harris,  20  Mo.  383.  that  no  transfer   can    be    made    of  it, 

■*  Colt  V.  Ives,  31  Conn.  25  ;  Sargent  or  even  any  equitable  interest  acquired 

V.  Franklin  Ins.  Co.,  8  Pick.  90.  in  it,  as   against    attaching    creditors, 

*  Black  V.  Zacharie,  3  How.  (U.  S.)  unless  by  an  actual  transfer  made 
483  ;  Farmers'  Bank  of  Maryland  v.  upon  the  corporation  books,  or  re- 
Iglehart,  6  Gill  (Md.),  50  ;  Duke  v.  corded  in  them,  in  the  mode  pre- 
Cahawba  Navigation   Co.,  10  Ala.  82.  scribed  by  the  charter  or  by-laws  of 

*  Colt  V.  Ives,  ante.  We  append  the  the  institution  ;  and  the  cases  of  The 
opinion  of  HiNMAN,  Ch.  J.,  in  this  case,  Marlborough  Manufacturing  Co.  v. 
as  it  is  of  suificient  importance  to  give  Smith,  2  Conn.  579  ;  Northrop  v.  New- 
it  a  place  in  a  work  of  this  character,  town  &  Bridgeport  Turnpike  Co.,  3  id. 
upon  a  question  of   so  much  import-  544,   and   Northrop   v.   Curtiss,  5   id. 


Members  —  Stockholders  and  Stock. 


165 


that  one  William  Jarvis  was  in  1846  appointed  guardian  of  tlie 
petitioner  Elizabeth  Colt,  who  was  his  daiigliter,  and  was  tlien  a 
minor  and  unmarried.     At  that  time  there  came   into  his  hands 


24G,  subsequently  sanctioned  by  more 
modern  cases  in  our  reports,  as  is* 
claimed,  are  relied  upon  in  support  of 
the  position.  The  first  two  of  these 
cases,  and  the  case  of  The  Oxford 
Turnpike  Co.  v.  Bunncl,  6  Conn.  552, 
do  undoubtedly  decide  that,  in  actions 
at  la\v,  in  cases  where  the  legislature 
in  the  act  of  incorporation  either  pre- 
scribe the  mode  of  transferring  stock, 
or  authorize  the  company  to  do  it  in 
their  by-laws,  and  the  company  do  in 
their  by-laws  prescribe  a  mode  as  the 
only  one  to  be  pursued,  that  mode 
must  be  followed,  or  the  legal  title 
will  not  pass  by  an  assignment  which 
would  be  good  at  common  law  had  no 
particular  and  exclusive  mode  of 
transfer  been  prescribed.  These  cases, 
and  others  to  the  same  effect,  being 
actions  at  law,  conversant  only  with 
what  at  the  time  was  considered  the 
strict  legal  title  to  corporate  stock, 
have  necessarily  no  controlling  force 
in  a  case  depending  upon  equitable 
instead  of  legal  principles.  And  al- 
though the  case  of  Korthrop  v.  Curtiss 
was  upon  a  bill  in  chancery  praying 
that  the  legal  title  to  certain  shares  of 
stock  might  be  transferred  to  the 
plaintiff,  who  claimed  the  equitable 
title  thereto,  yet  the  case  itself  shows 
that  the  plaintiff  relied  not  only  upon 
what  he  considered  an  equitable  as 
distinguished  from  a  legal  assignment 
of  the  stock  to  himself,  but  more  par- 
ticularly upon  the  fact  that  the  party 
from  whom  he  claimed  to  have  de- 
rived his  title,  such  as  it  was,  had 
only  an  equitable  interest  in  the  stock 
to  assign,  and  therefore  could  not 
create  in  the  plaintiff  as  his  assignee 
any  better  title  than  he  himself  had 
in  it ;  and  it  was  upon  this  last  ground 
that  he  insisted  that  the  intervening 
attaching  creditors  took  nothing,  be- 
cause, as  he  claimed,  the  debtor's 
equitable  interest  was  not  the  subject 
of  an  attachment.  The  court  was  of 
opinion  that  the  debtor  had  a  valid 
legal  title  at  the  time  his  stock  was 
attached  and  taken  in  execution,  and 
therefore  that  the  plaintiff's  title,  de- 
rived from  him  subsequently  to  the 
attachment,  was  of  no  validity,  and  on 


this  ground  dismissed  the  bill.  It 
appears  to  us,  therefore,  that  there  is 
nothing  in  any  of  these  cases  that 
ought  to  control  our  determination  of 
the  present  case,  contrary  to  the  strong 
equitable  claim  of  the  plaintiff,  as 
shown  in  the  facts  found  by  the  court, 
whatever  may  be  thought  of  some  of 
the  remarks  made  by  the  judges  in 
giving  reasons  for  the  decisions.  On 
the  contrary,  the  cases  themselves,  so 
far  as  they  decide  that  there  can  be  no 
legal  transfer  of  stock  except  upon  the 
books  of  the  company,  or  by  an  assign- 
ment actually  recorded  on  those  books, 
may  be  regarded  as  authorities  show- 
ing that  the  plaintiff  has  no  legal  title 
to  the  stock  and  is  therefore  justified 
in  applying  to  a  court  of  equity  for 
relief. 

Shares  in  the  stock  of  a  corporation 
are  the  subjects  of  sale,  mortgage  or 
pledge,  and  are  liable  to  attachment 
and  execution  like  other  personal 
property.  And  when  the  question  is 
between  a  vendee  and  an  attaching 
creditor  of  the  vendor,  as  to  which  of 
them  has  the  better  title,  and  it  ap- 
pears, as  it  does  here,  that  the  instru- 
ment of  transfer  or  assignment  was 
executed  prior  in  point  of  time  to  the 
service  of  the  attachment,  then,  if  the 
vendee's  purchase  was  made  in  good 
faith  and  for  a  valuable  consideration, 
as  to  which  no  question  is  made  in 
this  case,  it  would  seem  that  in  equity 
his  title  ought  to  prevail,  provided  he 
has  done  all  that  the  law  requires  of 
him,  and  all  that  it  was  possible  for 
him  to  do,  in  "taking  such  possession 
as  the  nature  of  the  property  is  sus- 
ceptible of.  In  regard  to  chattels 
there  must  be  a  substantial  change  of 
possession  accompanying  and  follow- 
ing the  sale,  or  it  will,  unexplained, 
be  conclusive  evidence  of  a  fraudulent 
trust,  which  will  render  the  sale  void 
as  to  creditors.  Possession  being  the 
usual  indication  of  ownership  in  per- 
sonal chattels,  the  law  looks  upon  the 
purchaser's  neglect  to  take  and  hold 
possession  of  the  property  purchased 
as  evidence  that  the  sale  was  fictitious, 
and  therefore,  as  to  the  vendor's  credi- 
tors, treats  the  property  as  still  his, 


16G 


PlilVATE    CoRPOKATIONS. 


about  $5,000  in  cash,  as  a  part  of  liur  estate,  no  part  of  the  prin- 
cipal of  which  liad  ever  been  paid  over  to  her.  The  petitioner 
was  married  in  185(3.     The  funds  belonging  to  the  j)etitioner  in 


notwithstanding  the  gale.  So  in  re- 
spect to  the  assignment  of  ordinary 
choses  in  action,  tliere  must  be  notice 
of  the  assignment  to  the  debtor — the 
assignment  conveying  but  an  equit- 
able interest  in  the  thing,  and  notice  to 
a  trustee  being  in  equity  the  ordinary 
and  only  practicable  mode  in  which 
an  assignee  can  protect  his  interest. 
And  in  the  case  of  the  purchase  of 
stocli  in  a  corporation,  there  must  be 
such  a  transfer  of  it  as  the  legislature 
in  the  charter  or  by  statute  piescribes  ; 
and  notice  of  the  assignment  of  choses 
in  action,  and  the  transfer  required  by 
statute  of  corporate  stock,  stand  in 
lieu  of  the  taking  and  retaining  of  the 
possession  of  personal  chattels  sold, 
being  the  only  possession  the  nature 
of  the  property  admits  of.  These  ele- 
mentary principles,  for  which  surely 
no  authority  need  be  cited,  it  is  neces- 
sary to  bear  in  mind  in  considering  a 
case  of  this  sort ;  since,  if  a  good  rea- 
son is  shown  for  not  giving  notice  of 
the  assignment  of  a  chose  in  action,  as 
was  the  case  in  Bishop  v.  Holcomb,  10 
Conn.  444,  or  for  the  failure  to  procure 
a  transfer  of  stock  on  the  books  of  a 
corporation,  as  in  this  case,  which 
would  have  been  sittiicient  to  excuse 
the  taking  possession  of  personal 
chattels  sold,  then  upon  the  same 
principles  upon  which  the  taking  pos- 
session in  the  latter  case  would  be 
excused,  it  would  seem  that  the  act 
which  is  ordinarily  required  in  order 
to  perfect  an  assignment  of  a  chose  in 
action  or  of  stock  in  a  corporation 
ought  in  equity  certainly  to  be  also 
excused. 

The  application  of  these  suggestions 
to  the  case  in  hand  seems  quite 
obvious.  We  need  not  determine 
whether  the  written  assignment  of 
the  stock  by  Mr.  Jarvis  passed  the 
legal  title  or  only  an  equita'ble  title, 
since  it  is  very  clear  that  in  either 
case  it  passed  all  the  substantial  in- 
terest, and  left  in  him,  if  any  thing, 
only  the  technical  legal  title. 

But  the  respondents  claim  that,  so 
long  as  this  bare  legal  title  remained, 
with  no  knowledge  on  the  part  of  his 
creditors  that  he  had  made  the  assign- 


ment, it  was  open  to  their  attach- 
ments as  his  to  the  same  extent  as  be- 
fore the  assignment.  V^'e  think  this 
too  broad  a  claim.  The  ground  on 
which  stock  sold  but  not  legally  trans- 
ferred is  open  to  attachment  by  the 
creditors  of  the  vendor  is,  as  has  been 
suggested,  the  same  upon  which  per- 
sonal chattels  sold  but  retained  in  the 
possession  of  the  vendor  are  liable  to 
attachment  by  the  vendor's  creditors. 
The  principle  in  each  case  is,  that  the 
retention  of  possession  is  a  badge  of 
fraud  —  that  is,  is  evidence  of  a  fraud- 
ulent secret  trust.  This  is  the  reason 
given  in  the  recent  case  of  Shipman  v. 
Mtna.  Ins.  Co.,  29  Conn.  245,  why 
certain  stock,  sold  by  a  written  bill  of 
sale  but  not  transferred,  was  held  to 
pass  to  the  trustee  in  insolvency  of 
the  vendor ;  the  trustee  being  held  to 
have  taken  precisely  as  an  attaching 
creditor  would  have  done. 

But  it  is  well  settled  that  this  re- 
tention of  possession  in  every  case  is 
only  a  badge,  that  is,  is  evidence  of 
fraud,  to  be  regarded  as  conclusive 
where  the  retention  of  possession  is 
voluntary  and  unnecessary. 

And  it  is  to  be  observed  that  it  is 
the  policy  of  the  law  which  forbids 
this  retention  of  possession  ;  and  the 
liability  of  the  property  to  attachment 
is  in  a  measure  a  punishment,  either 
for  the  actual  fraud,  or  the  negligence 
of  the  vendor.  Hence  it  is  said  in  the 
cases  on  this  subject  that  "  proof  of 
the  payment  of  a  full  consideration, 
or  of  the  justice  of  the  debt  for  which 
the  property  is  taken  on  legal  process, 
accompanied  with  the  highest  evidence 
of  the  honesty  of  the  transaction,  will 
not,  in  general, be  sufficient  to  repel  the 
legal  effect  of  neglecting  an  actual  re- 
moval of  the  property."  Mills  v.  Camp, 
14  Conn.  219  ;  Kirtland  v.  Snow,  20 
id.  23.  The  rule  therefore  is,  to  a 
certain  extent,  punitive  in  its  character, 
creating  something  in  the  nature  of  a 
forfeiture  for  the  violation  of  the 
policy  of  the  law.  It  is  on  this  ground 
that  the  rule  is  relaxed  where  there 
has  been  no  voluntary  violation  of 
this  policy.  If  the  manual  delivery 
of  the  article   sold,  in  consequence  of 


Members  —  Stockholders  and  Stock. 


167 


common  -with  funds  of  his  liad  been  invested  in  stocks  and  other 
securities,  and  it  was  agreed  between  them  a  short  time  before 
lier  marriage,  she  being  then  of  full  age,  that  she  should  select' in 


its  bulk  or  situation,  is  impossible,  the 
delivery  and  taking  possession  are  ex- 
cused. So  where  the  vendor  has  used 
due  diligence  to  make  delivery,  and 
the  vendee  to  take  possession,  the 
property  is  not  open  to  attachment ; 
as  la  the  case  of  Mead  v.  Smith,  10 
Conn.  34G,  where  it  was  held  that  a 
purchaser  in  New  York  was  to  be 
allowed  a  reasonable  time  to  come 
into  Connecticut  to  take  possession  of 
the  property  purchased  ;  and  it  is  al- 
ways held  that  a  grantee  is  to  be 
allowed  a  reasonable  time  to  get  his 
deed  to  the  recording  office.  Now 
whether  this  principle  ought  to  be 
applied  in  actions  at  law,  depending 
upon  rigid  legal  principles,  to  the  case 
of  the  transfer  of  stock  in  a  corpora- 
tion, perhaps  depends  upon  whether 
we  regard  the  dictum  in  the  case  of 
The  Newtown  &  Bridgeport  Turnpike 
Co.  v.  Northrop,  as  correct,  "  that  the 
transfer  on  the  books  of  a  company 
does  not  operate  by  giving  notice  of 
an  antecedent  conveyance,  but  is  a 
fact  essentially  necessary  to  originate 
a  title."  But  we  are  not  called  on  to 
discuss  this  question  at  this  time.  It 
is  only  necessary  to  say  tlierefore  that 
the  respondents  admit  that  such  is 
not  the  law  generally  ;  and  it  is 
claimed  merely  to  be  the  law  of  Con- 
necticut, founded  upon  peculiar  views 
which  have  obtained  here.  But 
whether  it  is  law  or  not,  so  far  as  re- 
gards the  bare  technical  legal  title, 
and  to  be  adhered  to  in  trials  at  law, 
we  are  satisfied  that  it  ought  not  to 
be  regarded  as  having  the  controlling 
force  and  efficacy  claimed  for  it  in 
equity.  No  such  ground  was  taken 
or  suggested  in  the  case  of  Shipman 
V.  The  ^tna  Ins.  Co.,  before  referred 
to  ;  and  the  late  case  of  The  Bridge- 
port Bank  v.  The  New  York  &  New 
Haven  R.  R.  Co.,  30  Conn.  231,  pro- 
ceeded throughout  upon  the  idea  that 
the  plaintiffs  had  a  good  equitable 
title  to  the  stock  claimed  in  that  case. 
In  analogy  then  to  the  principles 
which  have  been  suggested,  we  think 
the  effort  of  the  vendor  to  get  the 
assignment  perfected  on  the  transfer 
books  of  the  company,  and  on  failure 


to  accomplish  this  his  effort  to  make 
the  assignment  as  notorious  as  possi- 
ble, constituting  not  only  due  diligence 
but  all  the  diligence  on  his  part  that 
it  was  possible  to  exercise,  ought  to 
exempt  this  retention  of  possession 
from  the  condemnation  of  tlie  law,  if 
a  retention  of  possession  ever  can  be. 
Indeed  the  retention  of  possession  was 
as  nearly  nominal  as  possible.  Assum- 
ing then  that  the  respondents  are 
correct  in  the  claim  that  this  retention 
of  possession  involves  the  retention  of 
the  naked  legal  title  also,  is  this  cir- 
cumstance sufficient  to  distinguish 
the  case  from  those  cases  where  the 
retention  of  possession  by  the  vendor 
may  be  excused  or  justified?  In  the 
case  of  the  sale  of  personal  property 
the  mere  sale  is  ordinarily  sufficient  to 
pass  the  legal  title  between  the  parties 
before  delivery ;  while  here  it  is 
claimed  that  the  formal  transfer  on 
the  books  of  the  company  was  neces- 
sary for  that  purpose.  But  ought  this 
distinction  to  be  allowed  to  deprive 
the  petitioner  of  her  property,  when, 
if  it  was  of  any  other  description,  she 
would  confessedly  hold  it?  Is  the 
distinction  so  material  that  the  case 
must  rest  upon  the  mere  fact  that  a 
bare  legal  title  was  retained  against 
the  desire  of  the  vendor  and  his  ut- 
most effort  to  convey  it?  This  cer- 
tainly is  to  place  the  case  upon  the 
most  technical  ground  possible,  and  it 
would  vest  in  corporations  and  their 
officers  the  power  to  prevent  the  trans- 
fers of  their  stock  by  the  holders  of  it 
—  a  power  which  it  is  too  much  to  be 
feared  would  not  always  be  exercised 
with  the  most  disinterested  motives. 
It  is  true  there  will  sometimes  be 
cases  where  a  mere  technical  title  will 
prevail ;  but  it  is  desirable,  so  far  as 
practicable,  that  the  substantial  and 
equitable  ownership  should  be  sus- 
tained rather  than  a  technical  title  ; 
and  so  far  as  the  rule  was  intended  to 
be  punitive  in  its  application,  in  order 
to  compel  a  conformity  to  the  policy 
of  the  law,  there  is  no  reason  why  a 
party  who  has  done  all  that  he  possi- 
bly could  should  be  made  to  suffer  any 
penalty.     The   plaintiff  then,   having 


1G8  Pkivate  Corporations. 

payment  of  the  $5,000,  from  any  of  the  stock  tlien  owned  by 
liiin,  such  an  amount  as  at  the  par  value  would  amount  to  that 
sum.  She  thereupon  selected  the  stock  of  tlie  Hartford  and  New 
Haven  Railroad  Company,  and  Mr.  Jarvis  assented  tliereto,  but 
the  stock  was  not  at  that  time  transferred  to  her,  though  an  in- 
strument in  writinw-  for  the  purpose  of  transferi-ing  it  was  drawn, 
but  remained  unexecuted.  Afterward,  on  the  10th  of  August, 
1857,  the  stock  so  intended  to  be  transferred  to  her  was  attached 
at  the  suit  of  the  Middletown  Savings  Bank  as  the  property  of 
Mr.  Jarvis.  Mr.  Jarvis,  not  knowing  that  the  stock  was  about  to 
be  attached,  had  on  the  same  day  gone  to  Hartford  for  the  pur- 
pose of  transferring  it  in  pursuance  of  the  agreement,  but  learn- 
ing that  the  same  had  been  attached  about  an  hour  before  his  ar- 
rival, and  believing  that  the  attachment  would  soon  be  removed, 
he  deferred  transferring  it  to  the  petitioner  at  that  time.  After- 
ward, on  the  IGtli  of  September,  1857-,  Mr.  Jarvis  transferred 
forty-nine  shares  of  the  stock,  subject  to  the  attachment  to  the 
petitioner,  by  the  following  instrument  executed  by  him : 

"For  value  received  of  Elizabeth  H.  Colt,  of  the  city  and 
county  of  Hartford,  I  hereby  assign  and  transfer  unto  the  said 
Elizabeth  H.  Colt  all  my  right,  title  and  interest  in  and  to  forty- 
nine  shares  of  the  capital  stock  of  the  Hartford  and  New  Haven 
Railroad  Company,  now  standing  in  my  name  on  the  books  of 
said  company.  Said  stock  is  now  subject  to  an  attachment  in 
favor  of  the  Middletown  Savings  Bank  for  the  sum  of  $5,P00. 
And  I  appoint,  authorize  and  empower,  as  my  attorney,  H.  Fitch, 
Esq.,  of  said  city  of  Hartford,  for  me  and  in  my  name  to  trans- 
fer said  stock  to  said  Elizabeth  H.  Colt  on  the  books  of  said 
company.  In  witness  whereof,  I  have  hereunto  set  my  hand  and 
seal,  this  16th  day  of  September,  1857. 

"  WILLIAM  JARVIS.     (Seal.) " 

"Witness,  S.  P.  Conner." 

On  the  same  day  he  placed  the  instrument  in  the  hands  of 
Horatio  Fitch,  then  secretary  of  the  company,  for  record,  and  for 
whatever  might  be  needful  in  relation  thereto,  according  to  the 

done,  or  having  had  done  for  her,  all  acquired  a  perfect  equitable    title  to 

that  could  be  done,  is  wholly  without  the    stock,  and  she   had   taken    every 

fault.      Her  debt  was   of  as   high  a  possible    means   to  obtain    the   legal 

nature  as  the  respondents'.     She  had  title  also." 


Members  —  Stockholdeks  and  Stock,  169 

by-laws  of  the  company,  and  at  tho  same  time  surrendered  the 
certificate  of  stock  wliich  he  held ;  but  the  president  of  the  com- 
pany then,  and  at  all  times  thereafter  before  the  bringing  of  the 
present  petition,  declined  to  permit  the  instrument  to  be  recorded, 
or  any  transfer  to  be  made  on  the  books  of  the  company,  because 
the  shares  had  been  attached  as  before  stated ;  and  the  secretary 
declined  for  this  reason  to  act  further  in  the  premises  than  to 
enter  on  the  certificate  and  transfer  the  time  when  the  same  were 
received,  and  the  instrument  was  not  at  the  time  of  the  attach- 
ments of  the  respondents  recorded  upon  the  books  of  the  com- 
pany. The  instrument  of  transfer  w^s  drawn  in  all  respects  ac- 
cording to  law,  and  according  to  the  by-laws  of  the  company,  and 
the  original  certificate  was  duly  surrendered  to  the  company,  and 
the  president  and  secretary  had  no  excuse  for  not  permitting  the 
transfer  to  be  recorded,  unless  the  facts  stated  constitute  in  law 
such  an  excuse. 

The  charter  of  the  company  provided  that  the  stock  of  the 
company  should  "be  transferred  in  such  manner  as  the  by-laws 
of  said  company  [should]  direct."  The  by-law  of  the  company 
with  regard  to  the  transfer  of  stock  was  as  follows : 

"  9th.  Regular  transfer  books  shall  be  kept  by  the  secretary,  at 
the  office  of  the  company  in  Hartford  only,  and  certificates  of 
stock  such  as  are  now  in  use  shall  be  issued,  signed  by  the  presi- 
dent and  countersigned  by  the  secretary.  No  transfer  shall  be 
permitted  but  by  stockholders  in  person,  or  by  power  of  attor- 
ney duly  attested  by  at  least  one  witness,  and  no  transfer  shall  be 
permitted  but  on  the  surrender  of  the  certificate  wliich  had  been 
issued  therefor,  unless  bonds  of  indemnity,  approved  by  the  board, 
are  given." 

The  stock  remained  subject  to  the  attachment  of  the  Middle- 
town  Savings  Bank  until  the  27tli  of  March,  1858,  when  judg- 
ment having  been  recovered  and  execution  satisfied  from  other 
property,  the  attachment  was  determined,  and  the  stock  was  then 
free  from  all  incumbrances  prior  in  date  to  the  assignment  to  the 
petitioner ;  but  the  company  still  refused  to  cause  the  transfer  to 
be  recorded  upon  their  books,  on  the  ground  that  the  stock  had, 
subsequently  to  the  assignment,  been  attached  by  the  respondent 
Ives,  whose  suit  was  then  pending.  The  judgment  obtained  on 
22 


170  Private  Corporations. 

tliis  attaelimcnt  liad,  since  the   bringing  of  the   present   petition, 
been  otherwise  satisfied. 

Afterward,  on  the  17tli  of  December,  1858,  writs  of  attach- 
ment were  levied  on  the  stock,  as  the  property  of  Mr.  Jarvis,  by 
leaving  copies  thereof  with  the  secretary  of  the  company  by  the 
officer  serving  the  same,  at  the  suits  respectively  of  Truman 
French  and  Edward  S.  llowland,  two  of  the  respondents ;  each 
placed  writs  of  attachment  in  the  hands  of  an  officer  with  in- 
structions to  attach  this  stock.  When  the  officer  went  to  the 
secretary  of  the  company  he  M'as  informed  by  the  secretary  that 
the  stock  stood  on  the  books  of  the  company  in  the  name  of 
Jarvis,  but  that  he  then  held  and  had  held  for  some  time  an  as- 
signment of  the  stock  to  the  petitioner,  and  a  power  of  attorney 
from  Mr.  Jarvis  to  transfer  the  stock  to  her  on  the  books  of  the 
company.  But  the  officer  attached  the  stock  notwithstanding 
this  information.  The  court  held  that  the  ecpiitable  title  vested 
in  the  petitioner,  and  that,  as  the  attaching  creditors  had  notice 
of  the  fact  before  the  attachments  were  made,  a  court  of  equity 
would  protect  her  title. 

Sec.  100.  Pow^er  of  attorney  to  transfer,  presumption  arising  from.  — 
Again,  it  has  been  held  that  where  a  holder  of  certificates  of 
shares  of  stock  has  an  irrevocable  power  of  attorney  from  the 
former  owner  to  transfer  them,  this  is  at  least  presumptive  evi- 
dence of  the  equitable  ownership  of  the  holder ;  and  if  he  is 
further  shown  to  be  the  holder  for  value  without  notice,  his  title 
cannot  be  impeached,  although  the  attorney's  name  is  left  in 
blank.'  The  power  of  attorney  in  such  "a  case  may  be  filled  up, 
and  the  transfer  executed  by  any  hona  fide  holder  whose  name  is 
inserted  in  the  blank,  and  the  power  is  not  exhausted  by  the  first 
use,  nor  revoked  by  the  maker's  death,  nor  aiiected  by  passing 
through  any  number  of  hands,  until  its  execution  by  an  actual 
transfer  of  the  stock  under  the  power.  The  rules  of  the  com- 
pany as  to  the  mode  of  making  transfers  of  stock  and  requiring 
the  surrender  of  the  certificate,  although  they  may  be  insisted  upon 
by  the  company  to  protect  its  rights,  yet  they  do  not  affect  the 
rights  and  interests  of  third  persons  who  are  ignorant  of  their 

'  Leavitt  v.  Fisher,  4  Duer,  1. 


Members  —  Stockholders  and  Stock.  171 

provisions  ;  and  a  transfer  of  stock  upon  tlie  books  of  a  company 
to  a  honafide  holder  for  value  in  such  a  case  carries  tlie  title  to 
the  stock,  although  the  certificate  previously  issued  was  not  surren- 
dered at  the  time  of  the  transfer.'  And  tlie  transferee  of  shares 
is  not  personally  liable  for  unpaid  installments  due  on  such  shares 
to  the  company  in  the  absence  of  any  provision  in  the  act  of 
incorporation  making  him  liable  under  such  circumstances,  or  any 
stipulation  to  that  eifect  in  his  contract.'  Subscriptions  to  the 
stock  of  a  corporation  not  paid  are  corporate  property,  and  a 
trust  fund  which  can  be  reached  by  the  creditors  of  the  corpora- 
tion," and,  when  a  subscription  is  once  perfected,  the  directors 
have  no  power  to  release  a  subscriber  from  his  engagement,  to 
the  prejudice  of  such  creditors,*  not  even  by  a  purchase  of  his 
shares,*  consequently  it  would  follow  that  they  could  not  release 
him  by  assenting  to  his  selling  the  stock  to  a  third  person,  so  far 
as  the  creditors  of  the  company  are  concerned. 

Sec.  101.  Liability  of  assignees  to  the  corporation. —  The  liability  of 
the  assignee  of  stock  to  the  corporation  must  depend  upon  the  pro- 
visions of  his  contract  with  the  assignor,  and  the  constating  instru- 
ments. If  by  these  he  is  substituted  to  the  rights  of  the  assignor, 
and  subject  to  his  liabilities,  then  there  is  sufficient  mutuality 
between  the  assignee  and  the  corporation  to  make  him  liable  on 
such  subscription.  If  the  assignment  is  authorized  by  such 
instruments,  the  liability  to  pay  subsequent  installments  is 
changed  from  the  subscriber  to  the  assignee,  and  the  assignor  of 
the  stock  would  be  discharged  from  liability  thereon.  And 
especially  would  this  be  the  case  if  such  assignment  was  made  by 
the  express  assent  of  the  corporation." 

'  New  York,  etc.,  R.  Co.  V.  Schuyler,  *  Currier  v.  Lebanon   Slate   Co.,   56 

38  Barb.  534.  N.  II.    2U3;     In  re,  County   Palatine 

*  Palmer  v.    Ridge  Mining  Co.,  34  Loan,  etc.,  Co.,  L.  li.,9  Ch.  App.  691. 

Penn.  St.  288.  « Mann  v.  Preutz,  2  Sandf.  Cb.  258  ; 

2  Bassett  v.  St.  Albans,  etc.,  Co.,  47  Hudersfield  Canal  Co.  v.  Buckley,?  T. 

Vt.  313  ;  Schaeffer   v.   Missouri,   etc.,  R.  36  ;  West  Philadelphia   Canal  Co. 

Ins.  Co. ,  46  Mo.  248.  v.  lunes,  3  Whart.  198  ;  Mann  v.   Cur- 

4  Hughes  V  Antietam  Manuf.  Co., 34  rie,  2  Barb.  294  ;  Cowles  v.  Cromwell, 

Md.  316  ;  Putnam  v.  New   Albany,  4  25   id.    413;  Hall  v.  U.  S.   Ins.   Co.,  5 

Biss.  365 ;  Osgood  V.  King,    42    Iowa,  Gill,    484;       Bend     v.     Susquehanna 

478;  /n  re  Bachman,  12    Bankr.  Reg.  Bridge  Co.,  6  H.   &   J.    128;  Hartford 

223  ;  Fisbkill  v.  Joliet   Opera    House,  R.  Co.  v.  Boorman,  12  Conn.  539. 

79  111.  334;  Melvin  v.  Lamar  Ins.  Co.,  "One  who  accepts    a    subscription 

80  111.  446.  made  by  another   on  his  behalf,  and 


172 


Private  Coeporations. 


But  a  solvent  and  responsible  party  cannot,  in  case  of  the  insol- 
vency of  the  corporation  or  in  anticipation  of  such  an  event,  or 
for  the  purpose  of  escaping  liability  for  the  unpaid  amounts  due 
upon  stock  subscribed,  assign  the  certihcates  to  another  party, 
and  especially  to  an  irresponsible  person,  and  thereby  be  discharged 
from  liability.'  And  where  the  constating  instruments  or  by-laws 
require  the  substitution  of  the  name  on  the  books  of  the  company, 
the  subscriber  cannot  without  a  compliance  with  such  provisions 
require  the  corporation  to  subrogate  an  assignee,  and  to  look  to 
the  assignee  for  payment  of  the  amount  due  upon  the  subscription 
of  the  original  subscriber.^ 


pays  tlie  calls  made  thereon  and  re- 
ceives a  certificate  of  ownership  is 
responsible  as  shareholders ;  and  it 
makes  no  diflerence  that  his  name  does 
not  appear  upon  the  transfer  books 
or  the  alphabetical  li.stof  stockholders 


as  a  transferee  of  stock.  And  one 
may  become  a  shareholder  without 
receiving  a  certificate  of  stock."  1 
Redf.  on  Rail.,  S]  53,  par.  10  ;  citing 
Burr  V.  Wilcox,  6  Bosw.  198. 


1  Mann  v.  Cooke,  20  Conn.  178 ;  Ever- 
hart  V.  West  Chester,  etc.,  R.  Co.,  28 
Penn.  St.  339  ;  Graff  v.  Pittsburgh  R. 
Co.,  31  id.  489  ;  Hays  v.  Pittsburgh  R. 
Co.,  38  id.  81.  "  If  the  former  owner 
was  indebted  to  the  corporation,  and 
the  charter  required  all  such  indebt- 
edness to  be  liquidated  before  trans- 
fer of  stock,  such  indebtedness  will 
remain  a  lien  upon  the  stock  in  the 
hands  of  the  assignee."  1  Redf.  on 
Rail.,  i^§  32-4.  See,  also.  Union  B'k  v. 
Laird,  2  Wheat.  390 ;  Marlborough 
Man.  Co.  v.  Smith,  2  Conn.  579  ;  Pitts- 
burgh, etc.,  Co.  v.  Clark,  29  Penn.  St. 
146. 

5  Ryder  v.  Alton,  etc.,  R.  Co.,  13111. 
516.  See,  silso,  Ex  parte  Bennett,  18 
Barb.  339  ;  5  De  G.  M.  &  G.  284  ;  27 
Eng.  L.  &  Eq.  572,  where  the  court 
say  :  "  A  subscriber  for  stock  cannot 
subrogate  another  person  to  his  obli- 
gation, without  a  substitution  of  his 
name  upon  the  books  of  the  company, 
or  some  equivalent  act  recognized  by 
the  charter  and  by-laws  of  the  com- 
pany. *  *  *  The  principal  diffi- 
culty, in  regard  to  liability  for  calls, 
arises  where  there  have  been  transfers, 
and  the  name  of  the  transferee  not 
entered  upon  the  books  of  the  com- 
pany. For,  whenever  the  name  of  the 
vendee  of  shares  is  transferred  to  the 
register  of  shareholders,  the  cases  all 


agree  that  the  vendor  is  exonerated 
(unless  there  is  some  express  provision 
of  law  by  which  the  liability  of  the 
original  subscriber  still  continues),  and 
the  vendee  becomes  liable  for  future 
calls.  And  the  vendee  having  made 
such  representation  to  the  company,  as 
to  induce  them  to  enter  his  name  upon 
the  register  of  shares,  is  estopped  to 
deny  the  validity  of  the  transfer.  And 
even  Avhere  the  party  has  represented 
himself  to  the  company  as  the  owner 
of  shares,  and  sent  in  scrip  certificates, 
which  had  been  purchased  by  him 
claiming  to  be  registered  as  proprietor, 
in  respect  thereof,  and  had  received 
from  the  company  receipts  therefor, 
with  a  notice  that  they  would  be  ex- 
changed for  sealed  certificates  on  de- 
mand, he  was  held  estopped  to  deny 
his  liability  for  calls,  although  his 
name  had  not  been  entered  upon  the 
register  of  shareholders,  or  any  me- 
morial of  transfer  entered  as  required 
by  the  act.  And  where  one  has  paid 
calls  on  shares,  or  attended  meetings 
of  the  company,  as  the  proprietor  of 
shares,  he  is  estopped  to  deny  such 
membership."  Citing  Sheffield,  etc., 
R.  Co.  V.  Woodcock,  2  Railw.  C.  522  ; 
S.  C.,7  M.  &  W.  574;  London  and 
Grand  J.  R.  v.  Freeman,  2  Railw.  C. 
468  ;  S.  C,  2  M.  &  G.  606  ;  Chelten- 
ham, etc.,  R.  Co.  V.  Daniel,    2   Q.    B. 


Members  —  Stockholders  and  Stock.  173 

Sec.  102.  Liability  of  purchasers  from  trustees.  —  It  is  a  familiar 
principle  in  equity  jurisprudence  tliat  one  who  deals  with  a  trus- 
tee, in  reference  to  property  held  in  trust,  must  act  in  good  faith  ; 
and  if  he  is  aware  of  the  character  in  which  the  property  is  held, 
he  cannot  purchase  it,  in  satisfaction  of  an  antecedent  debt  due 
from  the  trustee  to  him,  aior  can  he  prejudice  the  rights  of  the 
cestui  que  trust,  by  receiving  the  property  as  a  pledge  for  the 
payment  of  a  personal  debt  due  from  the  trustee,  or  for  the  re- 
payment of  money  advanced  for  his  personal  benefit.^ 

Sec.  103.  Right  of  trustee  to  pledge In  a  recent  case  in  Massa- 
chusetts, the  question  presented  was,  whether  the  holder  of  a  cer- 
tificate of  stock,  in  which  his  name  W'as  inserted  as  "  trustee," 
could  pledge  the  same  for  his  own  personal  debt  so  as  to  enable 
the  pledgee  to  have  the  benefit  of  the  same,  or  whether  the 
pledgee  was  not  put  upon  inquiry,  from  the  character  and  limita- 
tions of  the  certificate,  and  whether,  if  he  take  the  same,  he  does 
not  do  so  at  his  peril,  so  far  as  any  just  rights  of  the  cestui  que 
trust  are  concerned.  On  these  questions,  Foster,  J.,  in  deliver- 
ing the  oj^inion  of  the  supreme  court  of  that  state,  observes: 
"  Unless  the  word  '  trustee  ■  may  be  regarded  as  mere  descriptio 
personcB,  and  rejected  as  a  nullity,  there  was  plain  and  actual  no- 
tice of  the  existence  of  a  trust  of  some  description.  A  trust  as  to 
personalty,  or  a  chose  in  action,  need  not  be  expressed  in  writing, 
but  may  be  established  by  parol.  And  that  the  mere  uses  of  the 
word  '  trustee '  in  the  assignment  of  a  mortgage  and  note  imports 
the  existence  of  a  trust  and  gives  notice  thereof  to  all  into  whose 
hands  the  instrument  comes,  has  been  expressly  decided  by  this 

281  ;  Same  v.  De  Medina,  3  Railw.  C.  Can.  Co.  v.  Buckley,  7  T.  R.  30  ;  Ayles- 

738  :  London,  etc.,  R.  Co.  v.  Graham,  bury  R.  v.  Mount,  5  Scott   N.  R.  127  ; 

id.  870;  S.  C,  1  Q.  B.  271.  West   Phil.  Canal   Co.    v.     lunes,    3 

If  provisions  are  made  for  the  trans-  Whart.  198  ;  Mann  v.  Currie,  2  Barb, 

far  of  shares,  and  these  are   complied  294  ;  Hall  v.  U.  S.  Ins.  Co.,  5  Gill,  484; 

with,  or  waived  by  the  corporation  at  Bend  v.  Susquehanna  Br.  Co.,  GH.  &J. 

the  request  of   the  assignee,   his  lia-  128;  Aug.  &  Am.  on  Corp.,  chap.   15, 

bility  to  calls  is  complete.   Haddesfield  §  534. 

'Eland   v.  Eland,  4  M.    &  C.  420;  of  the  trust,  and  the  party  who  con- 

Watkins  v.  Cheek,  2  Sim.  &  Stu.  199.  curs  in  the  sale  is  aware  or  has  notice 

Mr.  Kent  observes  :  "  One  obvious  ex-  of  the  fact  that  such  is  its  object,  for 

ample  of  this  is,  where  a  devisee  has  in  such  a  case  they   are  coadjutors  in 

a  right  to  sell,  but  he  sells  to  pay  his  the  fraud."  3  Story's  Eq.  Jur.,  g  1131«. 
own  debt,  which  is  a  manifest  breach 


174  Private  Corporations. 

court.'  It  is  insisted  on  behalf  of  the  defendants,  that  even  if 
there  was  actual  notice  of  the  existence  of  a  trust  there  was  no 
notice  of  its  character,  and  that  the  trust  might  have  been  such  as 
to  authorize  the  transfer  which  was  made.  *  *  '''  But  in  our 
opinion  the  simple  answer  to  this  position  is,  that  where  one 
known  to  be  a  trustee  is  found  pledging  tliat  which  is  known 
to  be  trust  property  to  secure  a  debt  due  from  the  firm  of  which 
he  is  a  member,  the  act  is  owq  prima  facie  unauthorized  and  un- 
lawful, and  it  is  the  duty  of  him  who  takes  such  security  to  ascer- 
tain whether  the  trustee  has  a  right  to  give  it.  The  appropria- 
tion of  corporate  stock  held  in  trust  as  collateral  security  for  the 
trustee's  own  debt,  or  a  debt  which  he  owes  jointly  with  others, 
is  a  transaction  so  far  beyond  the  ordinary  scope  of  a  trustee's 
authority,  and  out  of  the  common  course  of  business,  as  to  be  in 
itself  a  suspicious  circumstance,  imposing  upon  the  creditor  the 
duty  of  inquiry.  This  would  hardly  'be  controverted  in  a  case 
where  the  stock  was  held  by  '  A,  B.,  trustee  for  C.  D.'  But  the 
effect  of  the  word  '  trustee '  alone  is  the  same.  It  means  trustee  for 
some  one,  whose  name  is  not  disclosed ;  and  there  is  no  greater 
reason  for  assuming  that  a  trustee  is  authorized  to  pledge  for  his 
own  debt  the  property  of  an  unnamed  cestui  que  trust,  than  the 
property  of  one  whose  name  is  known.  In  either  case  it  is  highly 
improbable  that  the  right  to  do  so  exists.  The  apparent  differ- 
ence between  the  two  springs  from  the  erroneous  assumption  that 
the  word  '  trustee,'  alone,  has  no  meaning  or  legal  effect.  Inasmuch 
as  such  an  act  of  pledgingproperty  is  j^r/mfl'^y^c^'^  unlawful,  there 
would  be  little  hardship  in  imposing  on  the  party  who  takes  the 
security  not  only  the  duty  of  inquiry,  but  the  burden  of  as- 
certaining the  actual  facts  at  his  peril.  Where  a  partner  assumes 
to  give  for  his  own  private  debt  the  note  of  his  firm,  the  creditor 
who  takes  it  must  show  that  it  was  given  with  the  assent  of  the 
other  partners,  because  it  is  an  apparent  misuse  of  the  name  of 
the  fii-m,  and  jyrima  facie  evidence  of  fraud. '^  But  -we  must  not 
go  to  that  length  in  deciding  the  present  case.  Notice  of  the 
existence  of  a  trust  is  by  all  the  authorities  held  to  itnpose  the 

'  Sturtevant    v.    Jaques,   14   Allen,         ^  Eastiuau  v.  Cooper,  15  Pick.  290. 
523;  Trull  V.   Trull,  13  id.  407.     See, 
also,  Bancroft  v.  Consen,  id.  50. 


Members  —  Stockholders  and  Stock.  175 

duty  of  inquiring  as  to  its  character  and  limitations.  And  wliat- 
ever  is  sufficient  to  put  a  person  of  ordinary  prn<lence  upon  in- 
quiry is  constructive  notice  of  every  thing  to  which  that  inquiry 
might  have  led."  ^ 

Sec.  104.  Rights  of  cestui  que  trust  against  purchaser. —  This  doc- 
trine is  equally  applicable  to  property  in  the  capital  stock  of  a 
corporation  as  to  other  proj^erty.  Where  a  person  holding  corpo- 
rate stocks,  as  trustee  for  another,  borrowed  money  on  certificates, 
by  depositing  them  as  collateral  security  for  the  repayment  of 
the  money,  and  used  the  money  in  his  own  business,  and  they 
were  subsequently  sold  upon  the  failure  of  the  trustees  to  repay 
the  loan ;  and  the  certificates  showed  upon  their  face  that  they 
were  issued  to  him  as  trustee  ;  and  the  cestui  que  trust  had  never 
given  the  trustee  any  authority  to  re  invest  the  money,  and  did 
not  know  that  the  certificates  had  been  used  as  collateral  security ; 
under  these  facts,  it  was  held  by  the  supreme  court  of  the  United 
States,  that  the  parties  who  took  the  certificates  had  constructive 
notice  of  the  rights  of  the  beneficiary,  or  cestui  qxte  trust,  and 
were  liable  to  him  to  the  full  value  of  the  stock." 

But  in  California  it  has  been  held  that  the  mere  fact  that  a 
person  holding  the  certificates  of  stock  and  apparently  having  the 
right  of  disposition  of  the  same  is  styled  "  trustee,"  raises  no 
presumption  that  he  has  not  authority  to  sell,  or  hypothecate  it,  in 

iSliaw  V.  Spencer,  100  Mass.  383.  ^  Duncan  v.  Jaudon,  15  Wall.  165. 
See,  also,  Jones  v.  Smith,  1  Hare,  55  ;  Where  the  court  will  declare  a  trust 
Jones  V.  Williams,  24  Beav.  63  ;  But-  in  shares,  see  Price  v.  Minot,  107  Mass. 
trick  V.  Holden,  13  Mete.  355  ;  Calais  49.  A  bank,  whose  certificate  of  stock 
Steamboat  Co.  v.  Van  Pelt,  3  Black  entitled  the  holder  to  so  many  shares 
(U.  S.),  377  ;  Ashton  v.  Atlantic  Bank,  which  are  upon  their  face  transfera- 
3  Allen,  217;  Hutching  v.  State  Bank,  ble  on  the  books  of  the  company,  by 
12  Mete.  431  ;  Smith  on  Eq.,  tit.  1,  attorney  or  in  person,  when  the  certi- 
chap.  4, 10.  Where  an  executor  dis-  ficates  are  surrendered,  but  not  other- 
poses  of  or  pledges  his  testator's  as-  wise,  and  which  allows  a  stockholder 
Bets,  in  payment  of,  or  as  security  for  to  transfer  his  stock  on  the  books  of 
a  debt  of  his  own,  the  person  to  whom  the  bank,  without  producin"^  and  sur- 
they  are  sold  or  pledged  will  take  rendering  the  certificates,  is  liable  to  a 
them  subject  to  the  claims  of  the  cred-  bona  fide  transferee,  for  value,  of  the 
itors  of  the  legatees.  Elliott  v.  Merry-  same  stock,  who  produces  the  certifi- 
man,  1  Lead.  Cas.  in  Eq.  89  ;  Hill  v.  cates  with  properly  executed  power  of 
Simpson,  7  Ves.  153.  See,  also,  Petrie  attorney  to  transfer;  and  the  fact  that 
V.  Clark,  11  S.  &  R.  377  :  Field  v.  the  bank  had  no  notice  of  the  latter 
Schieffelin,  7  Johns.  Cli.  150  ;  Walker  transfer  is  immaterial.  First  Nat. 
V.  Tavlor,  4  Law  Times  (N.  S.),  845 ;  Bank  v.  Lanier,  11  Wall.  369. 
2  Redf.  on  Wills,  chap.  8,  §  33. 


17 C)  Private  Corporations. 

the  usual  course  of  business.'  So,  the  corporation  may  be  rospon- 
sible  to  a  cestui  que  trusty  where  it  jiermits  a  transfer  of  its  own 
stock  w'rongfull}"  by  an  executor,  by  which  the  rights  of  innocent 
])arties  are  prejudiced.  A  corporation,  whose  stock  is  transferar 
ble,  is  held  to  be  the  custodian  of  the  shares,  and  is  clothed  with 
the  power  to  protect  the  riglits  of  every  one  from  unauthorized 
transfers.  This  trust  is  reposed  in  the  cor])oration  for  the  protec- 
tion of  individual  interests;  and  like  every  other  trustee  the  cor- 
poration is  bound  to  use  due  diligence  and  care  in  the  execution 
of  the  trust,  and  is  responsible  for  any  injury  sustained  by  its 
negligence  or  misconduct.  As  the  corporation  appoints  the  ofli- 
cers  before  whom  the  transfers  must  be  made,  it  is  responsible  for 
their  negligent  acts,  and  must  answer  for  their  negligence  or 
default,  wlienever  the  rights  of  third  persons  are  concerned.  Thus, 
where  a  bank  permitted  a  transfer  of  its  stock,  standing  in  the 
name  of  a  testator  on  its  books,  by  the  executor,  it  was  held 
chargeable  with  notice  of  the  provisions  of  the  will  under  which 
he  acted,  and  that'an  omission  to  examine  the  will  and  the  specific 
bequests  of  the  stock  standing  in  the  name  of  the  testator, 
amounted  to  negligence  on  the  part  of  the  bank,  and  rendered  it 
liable  to  the  cestui  que  trust  for  any  conversion  of  the  stock  thus 
wrongfully  transferred  by  the  executor.^ 

Sec,  105.  Stockholder's  right  to  vote. —  Holding  stock  constitutes 
membership  in  joint-stock  corporations. 

We  have  already  referred  to  the  riglit  of  members  and  stock- 
holders, as  such,  to  vote  at  all  coi'porate  meetings ;  °  and  we  shall 
hereafter  have  occasion  to  consider  the  right  more  fully  when  we 
come  to  consider  the  subject  of  corporate  and  directors'  meetings. 

'  Brewster  V.  Sime,  42  Cal.  139.  See,  transfer  on  books,  see  Bond  v.  Mount 

also,  Albert  v.  Savings  Bank,  1  Md.  Hope  Iron  Co.,  99  Mass.  505.     In  New 

Cli.    407.     But  in   Pennsylvania,  one  York,  a  valid  gift,  in    view  of  death, 

holding  stock  as  "  trustee  of  M.  Ci.,"  it  maybe    made    by    simple  delivery  of 

was   held,  could   not  insist   upon  its  the  certificates,  with  intent  to  transfer 

transfer  by  the    corporation,  without  the  stock,  even  though  the  certificates 

exhibiting  his  authority  for  so  doing,  contain  a  general  restriction  upon  this 

Bayard   v.    Farmers,   etc.,  Bank,    52  mode  of   transfer.     Walsh  v.  Sexton, 

Penn.  St.  232.  55  Barb.  251.     See  «n^e,  p. 

**  Lowrey  v.  Commercial,  etc..  Bank,  ^  But   it    does    not    appear    always 

Taney,  310.     See,  also,  Shaw  v.  Spen-  essential  thatthe  owners  of  stock  have 

cer,  100  Mass.  382.     But  see  Albert  v.  a  certificate  thereof,  to  entitle  them  to 

Savings  Bank,  1   ]VId.  Ch.  407.     As  to  vote  at  au  election  for  directors.  Beck- 

the  right  of  an  assignee  to  demand  a  ett  v.  Houston,  32  lud.  393. 


Members  —  Stockholders  and  Stock.  177 

This  right,  we  may  here  observe,  is  incident  to  the  relation  which 
the  corporators  bear  to  the  corporation ;  and  is  one  of  those  abso- 
hite  rights,  to  deprive  him  of  which  would  be  a  violation  of  his 
constitutional  rights. 

Sec.  106.  Rights  of  stockholders  to  access  to  books. —  It  will  be 
evident  from  the  relation  which  the  stockholder  sustains  to  the 
corporate  body,  that  he  should  have  the  right  of  access  to,  and 
examination  of,  the  books  and  records  of  the  corporation,  and  be 
restricted  in  this  respect  only  by  the  charter,  or  such  reasonable 
rules  and  by-laws  in  reference  thereto,  as  are  adopted  in  con- 
formity with  the  fundamental  law  of  its  institution,  and  public 
policy.  If  he  is  not  restricted  by  these,  a  stockholder  should 
have  a  right  to  inspect  the  books  at  reasonable  and  proper  times  ; 
and  if  this  right  is  denied  he  would  be  entitled  to  the  compul- 
sory process  of  Tnandannus  to  allow  him  so  to  do.'  And  if  he  is 
refused  such  right  he  could  maintain  an  action  for  damages  sus- 
tained by  reason  therefor.  But,  in  an  action  against  the  corpora- 
tion to  recover  a  penalty  provided  by  statute  for  such  a  refusal,  it 
was  held  that  the  complainant  must  show  that  the  officer  u]3on 
whom  the  demand  for  inspection  was  made  had  notice  that  the 
person  making  the  demand  was  entitled  to  the  inspection." 
When  a  statute  prescribes  that  the  stock  and  transfer  books  of 
incoi-porated  companies  shall  be  open  to  the  examination  of  stock- 
holders, a  stockholder  cannot  be  deprived  of  the  right  to  inspect 
them  because  they  are  kept  in  a  particular  way,  or  because  they 
contain,  besides  the  information  to  which  he  is  entitled,  other  in- 
formation which  he  has  no  right  to  demand.  If  the  corporation 
in  such  a  case  does  not  keep  the  books  or  records  in  the  manner 
and  form  required,  or  as  the  statute  prescribes,  it  is  its  duty  to 
permit  an  inspection  of  such  as  it  does  keep,  for  the  puq^ose  of 
recording  transactions,  which  the  law  gives  the  stockholders  a  right 
to  know. 

And  when  such  a  statute  provides  that  the  books  of  transfer  of 
stock,  and  the  books  containing  the  names  of  the  stockholders  of 

'  Cockburn  v    Union   Bank,  13  La.         ^Williams  v.  College,  etc.,  R.  Co., 
Ann.     289;     People   v.   Pacific    Mail    45  Ind.  170  (1873). 
Steamship  Co  ,  3  Abb.  Pr.  (N.  S.)  364  ; 
34  How.  Pr.  193. 

23 


178  Pbivate  Corporations. 

such  company  shall  be  open  to  the  examination  of  every  stock- 
holder for  thirty  days  previous  to  any  election  for  directors,  a 
stockholder  has  a  right  to  inspect  not  only  the  book  containing 
the  names  of  the  stockholders,  but  to  take  memoranda  or  copies 
of  the  names.  And  if  an  officer,  having  charge  thereof,  refuses 
to  permit  such  memoranda  or  copies  to  be  made,  he  incurs  the 
penalty  prescribed  by  the  statute  for  a  refusal  to  allow  an  inspec- 
tion of  such  books  by  stockholders.^ 

Sec.  107.  Holders  of  preferred  stock.  —  It  frequently  occurs  that 
by  virtue  of  authority  conferred  upon  the  corporation  or  vested  in 
the  directors  preferred  stock  may  be  created  and  certificates 
therefor  disposed  of  by  the  corporation.^  The  stock  certificates, 
issued  therefor,  usually  show  that  the  stockholder  is  entitled  to 
the  application  of  the  net  earnings  of  the  road,  to  the  payment  of 
dividends  or  interest  on  such  stock  ;  and  the  holders  thereof  are 
entitled  to  the  same  general  rights  and  privileges,  and  are  subject 
to  the  same  liabilities  as  the  holders  of  the  original  or  common 
stock,  which  we  have  already  considered.^  But  although  the  cer- 
tificates of  shares  of  preferred  and  guaranteed  stock  of  a  corpora- 
tion contain  a  clause  that  the  stock  is  entitled  to  dividends  at  a 
certain  rate  per  annum,  out  of  the  net  earnings  of  the  company, 
and  that  the  payment  of  dividends  is  guaranteed,  the  holder  of  a 
certificate  does  not  thereby  become  a  creditor  of  the  corporation, 
and  cannot  maintain  an  action  at  law  against  the  corporation  for 
a  failure  to  declare  and  pay  dividends.* 

Sec.  108.  when  it  can  be  issued  ;  dividends  on.  —  It  is  generally 
received  doctrine  that  preferred  shares  of  stock  can  only  be  issued 
when  the  power  so  to  do  is  expressly  conferred  upon  the  corpora- 

1  Cotheal  v.  Brower,  10  Barb.  216  ;  Coates  v.  Nottingham,  etc.,  R.  Co.,  30 

5  N.  Y.  562.    See,  also,  as  to  a  custom  Beav.  86. 

of  the  company  in  such  cases,  to  allow  ^  For  a  construction  of  certificates  of 

such  transfer  to  be  made  without  the  preferred   stock,    see    Bailey   v.   The 

consent   of    the    board    of    directors,  Hannibal,  etc.,  R.  Co.,  1   Dill.  (U.  S. 

where  the  by-laws  provided  for  such  C.  C.)  174 ;  Matthews  v.  Great  North- 

conseniw    Chambersburg   Ins.   Co.   v.  ern,  etc.,   R.  Co.,   28  L.  J.  Ch.    375; 

Smith,  11  Penn.  St.  120.  Coey  v.  Belfast,  etc.,  R.  Co.,  Ir.  Rep., 

^  Green's  Brice's  Ultra  Vires,  145  and  2  C.  L.  112. 

notes ;  Corry  v.  Londonderry,  etc.,  R.  ■*  Williston  v.  M.  S.  &  N.  J.  R.  Co., 

Co  ,  29  Beav.  263  ;  30  L.  J.  Ch.  290;  13  Allen,  400.    See,  also,  Taft  v.  Hart- 
ford, etc.,  R.  Co.,  8  R.  I.  310. 


Members  —  Stockholders  and  Stock.  179 

tion,'  although  it  has  sometimes  been  claimed  to  exist  as  an  inci- 
dent to  the  power  to  borrow  money,  it  being  considered  as  an 
inducement  to  loans,  and  a  method  of  security.  This  stock  has 
priority  over  the  common  stock,  and  is  first  entitled  to  dividends 
from  the  profits.  There  is  another  distinction  sometimes  made 
between  preferred  and  common  stock,  namely,  that  in  reference 
to  the  latter  the  directors  have  a  large  discretion  in  reference  to 
declaring  dividends  on  the  same,  and  the  court  will  seldom  inter- 
fere with  this  discretion  unless  the  abuse  is  manifest.  Whereas, 
in  the  former  the  court  will  inquire  into  the  affairs  of  the  corpo- 
ration with  greater  scrutiny,  and  require  payment  of  the  current 
profits  or  net  earnings  on  such  stock,  according  to  the  terms  of 
the  contract,  whenever  justice  and  equity  may  require  it."  But 
it  is  held  that  payments  of  interest  on  preferred  stock  can  only  be 
made  out  of  profits  bona  fide  earned ;  that  a  corporation  has  no 
power  to  pay  such  interest  in  excess  of  such  earnings,  and  that 
all  contracts  for  such  purposes  would  be  void.' 

If  a  power  to  issue  preferred  shares  exists,  it  is  held  that  it 
must  be  exercised  solely  for  the  purpose  of  obtaining  capital.* 

Sec.  109.  Scrip  and  preliminary  subscriptions.  —  Scrip,  in  the  sense 
used  here,  is  a  kind  of  certificate  sometimes  issued  in  England  by 
the  projectors  of  companies,  entitling  the  holder  to  become  a 
member  and  stockholder  of  a  future  company,  "  The  liability 
imposed  upon  the  scrip  receiver,"  observes  Mr.  Brice,  "  will 
principally  depend  upon  the  engagement  he  has  entered  into  with 
the  projectors.     He  may  negotiate  the  scrip,  but  he  will,   nevei- 

'  Green's   Brice's  Ultra  Vires,  145  ;  ^  Pittsburg,  etc.,  R.  Co.  v.  Allegheny 

Re  National  Patent  Steam  Fuel  Co.,  Co.,  63  Penn.  St.  126  ;  Lockhart  v.  Van 

ex  parte  Worth,  4  Drew,  529  ;  28  L.  J.  Alstyne,  not  reported,  Mich.        ;  Am. 

Ch.  589  ;  Hutton  v.  Scarborough  Cliff  L.  Reg.  (N.  S.)180;  Curran  v.  Arkan- 

Hotel  Co.,  3  Dr.  &  Sm.  521.  sas,  15  How.  (U.  S.)  304. 

2  Bailey  v.  R.  Co.,  17  Wall.  96  ;  St.  *  Herals  v.  Great  Western  R.  Co.,  L. 


John  V.  Erie  R  Co.,  10  Blatchf.  271 
affirmed,  22  Wall.  136  ;  Bates  v.  An 
droscoggin,  etc.,  R.  Co.,  49  Me.  491 
Hazlehurst  v.  Savannah,  etc.,  R.  Co. 
43  Ga.  13;  Thompson  v.  Erie,  etc.,  R 


R..  3  Ch.  262.  See,  also,  Henry  v.  Great 
Northern  R.  Co.,  4  K.  &  J.  1  ;  27  L.  J. 
Ch.  1  ;  Corry  v.  Londonderry,  etc.,  R. 
Co.,  29  Beav.  263  ;  30  L.   J.    Ch.   290  ; 

Coates  v.,  Nottingham  Water- Works 


Co.,  45  N.  Y.  468  ;  Prouty  v.  Michigan  Co.,  30  Beav.  86.     As  to  the  rights  of 

S.,  etc.,  R.  Co.,  1  Hun,  655  ;  McLough-  holders  in  the  different  kinds   of  pre- 

lin  V.  Detroit,   etc.,  R.   Co.,   8  Mich,  f erred  shares,  see  Matthews  v.  Great 

100;  Williston  v.  Michigan   S.,   etc.,  Northern  R.  Co.,    28  L.J.    Ch.   375; 

R.  Co.,  13  Allen,  400  ;  Barnard  v.  Ver-  Coey  v.  Belfast,  etc.,  R.  Co.,  I.   R.,  2 

mont  &  Massachusetts  R.  Co.,  7  id.  512.  C.  L.  112. 


180  Private  Cokporations. 

theless,  remain  liable,  if  the  company  be  formed,  until  the  name 
of  the  purchaser  be  entered  upon  the  register.'"  The  consid- 
eration for  the  issue  of  such  scrip  is  usually  the  obligation  of  the 
party  receiving  it  to  take  shares  in  the  future  company. 

In  this  country  preliminary  subscriptions  may  generally  be 
made,  and  in  such  cases  the  rights  secured  thereby  become  vested 
in  the  corporation  when  formed,  as  the  right  to  membership 
thereby  pledged  is  sufficient  consideration  for  such  subscription, 
and  the  company  generally  may  recover  calls  on  such  subscrip- 
tions after  its  incorporation,  the  same  as  though  they  were  made 
after  its  complete  organization.  In  fact,  it  is  frequently  required 
in  organizing,  under  general  statutes,  not  only  that  preliminary 
subscriptions  be  made,  but  that  a  certain  percentage  of  the  sum 
be  paid  as  a  condition  precedent  to  the  organization,  and  these 
subscriptions,  if  the  corporation  is  finally  organized,  become  bind- 
ing upon  the  subscriber,  whether  scrip  is  issued  therefor  or  not, 
and  they  become  a  part  of  the  assets  of  the  corporation,'* 

Sec.  110.  stock  defined,  etc.  —  The  term  "  stock,"  as  applied  to 
joint-stock  corporations,  is  the  money  or  capital  invested  in  the 
business,  and  it  is  usually  divided  into  shares  of  equal  value,  held 
by  owners  or  stockholders,  the  evidence  of  which  is  usually  fur- 
nished by  certificates  of  the  same,  signed  and  authenticated  by 
proper  officers  of  the  corporation  with  the  corporate  seal  attached. 

The  term  "  capital  stock,"  as  used  in  the  act  of  incorporation  in 
New  Jersey  has  been  defined  as  the  amount  contributed  or  ad- 
vanced by  the  stockholders  as  members  of  the  company,  and  not 
to  refer  to  the  property  of  the  corporation.^     And,  as  we  have  al- 

'  Green's   Brice's  Ultra   Vires,  148;  Hamilton,  etc.,  R.  Co.  v.  Rice,  7  Barb, 

citing  Midland  G.  W.  R.  Co.  v.  Gor-  157  ;  Reformed,  etc.,  Church  v.  Brown, 

don,  16  M.  &W.   804;  16  L.  J    Ex.  29  id.  335;  S.  C,   4    Abb.    Ct.    App. 

166.     But   see    Jackson  v.  Cocker,  4  Dec.  31  ;  Penobscot,   etc.,    R.    Co.  v. 

Beav.  59.  Dummer,  40  Me.  172  ;     Watkins    v. 

2  On  this  subject  see  Anderson  v.  Eames,  9  Cush.  537;  People's  Ferry- 
Newark,  etc.,  R.  Co.,  12  Ind.  376;  Co.  v.  Balch,  8  Gray,  303;  Danbury, 
Johnson  v.  Wabash,  etc.,R.  Co.,  16  id.  etc.,  R.  Co.  v.  Wilson,  22  Conn.  435; 
389  ;  Heaston  v.  Cincinnati,  etc.,  R.  Taggart  v.  West  Maryland  R.  Co.  24 
Co.,  id.  275;  Buffalo,  etc.,  R.  Co.  v.  Md.  563  ;  Griswold  v.  Peoria  Univ.',  26 
Dudley,  14  N.  Y.  336  ;  Eastern  P.  R.  111.  41  ;  Johnston  v.  Ewing  Female 
Co.  V.  Vaughan,  id.  546;  Lake  On-  Univ.,  35  id.  518. 
tario  R.  Co.  v.  Mason,  16  id.  451;  ^  State  v.  Morristown  Fire  Ins. 
Rensselaer  P.  R.  Co.  v.  Barton,  id.  Assoc,  23  N.  J.  L.  195, 
457 ;  Stanton  v.  Wilson,  2  Hill,  153 ; 


Members  —  Stockholders  and  Stock.  181 

ready  seen,  shares  of  stock  of  a  corporation  are  personal  prop- 
erty.' The  term  "  joint-stock  "  coi-poratiou  means  such  a  cor})ora- 
tion  as  has  for  its  object  a  dividend  of  profits  among  its  stock- 
holders.    And  such  dividends  are  personal  property.' 

Sec.  111.  Issuing  certificates  of  shares.  —  Where  a  charter  pro- 
vided that  the  president  and  directors  should  cause  a  certificate  to 
be  given  to  each  shareholder,  signed  by  them,  and  countersigned 
by  the  treasurer,  certificates  issued  by  the  president  alone,  signed 
by  him  and  countersigned  by  the  treasurer,  without  authority  of 
the  directors,  and  without  consultation,  were  held  void,  and  that 
as  the  president  in  issuing  such  certificates  acted  without  the  scope 
of  his  authority,  the  corporation  were  not  liable  for  his  act."  But 
in  order  to  make  one  an  owner  of  stock  in  a  corporation,  it  is  not 
usually  necessary  that  a  certificate  of  his  shares  shall  have  been 
issued,  or  that  the  fact  of  ovniership  should  appear  on  the  books 
of  the  corporation,  but  it  may  be  shown  by  parol.''  And  a  certifi- 
cate issued  in  the  ordinary  form  of  a  certificate  of  stock,  but  con- 
taining a  promise  in  addition  thereto  on  the  part  of  the  corpora- 
tion to  pay  interest  thereon  until  the  happening  of  a  certain  event, 
constitutes  the  person  to  whom  it  is  issued  a  stockholder,  and  the 
corporation  cannot,  by  a  vote  of  the  stockholders,  oblige  him  to 
receive  their  bond  instead  of  money  for  the  interest  upon  such 
certificate.*  If  a  part  of  the  capital  stock  remains  untaken,  the 
right  to  issue  it  is  a  corporate  franchise,  and  the  property  thus 
held  is  in  trust  for  the  benefit  of  the  corporators,  and  if  disposed 
of,  it  must  be  for  the  benefit  of  all  the  stockholders.  If  the  di- 
rectors disposed  of  it  unequally  to  corporators,  those  injured 
thereby  may  have  an  action  against  the  corporation  for  the  damage 

'  Arnold  v.  Ruggles,  1  R.  I.  165.  the  corporation  to  issue  them,  and  a 

^  Tippets  V.  Walker,  4  Mass.  595.  refusal  so  to  do   would  justify  a  pro- 

3  Holbrook  v.  Fauquier,  etc.,  Turnp.  ceeding  in  chancery  to  compel  it  to 

Co.,  3  Cranch  (C.  C),  425.  issue  them,  and  for  want  of  them  the 

••  Chaffin  V.  Cummings,   37  Me.  76.  stockholder  should  not  be  prejudiced. 

And  the  making  of  a  certificate  and  Chester  Glass  Co„  v.  Dewey,  16  Mass. 

mailing  of  it  to  a  stockholder  was  re-  94  ;  Field  v.  Pierce,  103  id.  353.     See, 

garded  as  the   issuing  of    it.     Jones  also,  Hoagland  v.  Bell,  36  Barb.  57. 

V.  Terre  Haute,  etc.,  R.  Co.,  17  How.         '  McLaughlin  v,  Detroit,  etc.,  R.  Co., 

Pr.  539  ;  Agricultural  Bank  v.   Burr,  8   Mich .   100.     A   corporation   having 

84  Me  356  ;  Same  v.  Robinson,  id.  375;  stock  not  taken  may  issue  certificates 

Ellis  V.  Essex  Merrimack  Bridge  Co.,  therefor,  taking  in  payment  its  own 

2  Pick.  343,     If  a  party  was  entitled  to  bonds.     Loham  v.  N<  T.,  etc.,  R.  Co., 

the  certificate  it  would  be  the  duty  of  3  Sandf.  ^9. 


182  Private  Cobporationb. 

sustained.  Thus,  where  a  resolution  of  the  directors,  carried  into 
effect,  provided  for  the  distribution  of  such  stock  among  all  the 
stockholders  who  were  not  in  arrears  on  shares  already  taken  by 
them,  and  excluded  those  who  were  so  in  arrears,  it  was  held  to 
be  an  unlawful  imposition  on  those  in  arrear,  and  a  violation  of 
the  rights  of  a  corporator  who  was  ready  and  offered  to  take  his 
portion  of  the  new  shares.' 

Sec.  112.  Certificates  unlawfully  issued.  —  If  stock  certificates  are 
unlawfully  issued,  they  will  be  valid  in  the  hands  of  innocent 
holders,  although  the  consideration,  as  between  the  corporation 
and  the  party  to  whom  they  are  issued,  may  entirely  fail.  Thus, 
where  the  president  of  a  corporation,  in  pursuance  of  an  agree- 
ment by  the  directors,  issued  certificates  of  certain  shares  of  stock 
to  contractors,  upon  entering  into  a  contract  to  build  the  railroad 
in  which  the  corporation  was  interested,  and  as  a  consideration 
therefor,  and  the  action  of  the  president  was  subsequently  ap- 
proved by  the  directors,  and  by  a  meeting  of  the  stockholders ;  it 
was  held  that  though  the  road  was  never  built,  and  the  stock 
never  paid  for,  so  that  the  corporation  was  in  equity  entitled  to 
have  it  returned,  this  did  not  impair  the  validity  of  the  stock  or 
the  legality  of  an  election  of  directors  chosen  by  votes  given  upon 
the  stock  so  issued." 

And  where,  by  statute,  the  affixing  of  the  treasurer's  signature 
to  the  certificates  of  shares  of  stock  is  required,  this  was  held  to 
be  a  ministerial  duty,  merely,  and  that  it  might  be  performed  by 
him  even  after  the  dissolution  of  the  corporation.'  So  certificates 
of  stock  are  not  necessarily  invalid  because  issued  at  a  place  out- 
side of  the  state  in  which  the  corporation  was  organized  and  has 
its  principal  place  of  business.* 

A  stock  certificate,  issued  by  a  corporation  having  the  power  to 
issue  the  same,  is  a  continuing  affirmation  of  the  ownership  of  the 

'  Reese  v.  Bank  of  Montgomery  Co.,  "^  Savage  v.  Ball,  17  N.  J.  Eq.  142. 

31  Penn.  St.  78.     But  where  an  act  of  *  Sewall   v.  Chamberlain,   16   Gray, 

the  legislature  authorizes  the  issue  of  581.     See,  also,  as  to  the  right -of  a 

preferred  stock,  if  it  is  accepted  by  the  stockholder  to  certificates  of  shares, 

stockholders,  it  empowers  the  direct-  Field  v.  Pierce,  103  Mass.  253  ;  James 

ors  to  issue  the  same,  although  indi-  v.  Cincinnati,  etc.,  R.  Co,,  2  Dis.  (O.) 

vidual    stockholders    may   oppose   it.  261. 

Curry  v.  Scott,  54  Penn.  St,  270.  *  Courtright  v.  Deeds,  37  Iowa,  508. 


Members — Stockholders  and  Stock.  183 

specified  amount  of  stock  by  the  person  mentioned  therein,  or  his 
assignee,  until  it  is  withdrawn  in  some  manner  recognized  by 
law ;  and  a  purchaser  in  good  faith  has  a  right  to  rely  thereon, 
and  to  claim  the  benefit  of  an  estoppel  in  his  favor,  as  against  the 
corporation,  in  all  cases  where  the  original  ownor  could  make  such 
claim.^  And  a  purchase  from  one  other  than  the  original  holder 
of  the  stock,  with  the  usual  assignment  and  power  of  attorney 
executed  in  blank,  in  an  action  against  the  corporation  for  a  re- 
fusal to  transfer  the  stock  on  its  books,  is  not  bound  to  show 
aiBrmatively  the  title  of  his  immediate  vendor,  and  the  presump- 
tion is  that  the  stock  was  transferred  and  the  certificates  delivered 
in  the  usual  course  of  business.' 

Sec.  113.  Fraud  in  issuing  stock  certificates.  —  The  sale  of  Stock, 
by  the  directors  of  a  corporation,  at  a  less  rate  than  the  price 
fixed  in  the  charter,  is  a  fraud  upon  the  stockholders ;  and  the 
issuing  of  a  bond  convertible  into  stock  is  the  same  in  effect  as 
the  sale  of  so  much  stock,  and  the  sale  of  such  a  bond  is  unlaw- 
ful and  void ;  and  stock  thus  taken  is,  in  the  hands  of  a  party 
with  notice,  subject  to  the  right  of  prior  subscribers  to  have  it 
reduced  to  the  charter  value  of  the  shares.^  And  the  purchaser 
of  stock  illegally  issued  by  the  directors  of  a  company  at  less  than 
the  charter  price  may  rescind  his  contract  and  recover  from  his 
vendor,  who  participated  in  the  illegal  issue  of  the  stock,  the 
money  paid  for  the  same.* 

Sec.  114.    Shares  and  income,  character  and  quality  of,  as  property. — 

"A  share  is  a  mere  ideal  thing — it  is  no  portion  of  matter,  it  is 
no  portion  of  space,  it  is  not  susceptible  of  tangible  and  visible 
possession  actual  or  constructive.  It  is  not,  therefore,  a  chattel 
personal  susceptible  of  possession  actual  or  constructive."  ^ 

Corporations  may  take  and  hold  real  or  personal  property,  but 
the  members  are  not  as  such  entitled  to,  or  invested  with  the 

'  Holbrook  v.  New  York  Zinc  Co.,  eludes  stock  in  corporations  ;  Field  v. 

57  N.  Y.  616.  Montmollin,  5  Bush,  455  ;  and  it  is  the 

'  Id.  subject  of  conversion  like  oth^er  prop- 

3  Sturges   V.   Stetson,  1   Biss.  (U.  S.  erty.     Kuhn   v.   McAllister,   1   Utah, 

C.  C.)246.  273.    And  the    words    "shares"  and 

*  Arnold  v.  Rugglee,  1  R.  I.  165.  "  stock  "  are  synonymous  terms.    Har- 

*Fosdicb  V.  Sturges,   1  Biss.  (U.  S.  risen  v.  Vines,  46  Tex.  15. 

C.   C.)  255.     The  word  "  property  "  in- 


184  Private  Corpoeations. 

property  thiis  lield.  "  The  interest  of  each  individual  shareholder 
is  a  share  of  the  net  produce  of  both,  when  brouglit  into  one 
fund."  *  It  is  not  unusual  for  statutes  to  declare  the  shares  and 
dividends  to  be  personal  property ;  and  to  be  transferable  like 
other  personal  property.'  But  in  the  absence  of  any  statutory 
provision,  it  would  be  regarded  as  such,  whether  they  arise  out  of 
real  or  personal  property.  On  this  subject  Baron  Alderson  in 
a  case  before  him  observed :  "  In  the  first  place,  there  is  a  cor- 
poration to  whose  management  the  joint  stock  of  money  sub- 
scribed by  its  individual  corporators  is  intrusted.  They  have  power, 
at  their  pleasure,  of  vesting  it  in  real  estate,  or  in  personal  estate, 
limited  only  as  to  amounts,  and  of  altering  fi'om  time  to  time  the 
species  of  property  they  may  choose  to  hold ;  and  in  order  to 
give  them  greater  facilities  and  advantages,  certain  powers  are 
intrusted  to  the  undertakers,  by  the  legislature,  and  that  even 
before  they  were  constituted  a  body  corporate,  of  laying  down 
pipes,  and  thereby  occupying  land  for  the  purposes  of  their  un- 
dertaking. These  powers  render  the  use  of  joint  stock  by  the 
body  corporate  more  profitable,  but  they  form  no  part  of  their 
joint  stock  itself  ;  and  one  decided  test  is  this,  that  they  belong 
inalienably  to  the  corporation  ;  whereas  all  joint  stock  is  capable 
expressly  of  being  sold,  exchanged,  varied,  or  disposed  of,  at  the 
pleasure  of  the  corporate  body."  ^ 

Sec.  115.  interest  of  stockholders  in  corporate  property.  —  The  inter- 
est of  the  shareholder,  and  tiie  character  and  quality  of  his  inter- 
est, was  well  stated  in  the  opinion  of  Rogers,  J.,  in  a  case  in  the 
supreme  court  of  Pennsylvania.  He  says :  "  Money  due  on  bond 
or  note,  or  other  contract,  for  the  detention  of  chattels,  or  for 
torts,  is  included  under  the  head  of  title  to  things  in  action.  Bank 
shares  would  seem  to  be  included  in  that  class,  as  they  merely  en- 

>  Bradley  v.  Holdsworth,  3  M.  &  W.  268.     See,  also,  Durkee  v.  Stringham, 

422  ;  Waltham  Bank  v.  Wallham,  10  8  Wis.  1 ;  Wordsworth  on  Joint-stock 

Mete.  (Mass.)  334  ;  Tippets  v.  Walker,  Companies, 288 ;  Edwards  v.  Hall,  6  De- 

4  Mass.  595.  G.  M.  &  G.  74  ;  35  Eng.  L.  &  Eq.  433 

2  Stat.    Geo.   1,  chap.    19,  §  9;  Wil-  Wildman   v.    Wildman,   9  Ves.  174 
liams'Lawof  Personal  Prop.  151.  See,  Kirby  v.  Potter,  4  id.  751  ;  Planters 
also,  Union  Bank  of  Tenn.  v.  State,  9  Bank  v.  Leavens,  4  Ala.  753  ;  Denton 
Yerg.  490.  v.  Livingston,  9  Johns.  96. 

3  Blight  V.  Brent,  2  You.  &  C.  (Ex.) 


Members — Stockholders  and  Stock.  185 

title  the  holder  to  receive  on  demand  a  portion  of  the  profits  oi- 
earnings  of  the  bank,  and  never  in  this  countr}'  have  been  con- 
sidered as  other  than  chattels,  giving  no  such  interest  to  the  holder 
as  that  of  a  partner  in  a  partnership  transaction.  I  know  of  no 
case  in  which  the  point  has  been  directly  adjudged,  but  in  Giljpan 
V.  Howell  ^  such  would  seem  to  be  the  opinion  of  the  court.  In 
that  case  so  far  from  treating  stock  as  real  estate,  or  as  personal 
property  in  possession  (as  a  horse,  for  example),  it  is  ruled,  that 
when  one  purchases  stock  for  another,  and  takes  a  transfer  on  the 
books  of  the  bank  in  his  own  name,  it  is  sufficient  if  he  retains  so 
much  of  the  same  stock  as  will  enable  him  to  transfer  to  his  princi- 
pal on  demand  the  whole  amount  purchased  for  him,  and  that  it  is 
not  necessary  that  he  should  retain  the  identical  scrip  or  shares. 
Although  the  bank  shares  may  be  said  to  indicate  or  represent  the 
portion  of  interest  which  the  shareholder  has  in  the  property  of 
every  kind  belonging  to  the  company,  yet  it  cannot  be  said,  with  any 
propriety,  that  he  is  in  the  actual  possession  of  the  common  property 
of  the  bank,  any  more  than  the  owner  of  a  bond  or '  note  is  in 
possession  of  the  money  of  which  it  is  the  representative.  The 
only  possession  the  holder  has  is  the  certificate,  which  is  merely 
the  evidence  of  his  interest,  as  title  deeds  are  of  title  to  lands,  but 
not  of  possession.  That  stock  cannot  be  considered  in  the  light 
of  a  thing  in  possession,  and  personal  estate,  as  distinguished  from 
a  chose  in  action^  would  also  appear  from  this,  that  at  common 
law  it  could  not  be  taken  in  execution  and  sold  for  debt."  ^ 

Sec.  116.  How  stockholder's  interest  is  conveyed.  —  According 
to  the  recognized  principles  of  the  law,  personal  chattels  are 
material  things  capable  of  actual  and  manual  possession,  such  as 
money,  jewels,  corn,  etc.  These  are  usually  transferred  on  a  sale 
by  actual  delivery  of  the  material  thing.  But  a  chose  in  action  is 
a  right  of  action  merely  ;  as  money  due  on  a  note  or  other  con- 
tract or  damages  for  a  wrong.^  The  learned  Chief-Justice  Shaw 
has  clearly  illustrated  this  distinction  of  personal  property,  into 

>5  Penn.  St.  57.  Albrecht,  13  Sim.  189  ;  Hargreaves  v. 

2  Slaymaker  v.  Gettysburgh  Bank,,  Parsons,  13  M.  &  W.  561. 

10  Penn.  St.  373.    See,  also.  Humble  v.  ^  2     Kent's    Com.    285  ;     Long    on 

Mitchell,  11  A.  &  E.  205  ;  Duncuft  v.  Sales,  2. 

24 


186  Pbivate  Corporations. 

chattels  and  merely  choses  in  action,  in  the  following  language  : 
"  According  to  the  modern  decisions  courts  of  law  recognize  the 
assignment  of  a  chose  in  action,  so  far  as  to  vest  an  equitable  in- 
terest in  the  assignee,  and  authorize  him  to  bring  an  action  in  the 
name  of  the  assignor  and  recover  a  judgment  for  his  own  benefit. 
But  in  order  to  constitute  such  an  assignment  two  things  must 
concur  :  first  the  party  holding  the  chose  in  action  must,  by  some 
significant  act,  express  his  intention  that  the  assignee  shall  have 
the  debt  or  right  in  question,  and,  according  to  the  nature  and 
circumstances  of  the  case,  deliver  to  tbe  assignee,  or  to  some  per- 
son for  his  use,  the  security,  if  there  be  one,  bond,  deed,  note,  or 
written  agreement,  upon  which  the  debt  or  chose  in  action 
arises ;  and  secondly,  the  transfer  shall  be  of  the  whole  or  entire 
debt  or  obligation,  in  which  the  chose  in  action  consists,  and,  as 
far  as  practicable,  place  the  assignee  in  the  place  of  the  assignor, 
so  as  to  enable  the  assignee  to  recover. the  full  debt  due,  and  to 
give  a  good  and  valid  discharge  to  the  party  liable.  The  transfer 
of  a  chose  in  action  bears  an  analogy,  in  some  respects,  to  the 
transfer  of  personal  property  ;  there  can  be  no  manual  extradition 
of  a  chose  in  action,  as  there  must  be  of  personal  property  to  con- 
stitute a  lien  ;  but  there  must  be  that  which  is  similar,  a  delivery 
of  the  note,  certificate,  or  other  document,  if  there  is  any,  which 
constitutes  the  chose  in  action,  to  the  assignee,  with  full  power  to 
exercise  every  species  of  dominion  over  it,  and  the  renunciation 
of  any  power  over  it,  on  the  part  of  the  assignor.  The  intention 
is,  as  far  as  the  nature  of  the  case  will  admit,  to  substitute  the 
assignee  in  the  place  of  the  assignor  as  the  owner."  ^ 

Sec.  117.  Character  and  quality  of  certificates.  —  Certificates  of 
stock  are  not  securities  for  money,  nor  are  they,  as  we  have  seen, 
possessed  of  the  qualities  of  commercial  obligations,  and,  there- 
fore, subject  to  the  rules  and  principles  of  the  law  merchant,  re- 
lating to  negotiable  notes  or  bills  of  exchange.^  T^hey  are  merely 
the  muniments  of  title,  and  evidence  of  the  holder's  right  and 
title  to  given  shares  in  the  property  and  franchises  of  the  corpora- 

'  Palmer  V.  Merrill,  6  Cush.  282.  R.   Co.   v.   Schuyler,  3  E.   P.   Smith 

''  Mechanics'  Bank  v.  New  York,  etc.,     (17  N.  Y.),  592.' 
R.  Co.,  13  N.  Y.  600  ;  New  York,  etc., 


Members  —  Stockholders  and  Stock.  187 

tion,  of  which  such  shares  constitute  him  a  member.'  But  the 
delivery  of  the  certificates  with  a  proper  assignment  of  tlie  same, 
on  a  sale  thereof,  usually  renders  the  sale  complete.'  They 
are  in  the  nature  of  a  chose  in  action,  and  like  a  note '  or 
bill  of  exchange  they  may  be  transferred  by  assignment  and 
delivery,  subject  only  to  such  reasonable  rules  as  may  be  pre- 
scribed therefor  by  the  corporation,  for  mutual  advantage  and 
protection;  the  assignee  being  substituted  thereby  in  the  place 
of  the  assignor  and  entitled  to  all  his  rights  and  pri\aleges, 
conferred  by  the  certificate.  The  assignee,  however,  must  take 
the  certificate  subject  to  all  the  equities  which  the  corporation 
may  have  against  the  same.  But  the  holder  may  transfer  his 
interest  to  a  purchaser,  though  the  transfer  be  not  made  as  re- 
quired by  the  rules  or  by-laws  of  the  corporation.' 

In  such  cases  the  assignee  takes  the  stock  subject  to  all  equities 
of  the  corporation  and  of  every  other  person.*  It  is  clear  that 
a  certificate  of  stock  transferred  in  blank  is  not  a  negotiable 
instrument.  Each  of  these  certificates  is  expressed  on  its  face 
to  be  transferable  only  on  the  books  of  the  company  by  the 
holder  thereof,  in  person,  or  by  a  conveyance  in  writing  recorded 
in  said  books,  and  a  surrender  of  this  certificate.  iSIo  commercial 
usage  can  give  such  an  instrument  the  attributes  of  negotiable 
paper.  However  many  intermediate  hands  it  may  pass  through, 
whoever  would  obtain  a  new  certificate  in  his  own  name,  must 
fill  out  the  blanks,  so  as  to  derive  title  to  himself  directly  from 
the  last  recorded  stockholder,  who  is  the  only  recognized  and 
legal  owner  of  the  shares." 

'  Mechanics' Bank  V.  New  York,  etc..  And  where  the  charter  required  a 

R.    Co.,   14   N.  T.    637  ;    New   York,  transfer    on    the    books   of    the   cor- 

etc. ,  R.  Co.  V.   Schuyler,  17  id.    592.  poration,   it   is    under    no    obligation 

See,  also,  Hutchins  v.  State  Bank,  12  to  permit  a  transfer  to  be  made  by  a 

Mete.     (Mass.)     421 ;     Slaymaker     v.  person   claiming   to   be   an   assignee, 

Gettysburgh  Bank,  10  Penn.  St.  373.  where  the  assignment  and  power  of 

*  Howe  V.   Starkweather,    17  Mass.  attorney  is  executed  to  some  person  in 

243  ;  Sargent  v.   Franklin  Ins.  Co.,  8  blank.     Dunn  v.  Commercial  Bank,  11 

Pick.  98  ;  United  States  v.  Vaughan,  Barb.  580.     See,  also,  Gilbert  v.  Man- 

3    Binn.    394  ;    Munn  v.  Barnum,    24  Chester  Iron  Co.,  11  Wend.  627. 

Barb.    283;    Noyes  v.    Spaulding,  27  *  Stebbins  v.  Phoenix  Fire  Ins.  Co., 

Vt.  420  ;  Orr  V.  Bigelow,  20  Barb.  21  ;  3  Paige's Ch.  350  ;  Mechanics'  Bank  v. 

14  N.  Y.  556.  New  York,  etc.,  R.  Co..  13  N.  Y.  599  ; 

2  Gilbert  v.   Manchester  Iron  Man.  New  York  R    Co.  v.  Schuyler,  34  id. 

Co.,  11  Wend.  627  ;  Marblehead  Social  30. 

Ins.    Co.    V.    Quiner,   10  Mass.  476;  'Greenwood   v.  Lake  Shore  R.  Co., 

Sargent  v.  Essex   Marine   R.    Co.,  9  10  Gray,  373. 
Pick.  202. 


188  Private  Cokporations. 

Sec.  118.  Transfer  of  shares  ;  how  made.  —  We  have  already 
alluded  to  the  right  of  the  holder  of  shares  of  capital  stock  to 
sell  and  transfer  the  same,  as  any  other  personal  property  may  be 
sold  and  transferred,  and  shown  that  any  restraint  upon  such 
right  would  be  unconstitutional  and  void.  But  it  is  usually  pro- 
vided by  the  articles  of  association  or  by-laws,  that  transfers  of 
shares  of  stock  shall  be  recorded  on  the  proper  books  of  the 
company,  kept  for  that  purpose.  And  where  a  deed  of  settle- 
ment of  a  banking  company  provided  that  no  person  should  be 
entitled  to  become  a  transferee  of  a  share,  unless  he  was  approved 
by  the  directors,  it  was  held  that  they  must  exercise  their  power 
reasonably.'  And  the  better  opinion  now  seems  to  be,  that 
clauses  in  the  acts  of,  or  articles  of  incorporation,  providing  that 
stock  shall  only  be  transferred  on  the  books  of  the  company,  are 
only  for  the  security  of  the  corporation,  and  do  not  prevent  the 
title  from  passing,  as  between  the  assignor  to  the  assignee  of  the 
stock.''  But  in  such  a  case,  a  purchaser  without  a  transfer  on  the 
books  of  the  company  acquires  only  the  equitable  rights  of  the 
assignor  ;  ^  and  the  assignee  would  take  the  transfer  of  the  same, 
subject  to  the  obligations  of  the  assignor  to  the  company  and  all 
liens  which  they  may  have  on  the  stock,  and  all  rights  of  the 
company  to  any  assessments  thereon,  and  all  equities  of  the  cor- 
poration or  any  other  person." 

A  power  to  regulate  the  transfer  of  stock  by  the  corpora- 
tion is  sufficient  to  authorize  a  by-law  that  the  stock  shall 
only  be  transferable  at  the  bank  of  the  coi'poration  and  on 
its  books ;  and  in  that  case,  until  such  transfer  the  purchaser 
coiild  take  only  an  equitable  title,  subject  to  any  claims,  or  liens 
of  the  corporation,  by  virtue  of  its  charter  or  by-laws,  or  by 
valid  usage  or  agreement.^     In  New  York,  where  a  stockholder 

'  Robinson  v.  Chartered  Bank,  L.  R.,  ■*  Gilbert  v.  Manchester  Iron  Manuf. 

1  Eq.  32.  Co.,  11  Wend.  627;    Mechanics'   Bank 

">■  Per  GOLDWAITHE,  J.,  in  Duke  v.  v.  New  York,  etc.,  R.  Co.,  13  N.  Y.  599: 

Cahawba  Nav.  Co.,  10  Ala.  82.  See, also,  New  York,  etc.,  R.  Co.  v.  Schuyler,  34 

Chambersburg   Ins.  Co    v.  Smith,  11  id.  30;  Geyer  v.  Western  Ins.  Co.,  3 

Penn.  St.  120  ;  Chouteau  Spring  Co.  v.  Pittsb.  (Penn.)  41 . 

Harris,  20  Mo.  382  ;  Bargate  v.  Short-  ^  Id.  See,  also,  Lockwood  v.  Mechan- 

ridge,  5  H.  L.  Cas.  297 ;   31  Eng.  L.  &  ics'  National  Bank,  9  R.  I.  308,  where 

Eq.  44  ;  Eames  v.  Wheeler,  19   Pick,  the  doctrine  is  maintained.     See,  also, 

442  ;  Stone  v.  Hackett,  12  Gray,  227.  as  to  the  validity  of  the  custom  of  the 

^  Mount  Holly  Tump.  Co.  v.  Ferree,  transfer  in  such  cases  by  the  secretary, 

17  N.  J.  Eq.  117.  Chambersburg   Ins.  Co.  v.  Smith,  11 


Members  —  Stockholders  and  Stock.  189 

of  a  corporation  transferred  his  stock  in  good  faith,  but  did  not 
cause  the  transfer  to  be  made  upon  the  books  of  the  company, 
as  required  by  the  statute  of  iiicoii^oration  ;  and  the  company 
had  no  transfer  book  ;  and  the  certificate  of  the  transfer  re- 
quired to  be  filed  in  the  town  clerk's  office  was  not  signed  by  the 
officers  of  the  company  as  required  by  its  by-laws,  but  was 
recorded  by  the  direction  of  the  company,  who  acquiesced  in  the 
same  and  recognized  the  transferee  as  the  owner  of  the  stock,  it 
was  held  that  the  original  stockholder  was  not  liable  to  pay  calls 
upon  the  stock  after  the  transfer.'  But  in  Massachusetts,  it  has 
been  held  that  shares  in  a  bank,  whose  charter  provides  that 
they  shall  "  be  transferable  only  at  its  banking-house  and  on  its 
books,"  cannot  be  effectually  transferred  (as  against  a  creditor  of 
the  vendor  who  attaches  them  without  notice  of  any  transfer),  by 
a  delivery  of  the  certificates  thereof,  and  a  blank  power  of  attor- 
ney from  the  vendor  to  the  vendee,  to  transfer  the  same  on  the 
books  of  the  company,  even  if  notice  of  such  transfer  be  given 
to  the  bank  before  the  attachment  is  executed.'' 

Mr.  Brice  observes :  "  The  capital  stock  is  usually  divided  into 
portions  styled  shares.  Such  shares  may  be  of  one  description 
only,  being  of  one  and  the  same  amount,  and  conferring  on  all 
holders  thereof  the  same  rights,  privileges  and  liabilities ;  or  they 
may  be  of  various  classes  and  with  various  denominations,  the 
possessors  of  shares  of  one  class  having  rights  and  being  under 
liabilities  differing  widely  from  those  belonging  to  the  shares  of 
other  classes.''  The  shares  of  capital  stock  are  now  regarded  as 
personal  property ;  *  and  dividends  when  made  on  such  shares 
should  be  made  on  all  the  stock,  so  that  each  holder  shall  receive 

Penn.  St.  120 .  As  to  what  constitutes  as  to  who  is  a  bona  fide  holder  of  stock, 
a  legal  transfer  of  corporate  stock  as  see  Weaver  v.  Barden,  49  N.  Y.  286. 
against  one  having  a  prior  equity, and 

'  Isham  V.  Buckingham,  49   N.  Y.  ton,  15  Vt.  519  ;  Isham  v.  Bennington 

216.  Iron  Works  Co.,  19  id.  230  ;  Arnold  v. 

^  Fisher    v.  Essex    Bank,    5    Gray,  Ruggles,  1  R.  I.  165  ;  Denton  v.    Liv- 

B73.  ingston,  9  Johns.  96  ;  Johns  v.  Johns, 

2  Green's  Brice's  Ultra  Vires,  141.  1    Ohio   St.    350;    State   v.    Franklin 

■*  Gilpin    V.  Howell,  5  Penn.  St.  41 ;  Bank,  10  id.  91  ;  Heart  v.  State  Bank, 

Slaymaker  v.  Gettysburgh    Bank,    10  2  Dev.  Eq.  Ill  ;  Planters',   etc.,  Bank 

id.    373  ;    Waltham    v.  Waltham,  10  v.  Leavens,  4  Ala.  753  ;    Union  Bank 

Mete.  (Mass.)  334  ;   Hutchins  v.   State  v.  State,  9   Yerg.    440  ;  Brightwell  v. 

Bank,  12  id.  421  ;  Wheelock  v.  Moul-  Mallory,  10  id.  196. 


190  Private  Corporations. 

his  proportionate  share ;  and  directors  have  no  authority  to  de- 
clare a  dividend  on  any  other  principle,^  In  reference  to  certifi- 
cates of  stock  and  their  character  and  quality  the  supreme  court 
of  the  United  States  say :  "  Stock  certificates  of  all  kinds  have 
been  construed  in  a  way  to  invite  the  confidence  of  business  men, 
so  that  they  have  become  the  basis  of  commercial  transactions  in 
all  large  cities  of  the  country,  and  are  sold  in  open  market  the 
same  as  other  securities.  Although  neither  in  form  nor  character 
negotiable  paper,  they  approximate  to  it  as  nearly  as  practicable."^ 

Sec.  119.  Eflfect  of  assignment  and  delivery.  —  The  practice  of 
transferring  such  shares  by  delivery  of  the  certificates  with  a 
blank  assignment  and  power  of  attorney  is  sanctioned  by  the  au- 
thorities ;  and  the  purchaser  acquires  a  perfect  title  thereto  as 
against  the  former  holder,  from  whom  he  receives  it.  As  against 
the  corporation  he  has  a  right  of  action  against  the  corporation 
for  its  value  if  they  refuse  to  transfer  it  on  a  demand  being  made 
therefor ;  but  if  they  have  a  lien  upon  the  same,  then  the  pui*- 
chaser  takes  it  subject  to  such  lien.  But  the  certificate  of  stock 
of  a  corporation  has  none  of  the  qualities  of  commercial  or  nego- 
tiable instruments,  and  as  a  general  rule,  the  purchaser  acquires 
no  better  title  than  the  assignor  had.^  And  it  has  been  held  that 
if  it  is  transferred  merely  by  delivery,  with  the  blank  assignment 
and  power  of  attorney  above  referred  to,  but  without  any  trans- 
fer on  the  proper  books  of  the  company,  where  such  is  required, 
a  subsequent  hona  fide  purchaser  from  the  assignor,  in  whose 
name  it  stands  upon  the  books,  acquires  a  good  title  thereto,  and 
a   transfer   made   on   such   books,   with   the  permission  of   the 

'  Jones  V.  Terre  Haute,  etc.,  R.  Co.,  57  N.  Y.  616  ;    Weaver  v.  Barden,  3 

29  Barb.   353  ;    S.   C,  57  N.  Y.  196  ;  Lans.  338  ;    S.  C,  49  N.  Y.  286  ;  Me- 

Ryderv.  Alton,  etc.,  R.  Co.,  13111.516;  chanics' Bank  v.  New  York,  etc.,  R. 

Atlantic,  etc.,  R.  Co.  V.  Commonwealth,  Co.,  13  id.  599;  Dunn  v.  Commercial 

3  Brewst.  (Penn.)  366  ;  State  v.   Balti-  Bank,  11  Barb.  580 ;  McNeil  v.  Tenth 

more,  etc.,  R.  Co.,  6  Gill,  363  ;  Luling  Nat.  Bank,  46  N.  Y.    325  ;    S.    C.  55 

V.  Atlantic  Mut.  Ina.  Co.,  45  Barb.  510.  Barb.   50 ;    Bridgeport   Bank  v.   New 

2  Bank  V.  Lanier,  11  Wall.  369.    See,  York,    etc.,    R.    Co.,    30    Conn.  270 ; 

also,  Leitch  v.  Wells,  48   N.   Y.  585  ;  Broadway  Bank  v.  McElrath,  13  N.  J. 

Salisbury  Mills  v.  Townsend,  109  Mass.  Eq.  24  ;  Mt.  Holly,  etc.,  T.  Co.  v.  Fer- 

115.  ree,  17  id.  117. 

'  Holbrook  v.  New  Jersey  Zinc  Co., 


Members  —  Stockholders  and  Stock. 


191 


company,  to  such  subsequent  purcliaBer,  cuts  oflE  all  rights  and 
equities  of  the  holder  of  the  stock  certihcates  to  the  stock 
itself.' 


>  People  V.  Elmore,  35  Cal.  653 ; 
Naglee  v.  Pacific,  etc,  Wharf  Co.,  20 
id.  529.  And,  until  regularly  trans- 
ferred, it  may  be  attached  as  the  prop- 
erty of  the  assignor  by  a  creditor  hav- 
ing no  knowledge  of  the  assignment  ; 
Sliowegan  Bank  v.  Cutler,  49  Me.  315  ; 
but  a  creditor  having  knowledge  of 
the  equitable  transfer  cannot  hold  the 
stock  upon  attachment,  although  a 
transfer  upon  the  company's  books  has 
not  been  made.  Colt  v.  Ives,  31  Conn. 
25  ;  Broadway  Bank  v.  McElrath,  13 
N.  J.  Eq.  24.  The  rule  is,  that  a  bona 
fide  purchaser  of  stock  which  has  not 
been  transferred  on  the  books  is  never- 
theless entitled  to  hold  the  same 
against  all  the  world  against  a  bona 
fide  purchaser  without  notice.  Parrot 
V.  Byers,  40  Cal.  614. 

The  buyer  of  stock,  as  between  him 
and  the  seller,  acquires  the  right  to 
demand  a  transfer  upon  the  books  of 
the  company  ;  Webster  v.  Upton,  91 
U.  S.  65  ;  and  for  a  refusal  of  such  de- 
mand the  company  is  liable  as  for  a 
conversion  of  the  stock.  Bank  of 
America  v.  McNiel,  10  Bush,  54. 

The  company  may  refuse  to  make 
the  transfer  for  a  good  and  sufficient 
reason,  but  by  its  refusal,  it  assumes 
a  perilous  position,  as  the  question  as 
to  whether  the  reason  is  sufficient  or 
not  is  for  the  court,  Comeau  v.  Guild 
Farm  Oil  Co.,  3  Daly,  218  ;  State  v. 
Mclver,  2  S.  C.  25;  State  v.  Smith,  48 
Vt.  266. 

The  measure  of  damages  in  such 
cases  is  the  value  of  the  stock  at  the 
time  of  demand,  together  with  any 
dividends  which  had  accrued  at  that 
time.  Baltimore,  etc.,  R.  R.  Co.  v. 
Lowell,  35  Md.  238.  But  the  charter 
of  a  company  may  invest  the  directors 
with  a  discretion  relative  to  transfers, 
and  if  so,  the  company  cannot  be  made 
liable  for  their  refusal  to  permit  a 
transfer,  unless  it  is  proved  that  they 
acted  capriciously  and  unfairly.  Jn 
re  Gresham  Life  Assurance  Co.,  L,  R., 
8Ch.  App.  446. 

In  addition  to  any  discretion  ex- 
pressly conferred  on  them  by  the 
articles  of  association,  the  directors  of 
a  company  have  vested  in  them  a  dis- 


cretion to  refuse  to  register  a  transfer 
of  shares,  in  cases  where  the  proposed 
transfer  would  be  contrary  to  the  in- 
terests of  the  shareholders.  Such 
discretion  is,  however,  not  arbitrary, 
but  must  be  exercised  in  a  just  and 
reasonable  manner.  Where,  there- 
fore, a  company  was  in  difficulties,  and 
a  transfer  was  made  to  a  person  whose 
address  was  incorrectly  given  in  the 
transfer,  and  who  could  not  be  found, 
it  was  held  that  the  directors  were 
justified  in  refusing  to  register  the 
transfer  ;  and  the  court  refused,  after 
a  winding-up  order  had  been  made,  to 
rectify  the  register  by  inserting  the 
name  of  the  transferee,  it  appearing 
that  the  transfer  was  made  for  the 
purpose  of  avoiding  liability,  and  that 
the  transferee  was  not  a  person  of 
means.  Re  Smith,  L.  R. ,  6  Eq.  Cas. 
238.  A  transfer  may  be  refused,  when 
the  stock  has  been  previously  attached 
as  the  property  of  the  vendor.  State 
Ins.  Co.  V.  Sase,  2  Tenn.  Ch.  507  ;  Wil- 
liams v.  Mechanics'  Bank,  5  Blatchf. 
59.  But  it  cannot  sustain  its  refusal 
by  proof  that  after  the  assignment  of 
the  shares  to  the  plaintiff'  was  made 
and  delivered,  but  before  his  demand 
for  a  transfer,  the  company  was  served 
with  notice  of  attachment  of  the 
share,  as  property  of  the  assignor. 
Comeau  v.  Guild  Farm  Oil  Co.,  ante. 
But  see  State  Ins.  Co.  v.  Saxe,  ante, 
where  it  was  held  that  the  company 
was  justified  in  a  refusal  to  transfer 
after  a  levy  of  execution  had  been 
made,  in  a  case  involving  similar  facts. 

A  corporation  should  not  be  com- 
pelled by  mandamus  to  make  transfers 
upon  its  books  of  shares  of  its  stock 
to  a  purchaser  thereof  at  a  sale  upon 
attachment,  where  the  same  stock  has 
been  transferred  regularly  and  new 
certificates  issued  to  a  person  present- 
ing a  prima  facie  title,  before  the 
issue  of  the  attachment.  State  v. 
Warren  Foundry,  etc.,  Co.,  32  N.  J.  L. 
439. 

A  mere  notice  to  the  officers  of  the 
company,  from  parties  having  a  bene- 
ficial interest  in  the  stock  sought  to  be 
transferred,  that  the  right  of  the  party 
having  the   legal   title   to   make   the 


192 


PkIVATE    CoRPORA'nONS. 


Sec.  120.  Refusal  of  the  corporation  to  transfer  on  its  books.  —  Where 
the  provisions  of  the  statute,  articles  of  association,  or  by-laws,  re- 
quire that  a  transfer  of  the  certificates  of  stock  should  be  made 
or  recorded  on  the  books  of  the  company,  a  refusal  of  the  com- 
pany, or  oflSeer,  or  agent,  having  charge  of  such  books,  to  make 
the  requisite  entry  or  record  of  a  transfer  on  proper  application, 
and  the  furnishing  of  the  necessary  evidence  for  this  purpose, 
without  a  good  reason  therefor,  would  render  the  corporation 
liable  for  all  damages  sustained  by  reason  of  such  refusal. 
And  a  certificate  of  stock  in  a  corporation,  with  a  power  of 
attorney  authorizing  the  transfer  of  the  stock  to  any  person,  is 
prima  facie  evidence  of  equitable  ownership  in  the  holder,  and 
renders  the  stock  transferable  by  the  delivery  of  the  certificate  ; 
and  in  such  a  case,  when  the  party,  in  whose  hands  the  certificate 
is  found,  is  shown  to  be  the  holder  for  value,  and  without  notice 
of  any  intervening  equity,  his  title  as  owiier  cannot  be  impeached.^ 
And  if  the  corporation  has  no  secretary  or  clerk,  and  the  presi- 
dent has  charge  of  its  books,  a  right  to  have  a  transfer  exists, 


transfer  is  questioned  and  will  be  con- 
tested, will  not  justify  the  officers  in 
delaying  longer  than  to  give  a  reason- 
able time  to  the  claimants  to  institute 
legal  proceedings.  State  v.  Mclver,  2 
S.  C.  25.  Nor  can  the  company  law- 
fully withhold  a  transfer  because,  in 
their  judgment,  the  motives  and  pur- 
poses of  the  party  are  improper,  or 
because  the  transfer  may  aifect  in- 
juriously the  interests  of  the  company. 
State  V.  Mclver,  2  S.  C.  25;  State  v. 
Smith,  48  Vt.  266. 

The  stock  of  a  corporation  in  Massa- 
chusetts is  so  within  the  power  of  its 
courts,  having  all  proper  parties  be- 
fore them,  that  their  decree  will 
operate  upon  the  title,  and  will  be  a 
valid  transfer  of  the  stock  to  a  third 
person,  notwithstanding  the  certificate 
therefor  is  outstanding.  And  the  cor- 
poration will  not  be  required  to  recog- 
nize the  title  of  one  who,  years  after- 
ward, produces  the  certificate,  with 
the  signature  of  the  former  owner  to  a 
blank  assignment,  although  he  proves 
that,  since  such  judicial  proceedings, 
he  has  advanced  money  on  the  faith 


of  the  certificate.     Sprague  v.  Cacheco 
Manuf.  Co.,  10  Blatchf.  173. 

If  an  attachment  has  been  levied 
and  notified  to  the  company,  and  it 
has  transferred  the  shares  to  a  pur- 
chaser at  sheriff's  sale,  before  demand 
by  a  prior  assignee  for  a  transfer  to 
him,  the  company  is  protected.  Wil- 
liams v.  Mechanics'  Bank,  5  Blatchf. 
(U.  S.  C.  C.)59. 

The  purchaser  under  an  attachment 
sale  takes  the  same  title  that  the 
judgment  debtor  had  to  the  shares 
when  the  attachment  was  levied,  and 
cannot  compel  a  transfer  where  the 
debtor  himself  would  not  have  been 
entitled  to  compel  it.  Geyer  v.  West- 
ern Ins.  Co.,  3  Pittsb.  (Peun.)  41. 

The  corporation  is  entitled  to  refuse 
a  demand  of  an  equitable  owner  of 
shares  for  a  transfer,  where  he  does 
not  offer  to  surrender  the  certificates, 
but  they  are  known  to  the  officers  of 
the  company  to  be  in  possession  of 
another  person  claiming  to  be  the 
lawful  owner.  National  Bank  v.  Lake 
Shore,  etc.,  Ry.  Co.,  21  Ohio  St.  221. 


J  Mount  Holly  Turnp.  Co.  v.  Ferree,  17  N.  J.  Eq.  117. 


Members  —  Stockholders  and  Stock. 


193 


and  the  demand  tlierefor  may  be  made  on  tlic  president.  And 
where  the  charter  of  a  (corporation  provides  tliat  shares  shall  be 
transferable,  in  the  manner  prescribed  by  the  by-laws  of  the  cor- 
poration, and  no  by-laws  are  made,  but  the  certificates  recite  that 
the  stock  is  transferable  only  on  the  books  of  the  company,  on 
surrender  of  the  certificate,  the  officers  of  the  company  and  not 
the  assignee  of  the  stock  should  transfer  the  stock  on  the  books.  ^ 


'  Green  Mt.  Turnp.  Co.  v.  Bulla,  45 
Ind.  1.  When  a  court  of  last  resort, 
after  a  fair  bona  fide  contest  by  the 
corporation,  has  ordered  stock  to  be 
transferred  to  a  purchaser  at  a  sherifTs 
sale,  the  corporation  is  liable  to  the 
holder  of  the  certificate  of  the  stock, 
who  took  no  steps  to  protect  himself. 
Friedlander  v.  {Slaughter  House  Co., 
81  La.  Ann.  523. 

In  Tennessee  it  was  held  by  a  di- 
vided court  that  the  holder  of  certifi- 
cates of  stock,  transferred  to  him  in 
f^ood  faith,  either  absolutely  or  as 
collateral  security,  possesses  a  valid 
title  as  against  the  creditors  of  the 
assignor,  who  have  fixed  no  liens  on 
it  previous  to  the  assignment,  although 
no  transfer  has  been  made  on  the 
books  of  the  corporation,  or  no  notice 
of  the  assignment  given  to  it.  Cor- 
nick  V.  Richards,  3  Lea  (Tenn.),  1. 

In  Missouri  it  is  held  that  in  the 
absence  of  a  legislative  enactment  re- 
stricting the  transfer  of  stock  to  any 
particular  mode,  the  transfer  is  com- 
j)lete  on  delivery  of  the  certificate  tcith 
power  to  transfer,  and  payment  of  the 
purchasC'^noney,  not  only  between  ven- 
dor and  vendee,  but  when  the  corpora, 
tion  has  unjustifiably  refused  to  make 
the  transfer  on  its  books  against  a 
creditor  of  the  vendor,  who,  without 
notice  of  the  transfer,  attaches  the 
stock.  Merchants'  Bank  v.  Richards, 
6  Mo.  App.  454. 

In  an  Ohio  case  it  appeared  that  in 
1854  a  railroad  company  issued  to  V. 
certificates  of  stock,  declaring  on  their 
face  that  the  stock  was  transferable 
on  the  company's  books  on  surrender. 
Soon  afterward  V.  sold  the  stock  to 
F.,  delivering  to  F.  the  certificates 
with  blank  powers  of  attorney  to  en- 
able him  to  have  the  stock  transferred. 
The  certificates  were  mislaid  by  F., 
and  were  not  discovered  until  1871. 
In  1863,  on  application  of  V.,  the 
25 


directors  issued  to  B.,  to  whom  V.  as- 
sumed to  sell  the  stock,  new  certifi- 
cates, believing  the  original  ones  to 
have  been  lost  by  V.  On  the  ground 
of  such  issuance,  the  company  refused 
an  a])plication  of  F.'s  administrators 
for  a  transfer  of  the  stock  to  their 
names,  and  for  an  account  of  the  divi- 
dends. The  by-laws  provided  that  no 
new  certificates  should  be  issued  in 
place  of  any  certificate  previously 
issued,  until  its  surrender  and  cancel- 
lation ;  also  that  certificates  might  be 
issued  on  the  special  order  of  the 
board  of  directors,  in  place  of  certifi- 
cates lost  or  destroyed,  on  proof  of 
such  loss  or  destruction,  and  on  receiv- 
ing security  to  indemnify  the  company 
against  loss  consequent  upon  the  issu- 
ance of  such  new  certificates.  It  was 
held: 

1.  That  the  company  was  liable  to 
replace  the  stock  to  which  F.  was  en- 
titled, or  to  account  for  its  value. 

2.  That  this  liability  to  F.  was  not 
aflFected  by  the  by-law  enabling  per- 
sons who  had  lost  certificates  to  obtain 
new  ones. 

3.  That  the  company  was  not  liable 
for  the  dividends  paid  on  the  stock 
before  it  had  notice  of  the  transfer  of 
the  certificates  to  F. 

4.  That  until  the  transfer  of  the 
stock  to  the  holders  of  the  original 
certificate  was  refused,  or  they  had 
notice  of  the  transfer  of  the  stock  to 
other  parties,  the  statute  of  limita- 
tions did  not  begin  to  run.  Cleveland 
&  Mahoning  R.  R.  Co.  v.  Robbins,  35 
Ohio  St.  483. 

Transferees  of  stock  which  had 
been  improperly  issued,  on  asking  to 
have  it  transferred  to  them  on  the 
books,  were  refused,  but  were  told 
that  they  might  return  it  and  take  cer- 
tain securities,  given  as  collateral  to 
the  note  of  the  original  purchaser, 
and   the   stock  was    afterward  dealt 


194: 


PkIVATE    CoRPORA'nONS. 


Althoiigli  certificates  of  stock  do  not  possess  tlic  qualities  of 
comniercial  or  negotiable  paper,  and  even  a  hooia  fide  assignee 
will  take  tlicni  subject  to  all  tlie  equities  which   existed  against 


with,  and  some  of  it  clianged  hands 
on  that  understanding.  The  assets 
of  the  company  afterward  passed  into 
the  hands  of  one  who  was  not  a  bona 
fide  purchaser,  who  claimed  the  securi- 
ties as  part  thereof.  It  was  lield  that 
the  transferees  could  file  a  bill  to  ob- 
tain the  securities  on  giving  up  their 
stock.     Snow  V.  Weber,  39  Mich.  143. 

The  purchaser  at  a  sheriffs  sale  on 
execution,  of  stock  in  a  corporation 
whose  charter  gave  it  a  pre-emption 
right  to  its  stock,  filed  a  bill  in  equity 
against  tiie  corporation  to  compel  a 
transfer  of  the  purchased  stock  with- 
out first  demanding  such  transfer  as 
such  pre-emption,  did  not  apply  to 
a  sheriff's  sale  on  execution.  This 
was  held  to  afford  no  reason  for  dis- 
missing the  bill.  Barrows  v.  National 
Kubber  Co.,  12  R.  I.  173. 

In  a  New  York  case  it  appeared  that 
C.'s  husband,  without  consideration, 
executed  in  blank  an  assignment  and 
power  of  attorney  indorsed  on  a  cer- 
tificate of  shares  of  stock  of  a  manu- 
facturing corporation  and  delivered 
the  same  to  her.  He  afterward,  for  a 
valuable  consideration,  executed  an 
assignment  of  the  stock  to  B  ,  and 
caused  a  transfer  to  be  made  to  B.  on 
the  corporation's  books,  B.,  who  was 
an  officer  thereof,  knowing  of  the  as- 
signment to  C.  By  the  terms  of  the 
certificate  the  stock  was  only  trans- 
ferable upon  the  books  on  surrender 
of  the  certificate.  The  court  lield  that 
it  being  the  corporation'sduty  to  resist 
any  transfer  without  such  surrender, 
the  transfer  to  B.  was  no  valid  excuse 
for  the  corporation's  refusing  C.'s  de- 
mand for  a  transfer.  The  fact  that 
the  assignment  to  C.  was  without 
consideration  was  immaterial.  Such 
demand  need  not  be  made  by  the  one 
whose  name  was  inserted  as  attorney. 
Equity  will  compel  a  transfer  to  the 
owner  of  shares  of  stock  on  the  books 
of  the  corporation,  if  a  recovery  of 
damages  for  a  refusal  to  transfer 
would  furnish  an  inadequate  compen- 
sation. Cushman  v.  Thayer  Mauuf. 
Jewelry  Co.,  76  N  Y.  365. 

In  Webb  v.  Graniteville  Manuf.  Co., 
11  S.  C.  396,  certain  stock  stood  on  the 
books  of  a  corporation  in  the  names 


of  two  persons,  "  executors  of  A."  It 
was  then  transferred  ou  the  books  to 
"  B.,  guardian,"  and  a  certificate  issued 
iu  B.'s  name.  B.  was  the  guardian  of 
the  minor  children  of  A.  B.  indorsed 
the  certificate  and  intrusted  it  to  C, 
his  attorney.  C,  by  a  petition  in  B.'s 
name,  procured  an  order  from  a  circuit 
judge  for  the  sale  of  the  stock  and  re- 
investment of  the  money.  C.  then 
hypothecated  the  stock  to  a  bank  for 
money  for  his  own  use.  C.  failed  to 
redeem,  and  the  stock  was  sold,  the 
bank  purchasing  and  afterward  trans- 
ferring it  to  its  president,  E.,  also 
president  of  the  corporation,  and  to 
F.  In  an  action  by  the  wards,  held, 
that  the  books  of  the  corporation,  the 
certificate  of  stock,  and  order  of  the 
judge  were  sufficient  to  put  E.  on  in- 
quiry, and  charge  him  with  a  knowl- 
edge of  the  trust  and  conversion  ;  that 
his  knowledge  in  the  matter  was  the 
knowledge  of  the  corporation  of  which 
he  was  president,  and  that  the  corpo- 
ration, as  well  as  B.,  the  guardian, 
was  liable. 

In  Eraser  v.  Charleston,  11  S.  C,  486, 
a  legal  owner  of  a  certificate  of  city 
stock,  transferable  by  its  terms  only 
at  the  city  treasurer's  office,  by  appear- 
ance in  person  or  by  attorney,  indorsed 
the  certificate  in  blank,  and  delivered 
it  to  another  person,  who  hypothe- 
cated it  to  a  bank.  The  owner  died, 
and  the  certificate,  by  virtue  of  a  trans- 
fer written  over  his  name  by  the 
cashier,  was  transferred  to  the  bank 
on  the  books  of  the  city  treasurer. 
It  was  held  that  the  indorsement  and 
delivery  was  an  equitable  assignment, 
and  the  transfer  proper  ;  and  that  the 
terms  of  the  certificate  as  to  transfer 
were  to  protect  the  corporation  itself 
and  purchasers  without  notice. 

In  Case  v.  Citizens'  Bank,  100  U.  S. 
446,  A.,  in  order  to  secure  the  payment 
of  his  note  to  B.,  pledged  to  the  latter 
certain  shares  of  the  capital  stock  of 
a  national  bank  in  Louisiana,  with 
authority  to  sell  them  in  default  of 
such  payment.  Default  having  been 
made  B.  sold  them,  and  in  March, 
1873,  applied  to  the  cashier  of  the 
bank  to  have  them  transferred  on  its 
books.    That  oflficer  refused  to  allow 


Members  —  Stockiioldeus  and  Stock.  105 

the  assignor  ; '  still,  unless  the  right  to  transfer  on  the  books 
of  tlie  company  should  be  prohibited  by  the  conti-act  of  sub- 
scription, or  the  constating  instruments,  the  corporation  could 
not  refuse  to  permit  such  transfer ;  and  in  case  of  such  refusal, 
the  corporation  would  be  liable  for  all  damages  sustained  thereby. 
In  a  recent  case  where  an  action  was  brought  against  a  bank  to 
recover  damages  for  its  refusal  to  permit  a  transfer  of  shares  of 
stock  on  its  books,  the  facts  were  that  two  certificates  had  been 
issued  to  one  Culver ;  that  these  certificates  stated  on  their  face 
that  the  stock  was  transferable  on  the  books  of  the  bank  only, 
and  on  the  surrender  of  the  certificates  ;  that  this  limitation  was 
in  accordance  with  the  provisions  of  a  by-law ;  that  Culver 
pledged  said  stock  to  the  bank  as  security,  giving  it  a  power  of 
attorney  authorizing  it  to  sell  the  same ;  that  under  this  power 
fifty  shares  were  sold  by  the  bank ;  that  Culver  was  allowed  to 
retain  the  two  certificates  of  said  shares ;  that  he  sold  the  shares 
and  assigned  the  certificates,  and  gave  the  usual  power  to  the 
assignee  (Lanner),  authorizing  him  to  transfer  the  stocks  on  the 
books  of  the  bank ;  and  that  the  assignee  bought  the  stock  in 
good  faith.  The  supreme  court  of  the  United  States,  on  these 
facts,  held  that  the  assignee  was  entitled  to  recover." 

In  relation  to  such  cei'tificates  they  say  :  "  Although  neither  in 
form  or  character  negotiable  paper,  they  approximate  to  it  as  near 
as  practicable.  If  we  assume  that  the  certificates  in  question  are 
not  different  from  those  in  general  use  by  corporations,  and  the 
assumption  is  a  safe  one,  it  is  easy  to  see  why  investments  of  this 

the  transfer   on   the   ground   that   A.  1.  That  the  action  was  not  prescribed 

was  indebted  to  the  bank.    Before  the  by  the  limitation  of  one  year, 

transfer   could  be  enforced  the  bank  2.  That    the    cashier   having   been 

failed,    and   C.    was   appointed   a   re-  intrusted  by  the  directors  of  the  bank 

ceiver,  against  whom  B.,  February  34,  with   the   transfers  of  stock,   his   re- 

1876,    brought   an    action    to   recover  fusal   to  permit  the  transfer  was  the 

damages  for  the  loss  sustained  by  him.  refusal  of  the  bank. 

It  did  not  appear  that  the  bank  ever  3.  That,  judgment  having  been  ren- 

adopted   any    by-law  providing   for  a  dered,  the  court  below  had  power  to 

lien  on  the  shares  of  a  stockholder  in-  order  C.  to  pay  the  claim,  or  certify  it 

debted  to  it,  or  that  A.'s  debt  to  it  had  to  the  comptroller.     Case  v.  Citizens' 

been  contracted  before  his  etock  was  Bank,  100  U.  S.  446. 
pledged  to  B.     Held  : 

•  New  York  R.  Co.   v.  Schuyler,  17        ^  First  National  Bank   v.  Lanier,  11 
N.  Y.  592  ;  Anderson   v.   Nicholas,  28     Wall.  369. 
id.  600  ;  New  York  R.  Co.  v.  Schuyler, 
34  id.  30. 


196  Pkivate  Corporations. 

character  are  sought  after  and  relied  upon.  No  better  form  could 
be  adopted  to  assure  tlie  purcliaser  that  he  can  buy  with  safety. 
He  is  told,  under  the  seal  of  the  corporation,  that  the  shareholder 
is  entitled  to  so  much  stock,  which  can  be  transferred  on  the  books 
of  the  corporation,  in  person  or  by  attorney,  when  the  certificates 
are  surrendered,  but  not  otherwise.  This  is  a  notification  to  all 
persons  interested  to  know,  that  whoever  in  good  faith  buys  the 
stock,  and  produces  to  the  corporation  the  certificates  assigned 
with  power  to  transfer,  is  entitled  to  liave  the  stock  transferred  to 
him.  And  the  notification  goes  further,  for  it  assures  the  holder 
that  the  corporation  will  not  transfer  the  stock  to  any  one  not  in 
possession  of  the  certificates."  ^ 

Sec.  121.  Contracts  for  the  transfer  of  shares.  —  W  here  an  owner 
of  shares  contracts  to  convey  or  transfer  the  same  at  a  future  time, 
on  certain  conditions,  the  same  rules  would  be  applicable  as  in 
other  contracts  relating  to  personal  property.  But  in  case  of  a 
contract  to  transfer,  where  the  party  so  contracting,  at  the  time, 
has  not  such  shares,  but  expects  to  purchase  the  same  at  some 
future  time  in  the  market,  for  the  purpose  of  carrying  out  his 
contract,  it  has  been  the  subject  of  contrary  judicial  opinions 
whether  such  contracts  were  legal.  It  was  intimated,  at  least,  by 
Lord  Tenterden,  in  Ryan  v.  Lewis^^  that  such  contracts  were 
illegal.     But  this  is  not  regarded,  at  this  time,  as  sound  law,  how- 

'  Id.     Where  a  trustee  under  a  wi]l  States  circuit  court  (Mass . ),  by  Shep- 

had  a  certificate  issued  to  him  as  trus-  ley.  J.,  in  which  it  appeared,  that  a 

tee,  and   he    was    afterward  removed  party  borrowed  money  of  a  bank  and 

from   his   oflBce   as    trustee,    and   the  gave  as  collateral  security  a  certificate 

court  removing  him  ordered  the  mas-  of  stock   in  his  name,  which  he  had 

ter  in  chancery   to   assign    the   trust  fraudulently  altered  from  two  to  two 

property  to  a  new  trustee,  which  was  hundred  shares.     The  loan  was  repaid 

done,  and  the  corporation  issued  a  new  and  the  bank  returned  the  certificate, 

certificate  to  the  new  trustee,  and  the  which  had  a  transfer  on  it  in  blank, 

plaintiff  in  good  faith,  having  no  no-  signed  in  blank  by  the  cashier.     The 

tice  of  the  proceedings,  lent  money  to  holder  then  again  borrowed  money  of 

a  holder  of  the  old  certificates,  which  the  plaintiiF,  and  gave  the  same  certifi- 

had  a  transfer  on  it  signed  in  blank  cate,    thus   indorsed    to  him,  as  col- 

by  the  old  trustee,  and  he  filled  up  the  lateral  security.     The  court  held  that 

blank  and  demanded  a  transfer  to  him  the  bank,  by  indorsing  the  certificate, 

and  a  new  certificate,  it  was  held  that  warranted     the    genuineness     of    it. 

he  could  not  maintain  an  action  against  Mathews  v.    Massachusetts   Bank,    9 

the  corporation.     A  curious  case  was  Am.  L.  Rev.  164. 

recently    determined    in    the   United  ^  Ry.  &  M.  386. 


Members  —  Stockholders  and  Stock. 


19: 


ever  good  sense  or  good  morality  it  may  seem  to  be.^  Contracts 
of  this  character  are  now  regarded  as  valid,  and  can  be  enforced 
bj  action. ' 

Sec.  122.  Liens  of  the  corporation  on  stock.  —  It  may  be  observed 
that  the  company  would  not,  in  the  absence  of  some  express  pro- 
vision of  the  law  of  its  constitution  or  other  lawful  regulations, 
have  any  lien  on  the  shares  of  its  stockholders  for  amoimts  due 
thereon,  or  other  indebtedness  to  the  company  ;  but  it  is  usually 
provided,  in  such  law  or  regulations,  that  it  shall  have  such  lien 
for  any  balance  on  such  stock  which  may  be  due  or  will  become 
due  thereon  to  the  corporation.^  The  stockholders  of  the  corpora- 
tion and  assignees  of  stock  would  be  bound  to  take  notice  of  such 
a  provision.  The  rights  of  the  corporation  in  this  respect,  as  we 
have  seen,  are  usually  secured  by  a  provision  of  its  by  laws  or 
articles  of  association,  requiring  a  transfer  of  the  stock  to  be  made 
on  the  books  of  the  company,  in  order  to  be  valid,  at  least,  as 
between  the  owners  and  the  company."     Such  a  provision  is  per- 


11  Redf.  on  Rail  .,§§  33-4. 

^  On  this  question,  ISHAM,  J.,  in 
Noyes  v.  Spalding,  27  Vt.  420,  ob- 
serves :  "  Contracts  for  the  sale  of 
stock  of  this  character  on  time  are 
valid  at  common  law,  and  can  be  en- 
forced by  action.  The  statute  7  Geo. 
2,  chap.  8,  made  perpetual  by  10  Geo. 
2,  chap.  8,  has  rendered  some  con- 
tracts of  that  character  illegal.  They 
are  rendered  void,  so  far  as  the  public 
stock  of  that  country  are  concerned, 
when  the  seller  had  no  stock  at  the 
time  of  making  the  contract,  and  none 
that  was  ever  intended  to  be  trans- 
ferred by  the  parties,  but  their  inten- 
tion was  to  pay  the  diiference  merely 
that  may  exist  between  the  market 
value  of  the  stock  at  the  time  of  the 
transfer,  and  the  price  agreed  to  be 
paid.  Such  contracts  are  rendered 
void  by  that  statute,  and  are  treated 
as  wagering  contracts ;  the  seller  virtu- 
ally betting  that  the  stock  will  fall , 
the  buyer  that  it  will  rise.  Chitty  on 
Bills,  112,  note  w.  It  has  been  held 
that  railroad  stock  is  not  within  the 
act.  Hewitt  v.  Price,  4  M.  &  G.  355  ; 
S.  C,  3  Railw.  C.  175  ;  Fishery.  Price, 
11  Beav.  194.  In  the  case  of  Mortimer  v. 
McCallan,  6  M.  &  W.  70,  Lord  Abinger 


observed  '  that  the  act  was  made  for 
the  purpose  of  preventing  what  is  de- 
clared to  be  illegal  trafficking  in  the 
funds  by  selling  fictitious  stock  merely 
by  way  of  differences  ;  but  it  was  never 
intended  to  affect  bona  fide  sales  of 
stock.'  Els  worth  v.  Cole,  2  M.  &  W. 
31  ;  2  Kent's  Com.  468,  note  b.  In  the 
case  of  Grizebood  v.  Blane,  20  Eng. 
L.  &  Eq.  290,  it  was  held  that  a  toler- 
able contract  for  the  sale  of  railroad 
shares,  where  no  transfer  is  intended, 
but  merely  '  differences,'  amounting  to 
the  rise  or  fall  of  the  market,  is  gam- 
ing within  the  8  and  9  Vict.,  chap. 
109,  §  18  ;  S.  C,  11  Com.  Bench,  538." 

^  Massachusetts  Iron  Co.  v.  Hooper, 
7  Cush.  183 ;  Heart  v.  State  Bank,  2 
Div.  Ch.  Ill  ;  Sargeant  v.  Franklin 
Ins.  Co.,  8  Pick.  90. 

*  Fisher  v.  Essex  Bank,  5  Gray 
(Mass.),  373;  Northrop  v.  Newtown 
Turnpike  Co.,  3  Conn.  544  ;  Guyer  v. 
Western  Ins.  Co.,  3  Pittsb.  (Penn.)  41  ; 
Bryon  v.  Carter,  22  La.  Ann,  98  ;  In  re 
Stockton  Iron  Co.,  L.  R.,  2  Ch.  Div. 
101 ;  In  re  General  Exchange  Bank, 
L.  R.,  6  Ch.  App.  818 ;  Mechanics' 
Bank  v.  Merchants'  Bank,  45  Mo.  513 ; 
German  Security  Bank  v.  Jefferson, 
10  Bush,    326;  3  latter   of  Bigelow,  3 


198 


Private  Corporations. 


haps  usually  intended  to  secure  the  corporation  any  sum  due  to  it 
by  the  stockholder,  but  this,  as  we  have  noticed,  does  not  prevent 
a  transfer  of  the  legal  rights  or  equitable  interests  of  the  holder.^ 
It  has  been  held  that  a  lieu  on  shares  held  by  the  company,  by 
virtue  of  such  provisions,  extends  to  and  embraces  dividends ;  '^ 
although  it  has  also  been  held,  in  this  country,  that  such  a  pro- 
vision, giving  a  bank  a  lien  upon  the  stock  of  a  shareholder  for 
debts  due  the  bank,  does  not,  by  implication,  give  a  lien  upon 
dividends  accruing  after  the  death  of  the  shareholder.''  And  a 
corporation,  by  assenting  to  an  assignment  made  by  a  stockholder, 
for  the  benefit  of  all  his  creditors,  "  with  no  other  preference 
than  is  or  may  be  authorized  by  law,"  does  not  lose  its  lawful 
lien  on  the  stock  for  debts  due  by  the  assignor  to  the  corporation.* 

Sec.  123.  Company  may  refuse  to  transfer,  when.  —  Where  a  com- 
pany has  a  lien  on  the  stock  standing  upon  its  books  in  the  name 
of  a  judgment  debtor,  and  such  stock  is  sold  under  an  execution 
against  the  debtor,  there  is  no  obligation   of    the    company    to 


Benedict,  469.  But  a  corporation  may 
waive  its  right  to  insist  upon  this  lien, 
or  by  its  acts  may  estop  itself  from  in- 
sisting upon  it.  Thus,  in  In  re  North- 
ern, etc.,  Tea  Co.,i..  R.,  10  Eq.  Cas. 
458,  the  articles  of  association  of  a 
company  provided  that  the  company 
should  have  a  primary  lien  on  the  de- 
bentures of  any  member  of  the  com- 
pany who  might  be  either  absolutely 
or  contingently  indebted  to  the  com- 
pany for  any  amount  or  on  any  ac- 
count, and  that  the  directors  might, 
after  any  such  debt  became  absolutely 
payable,  sell  and  transfer  any  deben- 
ture of  the  member  so  indebted  or 
liable.  The  holder  of  certain  deben- 
tures, who  was  also  a  shareholder, 
transJferred  his  debentures  in  August, 
1865,  and  the  transferees  were  regis- 
tered as  the  proprietors  of  the  deben- 
tures, and  received  certificates  to  that 
efiFect  from  the  company.  In  1866  and 
1867,  calls  were  made  on  the  shares 
held  by  the  transferrer,  »which  were 

'  Marlborough  Manuf.  Co.  v.  Smith, 
2  Conn .  579  ;  Same  v.  Same,  5  id.  247 ; 
Farmers'  Bank  v.  Iglehart.  6  Gill,  50  ; 
Stebbins  v.  Phoenix  Ins.  Co.,  3  Paige, 
350  ;  Union  Bank  v.  Laird,  2  Wheat. 


unpaid .  In  December,  1867,  the  com- 
pany fell  into  difficulties,  and  applied 
to  the  transferee  of  the  debentures  to 
renew  them  for  a  period  of  three  years. 
Held,  that  the  company  had  precluded 
themselves  by  their  conduct  from  set- 
ting up  their  lien  for  unpaid  calls  as 
against  the  transferees.  In  another 
English  case  the  statute  provided  that 
no  shareholder  shall  be  entitled  to 
transfer  any  share  after  any  call  has 
been  made  in  respect  thereof  until  he 
shall  have  paid  such  call,  nor  until  he 
shall  have  paid  all  calls  for  the  time 
being  due  on  every  share  held  by  him, 
was  held  to  apply  only  to  the  transfer 
of  shares  on  which  a  call  can  be  and 
has  been  made,  and  not  to  shares  on 
which  all  the  calls  have  been  paid  ; 
and  the  company  is  therefore  bound  to 
register  a  transfer  of  stock,  although 
the  transferrer  be  the  holder  of  other 
shares  on  which  there  are  unpaid  calls. 
Hubersty  v.  Manchester,  etc.,  Ry.  Co., 
L.  R.,  2.  Q.  B.  471. 

390;  Black  v.  Zacharie,  3  How.  513; 
Arnold  v.  Suffolk  Bank,  27  Barb.   424. 

'■^  Hague  V.  Dandeson,  2   Exch.    741. 

3  Brent  v.  Bank.  2  Cranch  (C.  C),  517. 

^  Dobbins  v.  Walton,  37  Ga.  614. 


Members  —  Stockholders  and  Stock.  199 

transfer  the  same  to  tlie  purchaser,  except  upon  the  payment 
by  tlic  latter  of  the  amount  secured  by  tlie  lien.^  So,  where 
there  was  a  provision  in  the  charter  declaring  stock  personal 
property,  and  authorizing  the  board  of  directors  to  make  rules 
and  regulations  concerning  the '  transfer  of  it,  subject  to  the 
general  law  of  the  State,  and  the  board  of  dircetors  adopted  a 
rule  prohibiting  the  transfer  of  stock  until  all  the  debts  due  by 
the  owner  of  the  same  to  the  corporation  wore  paid,  this  was  held 
to  be  valid,  although  inconsistent  with  a  genwal  law  of  the 
state  relating  to  the  transfer  of  property,  and  that  a  transfer  con- 
trary to  such  a  rule,  although  good  against  the  assignor,  would 
not  be  good  as  against  the  corporation,  for  either  a  debt  due  or  to 
become  due  from  him,  either  as  principal  or  surety.''  But,  where 
a  person,  owning  shares  in  a  bank,  transferred  them  to  another, 
and  the  bank  issued  a  new  certificate  to  the  transferee,  making 
the  shares  in  the  new  certificates  "  transferable  after  the  holder 
pays  all  his  liabilities  to  said  bank,"  this  was  held  to  be  a  waiver 
of  the  lien  of  the  bank  upon  the  shares  thus  transferred,  for 
amounts  due  or  to  become  due  from  the  assignor.'  And,  wmere  a 
corporation  had  by  its  charter  a  lien  upon  the  shares  of  a  stock- 
holder for  a  debt  due  to  it,  and  the  stockholder  caused  his  stock 
to  be  transferred  on  the  books  of  the  company,  w^hich  was  the 
only  manner  in  which  it  could  be  transferred,  to  a  fictitious  name, 
which  was  known  to  the  officers  of  the  corporations  and  the  origi- 
nal o^vner  afterward  caused  the  stock  to  be  transferred  to  an- 
other person,  by  a  person  who  claimed  or  w^as  represented  to  be 
the  holder,  as  security  for  an  antecedent  debt  due  from  the  origi- 
nal owner  to  him,  but  no  money  was  paid  on  the  transfer,  it  was 
held  that  the  lien  of  the  corporation  upon  the  stock  for  a  debt 
due  from  the  original  owner  was  not  lost  by  said  transfers.* 

Sec.  124.  instances  where  corporation  has  been  held  justified  in  refus- 
ing to  transfer.  —  The  plaintiff  being  the  assignee  for  value  of  a  cer- 
tificate of  stock  in  a  bank,  which  stock  stood  in  the  name  of  his 
assignor,  demanded  a  transfer  to  himself,  which  was  refused  on 

'  Newberry  v.  Detroit,  etc.,  E.  Co.,        'Hill  v.  Pine  River  Bank,  45  N.  H. 

17  Mich.  141.  300. 

^  St.  Louis,  etc.,  Ins.  Co.  v.  Qoodfel-        ^  Stebbins  v.  Pbcenix  Fire  Ins.  Co., 

low,  19  Mo.  149.  3  Paige,  350. 


200  Pkivate  Corporations. 

the  gronnd  that  the  assignor  had  not  paid  his  original  subscrip- 
tion.    The  plaintiff  brought  his  action  for  damages  for  the  re- 
fusal, and  it  was  held  that  the  bank  had  a  right,  by  virtue  of  its 
by-laws,  to  refuse  a  transfer  while  the  original  owner  was  indebted 
to  the  bank.'     And  where  the  articles  of  association  of  a  bank 
provided  that  no  stockholder  should  be  permitted  to  transfer  his 
shares,  or  receive  a  dividend  thereon,  until  his  indebtedness  to 
the  bank  was  paid,  and  authority  was  given  to  the  bank,  in  case 
any  sum  was  past  due  and  owmg  to  it,  to  sell  the  stock  of  the 
owner  to  pay  the  same,  these  two  provisions  were  held  to  create  a 
lien  upon  the  stock  in  favor  of  the  bank,  for  the  holder's  indebt- 
edness to  the  bank.^     But  where  a  stockholder  died  insolvent 
and  indebted  to  the  corporation,  and  subsequently  the  directors 
passed  a  resolution  prohibiting  the  transfer  of  stock  by  any  debtor 
of  the  company  until  the  debt  should  be  paid  or  secured,  and  af- 
terward the  administratrix  of  the  stockholders  sold  the  stock  to 
a  person  who  was  ignorant  of  the  indebtedness  and  the  resolution, 
without  which  a  right  of  sale  and  transfer  existed  in  the  owner, 
it  was  held  that  the  corporation  had  no  right  to  refuse  to  transfer 
the  stock  on  its  books  to  the  purchaser.^ 

Sec.  125.  Corporations  may  be  compelled  to  allow  a  transfer. — 
Where  a  purchaser  or  assignee  of  stock  is  entitled  to  a  transfer  of 
the  stock  on  the  books  of  the  company,  he  could  undoubtedly 
compel  the  corporation  to  have  the  same  so  made  by  the  proper 
officer,  by  mandaimis.  And  where,  by  tlie  charter  or  rules  and 
regulations  of  the  corporation,  the  transfer  is  thus  required  to  be 
made,  an  assignment  of  certificates  of  stock  would,  as  we  have 
seen,  be  good  as  between  the  assignor  and  assignee,  and  the  com- 
pany could  only  claim  the  benefit  of  the  lien  for  debts  due  from 
the  assignor.     If  the  claims  against  him  are  satisfied,  then  the 

'  McCready  v.  Ramsey,  6  Duer,  574.  world  except   subsequent   purchasers 

2  Arnold  V.  Suffolk  Bank,  27  Barb,  in  good  faith,  without  notice.  People 
424.  V.  Elmore,  35  Cal.  653  ;  Naglee  v.  Pa- 

3  Steamship   Dock  Co.  v.  Heron,  53  cific  Wharf  Co.,  20  id.  529. 

Penn.  St.  280.     See,  also,  Weston  v.         But  the  assignee  cannot  maintain  an 

Bear   River,  etc.,  Mining   Co.,  5   Cal.  action  for  a  refusal  of  the  corporation, 

186.  if  the  assignor  has  not   paid   for  the 

Transfers   not     entered     upon    the  stock.     McCready  v.  Rumsey,  6  Duer, 

books  of  the  company  are,  under  the  574. 
California  statute,  good  against  all  the 


Members  —  Stockholders  and  Stock,  201 

assignee  may  compel  the  transfer  on  its  records'.'  If  the  corpora- 
tion demands  of  the  stockliolder  more  tlian  is  due,  the  holder  must 
tender  the  amount  actually  due,  to  put  the  corporation  in  the 
wrong,  and  enable  him  to  compel  the  transfer.'  But,  in  the 
absence  of  fraud  or  collusion  on  the  ])art  of  the  company,  a  mere 
transfer  of  stock  on  the  books  thereof,  by  direction  of  the  vendor 
to  his  vendee,  does  not  make  the  company  liable  as  a  guarantor 
of  the  vendor''s  title  to  the  stock.^  And,  unless  some  specific 
mode  of  transfer  is  required,  any  transfer  of  stock  entitles  the 
transferee  to  vote  at  all  meetings  of  the  corporate  body,  and  for 
directors  of  the  company." 

Sec.  126.  Stock  subject  to  execution  against  the  assignor  until  trans- 
ferred.—  Under  the  California  statute  (1852),  a  transfer  of  the 
certificates  of  stock,  though  conveying  the  interest  of  the  owner, 
was  held  not  to  be  a  valid  transfer  against  a  honajide  purchaser 
without  notice,  who  purchased  the  same  at  a  sale  on  execution 
against  the  assignor,  unless  there  was  also  a  transfer  of  the  stock 
on  the  books  of  the  company,  as  provided  by  the  statutes.*  So, 
in  Maine,  it  has  been  held  that  under  the  statute  of  that  state, 
providing  for  a  transfer  of  stock  on  the  proper  books  of  the  cor- 
poration," no  transfer  of  the  capital  stock  of  a  bank  will  secure  it 
from  attachment,  against  a  recorded  owner.'     But,  in  some  of 


'  Weston  V.  Bear  River  Mining  Co.,  to  the  same;  as  for  instance  whether 

5  Cal.  186.     An  action  will  lie  against  such  transfer  is  entered  on  the  proper 

a  corporation  for  a  refusal  to  transfer  books  of  the  company  as  required  by 

stock  upon  its  books,  if  it  is  its  duty  law.     Pinkerton  v.  Manchester  &  L. 

so  to  do      Commercial  Bank   v.  Kort-  R  Co.,  43  N.  H.  424.     See,  also,  Fisher 

right,  32  Wend.  348.  v.  Essex  Bank,  5  Grav,  373;  Sabin  v. 

•^  Pierson  v  Bank  of  Washington,  3  Woodstock,  21  Vt.  363 ,  Pittsburgh  & 

(.'ranch  (C.  C),  363.  C.  R.  Co.  v.  Clarke.  29  Penn.  St.  14G. 

3  Central   R.  Co.  v.   Ward,  37   Ga.  But  see  Broadway  Bank  v.  McElrath, 

515.  13  N.  J.  Eq.  24.     As  to  the  transfer  of 

■*  People  V.  Devin,  17111.  84.  equitable  interests,  and  the  time  for 

"  Naglee   v.  Pacific  Wharf  Co,  30  which  the  tran.sfer  dates,  see  Rice  v. 

Cal  529.  Courtis,  33  Vt  400  ;  1  Story's  Eq.  Jur. 

^  Rev.  Stat.  Me.,  chap.  46,  §  11.  400,  b.  "  A  corporation  has  no  implied 

'' Skowhegan  Bank  V  Cutler,  49  Me.  lien  upon  stock   for  the  liabilities  of 

315.     See,   also.   First   Nat.    Bank  v.  the  stockholders  to  the  company."     1 

Lanier,  11  Wall.  369.     The  question  Redf.   on   Rail.,    i^  33,    par    5;    citing 

as  to  whether  the  sale  and  transfer  of  Mass.  Iron  Co.  v.  Hooper,  7  Cush.  183; 

stock  is  complete  so  as  to  defeat  the  Heart  v.  State  Bank,  3   Dev.  Ch.  Ill  ; 

rights  of    creditors   to   the    same    is  Sargent  v.  Franklin  Ins.  Co.,  8  Pick, 

made  in  some  cases  to  depend  upon  90. 
the  provisions  of  the  statutes  relating 

26 


202  Private  Corporations. 

the  states,  the  equitable  title  acquired  by  assignment  will  be  pro- 
tected by  a  court  of  equity  against  cxery  one,  except  those  who 
are  not  affected  by  notice  of  the  assignment,'  and  in  a  recent  case 
in  California  it  has  been  held  that  an  assignee,  even  before  trans- 
fer, is  entitled  to  hold  the  stock  against  all  the  world,  except  a 
honafide  ])urchaser  without  notice.''  In  Michigan  it  is  held  that 
an  assignment  of  stock  may  operate  to  convey  the  interest  of  the 
holder,  even  though  not  recorded  upon  the  books  of  the  company, 
and  that  a  judgment  creditor  buying  such  holders  interest  at  a 
sale  on  execution  with  notice  of  the  assignment,  gets  no  better 
title  than  the  holder  had  at  the  time  of  the  sale.^ 

Sec.    127.        stockholder's  right  of  action  against  a  corporation. —  We 

have  already  referred  to  the  right  of  a  member  to  sue  a  corpora- 
tion, in  a  case  where,  under  the  same  circumstances,  he  could  main- 
tain an  action  against  a  natural  person.  'And  this  right,  in  particu- 
lar cases,  we  will  now  proceed  to  illustrate.  Thus,  a  stockholder 
of  a  corporation  may  maintain  a  bill  against  the  corporation  to 
restrain  it  from  paying  a  tax  illegally  assessed  upon  the  property 
of  the  company,  the  state  treasurer,  seeking  to  collect  the  tax,  being 
made  a  party  defendant,  and  enjoined  from  collecting  the  same/ 
A  refusal  by  the  directors  of  a  bank  to  commence  a  suit  to 
test  the  legality  of  a  tax  upon  the  property  of  the  bank  is  not  a 
breach  of  their  duty  for  which  a  bill  will  he  against  them  at  the 
suit  of  a  stockholder.^  But  any  dissenting  stockholder  may 
restrain  the  company  from  executing  a  contract  which  exceeds  its 
power "  And  it  is  well  settled  that  a  private  corporation  may 
be  sued  by  one  of  its  own  members,  either  at  law  or  in  equity, 
under  special  circumstances ;  as  where  it  attempts  to  do  acts  which 
it  is  not  warranted  in  doing  by  its  charter,  it  may  be  restrained 
by  injunction.''  So,  any  member  of  a  corporation  has  a  right  of 
action  against  the  corporate  body  for  any  injury  he  sustains  from 


'  Colt  V.  Ives,  a?j<e;  Broadway  Bank  id  331;  Mechanics'  Bank  v.  Thomas, 

V.  McElrath,  13  N.  J.  Eq.  24.  id.  384. 

«  5  Id. 

3  Newberry  v.  Detroit,  etc.,  Manuf.  ^Zabriskiev  Cleveland,  etc.,  R.  Co., 

Co.,  17  Mich.  141.  23  How  (U.  S  )  381. 

•»  Mechanics',  etc..  Bank  v.Debolt,  18  '  Ex,  parte  Booker,  18  Ark.  338 
How.  (U.  S.)  380;    Dodge   v.  Wolsey, 


Members  —  Stockholders  and  Stock.  203 

the  wrongful  acts  of  its  agents  or  officers. '  So  a  minority  of  the 
stockholders  of  a  corporation  may  maintain  a  bill  in  equity  in  be- 
lialf  of  themselves  and  the  other  stockJiolders  against  the  officers, 
for  conspiracy  and  fraud,  whereby  their  interests  will  be  or  have 
been  sacrificed."  And  in  order  to  constitute  an  illegal  application 
of  the  funds  or  money  of  the  corporation  it  is  not  necessary  that 
there  should  be  any  intentional  wrong  or  actual  fraud ;  and  to 
give  the  court  jurisdiction  in  equity  in  such  a  case,  the  plaintiff 
need  not  allege  or  prove  any  actual  and  willful  fraud  or  collusion 
on  the  part  of  the  company  or  the  directors  thereof.'  A  bill  in 
equity  will  also  lie  to  compel  the  delivery  of  stock  to  one  who  has 
already  an  equitable  title  to  such  stock,  although  a  suit  at  law 
might  also  be  maintained  therefor.* 

Sec.  128.  When  stockholder  may  have  injunction  against  corporation.  — 
An  injunction  against  a  corporation  will  be  granted  on  the  appli- 
cation of  a  single  stockholder  when  he  can  show  that  the  corpora- 
tion is  employing  the  corporate  powers  and  funds  to  accomplish 
purposes  not  within  the  scope  of  the  objects  of  the  institution.* 
But  no  corporation,  or  tax  payer,  individually,  or  on  behalf  of 
himself  or  others,  can  sue  for  an  injury  to,  or  misapplication  of, 
the  corporate  property  or  franchises,  except  in  cases  of  fraud, 
corruption,  or  violation  of  law  on  the  part  of  the  functionaries 
intrusted  with  the  corporate  powers  and  duties.^  A  stockholder 
may,  however,  have  relief  by  injunction  against  a  corporation  of 
which  he  is  a  member,  which  is  about  to  use  the  funds  of  the 
company  for  a  different  purpose  entirely  from  that  which  was 
designed  by  the  act  of  incorporation.'     And  where  a  corporation, 

'Gray  v.    Portland   Bank,  3  Mass.  bolder  may  be  entitled  to  an  injunction 

385.     See,    also,    Waring  v.  Catawba  against  the  directors  from  misapply- 

Co.,  2  Bay  (S.  C),  109.  ing  the  funds  of   the  corporation,  or 

-  Peabody  v.  Flint,  6  Allen,  52.  from  cbangiug  the  purpose  for  which 

^  Hill  V.  New  Jersey  R.  Co.,  10  N.  J.  it  was  created,  yet  an  injunction  will 

Eq.  171.  not  be  granted  to  restrain  the  general 

*  Hill  V.  Rockingham  Bank,  4  N.  H.  management  of  the  business  unless  a 

567.  clear  violation  of  law,  or  a  wide  de- 

^  GiflFord  v.  New  Jersey  R.  Co.,  10  parture  from  the  charter  purposes  is 

N.  J,  Eq.  171.  shown.     Bach  v.  Pacific  Mail  Steam- 

«  Arkenburgh   v.    Wood.   23  Barb,  ship   Co.,   12   Abb.   Pr.  (N.    S.)   373; 

360.  Goodwin  v.  New  York,  etc.,  R.  R.  Co., 

'Baltimore,  etc.,  R.  Co.  v.  Wheel-  43  Conn.  494, 
iuor,   13   Qratt.    40.      While   a   stock- 


204  Private  Corporations. 

of  which  the  plaintiff  was  a  member,  obtained  permission  from  the 
leo-islatnre  to  extend  their  raih-oad  beyond  tlie  terminus  named  in 
the  original  charter,  and  accepted  said  act  granting  said  extension 
by  a  majority  vote,  against  the  wishes  of  the  plaintiff,  who  was  a 
stockholder,  it  was  held  that  this  was  a  fundamental  change  in  the 
purposes  for  which  the  corporation  was  organized,  which  could 
not  be  binding  upon  the  individual  corporators  without  their  con- 
sent, and  that  the  plaintiff  was  entitled  to  have  an  injunction 
against  the  appropriation  by  the  defendant  (the  corporation)  of 
the  funds  or  credits  of  the  corporation,  toward  the  construction  of 
the  proposed  extension  of  the  road.^     And  it  has  also  been  held 
that  if  an  individual  stockholder  has  suffered  damage  in  a  contract 
with  a  corporation  through  the  fraudulent  and  illegal  acts  of  the 
directors,  done  by  color  of  their  office,  his  only  remedy  is  against 
the  corporation  ;  and  that  he  cannot  maintain  an  action  against  the 
directors,  who  are  themselves  liable  to  the  corporation,*     But  a 
minority  of  the  stockholders  in  a  corporation  have  a  remedy  m 
chancery  against  the  directors,  and  against  the  corporation  and  all 
others,  whether  individuals  or  corporations,  assisting  or  confede- 
rating with  them,  to  prevent  such  corporation  and  the  directors 
thereof  from  making  any  misapplication  of  their  capital  or  profits, 
which  might  result  in  lessening  the  dividends  of  the  stockholders 
or  the  value  of  their  sliares,  if  the  acts  intended  to  be  done  consti- 
tute in  law  a  breach  of  trust  or  duty."    The  general  rule,  however, 
is  that  the  suit  against  a  ministerial  officer  or  agent,  to  account,  or 
for  misconduct,  must  be  brought  in  the  name  of  the  coi-poration ; 
and  that  it  cannot  be  maintained  in  the  name  of  an  individual 
stockholder/     But,  if  justice  cannot  otherwise  be  obtained,  or 
where  the  directors,  officers  and  managers;  having  the  control  of 
the  corpoi'ation  and  its  affairs,  are   guilty  of  misconduct   that 
amounts  to  a  breach  of  trust,  it  will  be  permitted  to  sue  them/ 

'  Stevens  v.  Rutland  R.  Co..  29  Vt.  ^  Smith  v.  Poor,  40  Me.  415. 

545.     See,  also.  Bliss  v.  Anderson.  31  •'' March  v.  Eastern,  etc.,  R.  Co.,  40 

Ala.  613  ;  Neall  v.  Hill,  16  Cal.  145.  JST.   H.  548.     See,    also,   Gardiner   v. 

But,  in  Connecticut,  it  has  been  held  Pollard,  10  Bosw.  674  ;  Vanderbilt  v. 

that  an  individual  stockholder  cannot  Garrison.  5  Duer,  689. 

maintain  an  action  at  law  against  the  "Brown  v.   Vandyke,  8  N.   J.  Eq. 

directors   of   a   corporation    for    mis-  795. 

managing  its  affairs  or  defrauding  the  ^  Id. 
corporation.    Allen  v.  Curtis,  26  Conn. 
456. 


Members  —  Stockholders  and  Stock.  205 

Sec.  129.   Liability   of  the  stockholders  in   equity   to  creditors. — In 

eqnitj,  the  property  of  a  corporation  is  regarded  as  held  in  trust 
for  the  payment  of  its  debts,  and  creditors  may  pnrsue  it  into  the 
hands  of  any  person,  not  a  hmia  fide  holder.  And  it  is  also  well 
settled  that  the  stockholders  of  a  corporation  are  not  entitled  to 
any  share  of  the  capital  stock  or  dividends  of  the  profits,  until 
all  the  debts  are  paid.  Therefore,  a  sale  of  the  capital  stock  ot  a 
corporation  and  a  division  of  the  proceeds  among  the  stockholders 
will  not  defeat  the  rights  of  creditors  ;  but  they  may  compel  such 
stockliolders  to  contribute  pro  rata  to  the  payment  of  the  cor- 
porate debts  out  of  the  moneys  so  received.'  This  doctrine  was 
recently  affinned  in  the  supreme  court  of  the  United  States.  Mr. 
Justice  Clifford,  in  delivering  the  opinion  of  the  court,  observed : 
"  Equity  regards  the  property  of  a  corporation  as  held  in  trust 
for  the  payment  of  the  debts  of  the  corporation,  and  recognizes 
the  right  of  creditors  to  pursue  it  into  whosoever's  possession  it 
may  be  transferred,  unless  it  has  passed  into  the  liands  of  a  bona 
fide  purchaser;  and  the  rule  is  well  settled  that  stockholders  are 
not  entitled  to  any  share  of  the  capital  stock,  nor  to  any  dividend 
of  the  profits,  nntil  all  the  debts  of  the  corporation  are  paid. 
Assets  derived  from  the  sale  of  the  capital  stock  of  the  corpora- 
tion, or  of  its  property,  become,  as  respects  creditors,  the  substi- 
tutes for  the  things  sold  ;  and  as  such  they  are  subject  to  the  same 
liabilities  and  restrictions  as  the  things  sold  were  before  the  sale, 
and  while  they  remained  in  the  possession  of  the  coi-poration. 
Even  the  sale  of  the  entire  capital  stock  of  the  company,  and  the 
division  of  the  proceeds  of  the  sale  among  the  stockholders,  will 
not  defeat  the  trust,  nor  impair  the  remedy  of  the  creditors,  if 
any  debts  remain  unpaid  ;  as  the  creditors  in  that  event  may  pur- 
sue the  consideration  of  the  sale  in  the  hands  of  the  respective 
stockholders  and  compel  each  one,  to  the  extent  of  the  fund,  to 
contribute  ^:>7'c>  rata  toward  the  payment  of  their  debts  out  of  the 
moneys  so  received  and  in  their  hands." 

Yalid  contracts  made  by  a  corporation  survive  even  its  disso- 
lution by  a  voluntary  surrender  or  sale  of  its  corporate  franchises, 

'  See  pos^,  chap.  14.  A  creditor  of  the  caused  the  insolvency  of  the  corpora- 
corporation  cannot  maintain  an  action  tion.      Winter  v.  Baker,  34  How.  Pr. 
against  the  directors  for  damages  on  183;  50  Barb.  435. 
the  ground  that  their  misconduct  has 


206  Private  Corporations. 

and  the  creditors  of  the  corporation,  notwithstanding  snch  sui^ 
render  and  sale,  may  still  enforce  their  claims  against  tlie  property 
of  the  corporation,  as  if  no  such  surrender  had  taken  place. 
Moneys  derived  from  the  sale  and  transfer  of  the  franchises  and 
capital  stock  of  an  incorporated  company  are  assets  of  the  cor- 
poration, and,  as  such,  constitute  a  fund  for  the  payment  of  its 
debts ;  and  if  held  by  the  corporation  itself,  and  so  invested  as  to 
be  subject  to  legal  process,  the  fund  may  be  levied  on  by  such 
process ;  but  if  the  fund  has  been  distributed  among  the  stock- 
holders, or  passed  into  the  hands  of  other  than  hona  fide  creditors 
or  purchasers,  leaving  any  debts  of  the  corporation  unpaid,  the 
rule  in  equity  is,  that  such  holders  take  the  fund  charged  with 
trust  in  favor  of  creditors,  which  a  court  of  equity  will  enforce, 
and  compel  the  application  of  the  same  to  the  satisfaction  of  their 
debts.*  Kcgarded  as  the  trustee  of  the  corporate  fund,  the  cor- 
poration is  bound  to  administer  the  same  in  good  faith  for  the 
benefit  of  the  creditors  and  stockholders,  and  all  others  interested 
in  its  pecuniary  affairs;  and  any  one  receiving  any  portion  of  the 
fund  by  voluntary  transfer,  or  without  consideration,  may  be  com- 
pelled to  account  to  those  for  whose  use  the  fund  is  held.  Cred- 
itors are  preferred  to  stockholders  on  accourit  of  the  peculiar  trust 
in  their  favor,  and  because  the  latter,  as  constituent  members  of 
the  corporate  body,  are  regarded  as  sustaining,  in  that  respect,  the 
same  relation  to  the  former  as  that  sustained  by  the  corporation." 

Sec.  130.  Over-issued,  and  "  watered  stock." — Tlie  constatiiig  in- 
struments, in  this  country,  generally  limit  the  capital  stock  of 
corporations  for  pecuniary  profit,  and  fix  the  number  of  shares 
into  which  the  same  shall  be  divided.  In  other  cases,  and  partic- 
ularly under  special  charters,  corporations,  in  this  respect,  are 
only  limited  by  the  circumstances  of  the  case,  and  may  issue  stock 
and  increase  the  capital  to  any  extent  required  to  carry  out  the 
purijoses  and  objects  of  the  enterprise,  without  any  formal  vote  of 
the  stockholders.^ 

'  Story's  Eq.  Jur.,  §   1252  ;  Mumma  ^  Paygon  v.  Stower,    2  Dill.   (U.  S 

V.  Potomac  Co.,  8  Pet.   286  ;  Wood  v.  C.  C.)  428.     But  see  Eadman  v.  Bow- 

Dummer,  3  Mason, 308  ;  Vosev.  Grant,  man,   58  111.    444,  wliere  it  was  held 

15  Mass.  522;  Spear  v.  Grant,  16  id.  that  the  increase  must  be  authorized 

14  ;  Curran  v.  Arkansas,  15  How.  307.  by  votes  of  the  stockholders. 

"^  The  Chicago,  etc.,  R.  Co.  v.  How- 
ard, 7  Wall.  392. 


Membeks  —  Stock  FioLDERS  and  Stock.  207 

An  over-issno  of  stock  certificates  generally  operates  to  reduce 
the  value,  in  such  cases,  of  the  original  stock  legitimately  issued 
to  existing  stockholders,  and  such  stock  is  usually  issued  by  the 
directors  or  other  managers  and  agents,  for  selfish  and  fraudulent 
purposes,  and  is  a  fraud  upon  such  existing  stockholders  as  do 
not  authorize  it.  The  stock  thus  affected  is  frequently,  by  a 
figure  of  speech,  called  "  watered  stock." 

A  variety  of  decisions  have  been  rendered,  in  reference  to  such 
over-isvsued  stock  and  the  obligations  of  the  corporation  therefor. 
On  the  one  hand  it  has  been  claimed  that  as  such  over-issue  was 
the  act  of  the  directors  or  other  agents  of  the  corporation,  and  that 
although  in  excess  of  their  authority  or  of  the  authority  of  the 
corporation,  still  as  the  corporation  select  its  agents,  when  they 
act  within  the  apparent  scope  of  their  authority,  the  corporation 
should  be  liable,  as  the  corporation  fmniish  such  agents  with  the 
means  of  imposing  on  innocent  parties,  and  therefore  it  should 
be  bound  by  such  acts  of  its  agents.'  And  it  has  been  further 
maintained  that,  although  such  fraudulent  over -issue  of  stock,  or 
a  contract  made  by  agents  therefor,  imposed  no  obligation  upon 
the  corporation,  in  respect  to  it,  still  the  corporation  would  be 
responsible,  for  the  fraud  of  the  agents  in  issuing  such  spui'ious 
stock,  and  for  all  damages  sustained  thereby  by  the  purchaser; 
and  that  his  remedy  for  the  tort  would  be  as  effectual  and  afford 
him  as  complete  indemnity  as  if  the  contract  had  been  binding 
on  the  part  of  the  eorpora,tion.^  On  the  other  hand  it  has  been 
held  that  such  issue  of  stock  on  the  part  of  the  corporation  or  its 
agents,  in  excess  of  the  limitations  of  the  constating  instruments, 
is  tdtra  vires  and  void  ;  that  parties  dealing  with  such  agents  are 
bound  to  take  notice  of  such  limitations  in  the  fundamental  law 
of  the  corporation  ;  ^  that  if  the  company  has  authority  to  act  in 
a  matter  and  appoints  an  agent  for  the  purpose,  but  the  agent 
fraudulently  exceeds  his  authority,  the  person  dealing  \v\i\\  the 
agent  in  I'elation  to  stock  can  claim  no  advantage  therefrom,  or 
against  the  corporation,  if  he  has  knowledge  of'  the  fraudulent 

•  Mechanics'  Bank  v.  New  York  &  N.  ler,  38  Barb.  534  ;  Shotwell  v.  Mali,  id. 
H.  R.  Co.,  4  Duer.  480.  44o  ;  Cazeaux  v.  Mali,  25  id.  578. 

2  New  York  &  N.  H.  R.  Co.  v.  Schuy-        ^  2  Redf.  on  Rail. ,  g  234,  par.  70  and 

note. 


208  Pkivatk  Corporations. 

acts  of  tlie  agent,  or  if  lie  acts  in  bad  faith  in  the  transaction  ; 
and  that  a  hona  Jide  purchaser  from  him  would  be  in  no  better 
situation. 

This  is  illustrated  by  a  recent  case  in  New  York/  where  the 
facts  were  as  follows :  By  the  act  creating  a  corporation,  its 
capital  stock  was  limited  to  $3,000,000,  and  divided  into  shares  of 
$100  each,  transferable  in  such  a  manner  as  the  company  should 
direct ;  the  entire  stock  was  taken,  and  certificates  issued  therefor 
to  the  owners.  The  by-laws  of  the  company  prescribed  that 
transfers  of  stock  should  only  be  made  on  the  transfer  books  of  the 
company,  and  required  the  certificate  of  ownership  to  be  surren- 
dered prior  to  the  making  of  such  transfer  and  the  issue  of  a  new 
certificate.  The  company  established  a  transfer  agency,  and 
appointed  their  president  a  transfer  agent,  who  was  authorized 
and  accustomed  to  the  transfer  of  stock  on  the  books  in  his 
charge,  and  on  the  surrender  of  the  certificates  therefor,  to  execute 
and  deliver  to  the  transferee  the  usual  certificate,  stating  that  he 
was  entitled  to  the  number  of  shares  of  stock  specified  therein, 
transferable  on  the  books  of  the  company  by  him  or  his  attorney, 
on  the  surrender  of  the  certificate.  The  agent  fraudulently  gave 
to  one  Kyle  a  certificate  in  the  usual  form  for  eighty-five  shares 
of  stock,  when,  in  fact,  the  latter  owned  no  stock,  none  stood  on 
the  books  in  his  name,  and  no  certificate  for  such  stock  had  been 
surrendered.  The  plaintiffs  in  good  faith,  and  relying  upon  the 
certificate  as  regularly  issued  and  valid,  made  a  loan  to  Kyle,  re- 
ceiving from  him  as  security  the  certificate,  with  an  assignment  of 
the  stock  and  a  power  of  attorney  to  transfer  the  same.  In  an  action 
by  the  plaintiffs  against  the  corporation  for  refusing  to  permit  the 
stock  represented  by  the  certificate  to  be  transferred,  it  was  held 
by  the  court  of  appeals  of  that  state,  that  the  certificate  was 
void,  and  that  the  plaintiffs  did  not  thereby  acquire  a  right,  legal 
or  equitable,  to  any  stock ;  that  the  corporation  was  not  responsi- 
ble to  the  plaintiffs  for  damages  sustained  by  their  reliance  upon 
the  genuineness  of  the  certificate  ;  that  the  certificate  did  not  par- 
take of  the  character  of  negotiable  instruments ;  that  a  hona  fide 
assignee  of  such  an  instrument  takes  it  subject  to  the  equities 

I  Mechanics'  Bank  v.  New  York  &  N.  H.  R.  Co.,  13  N.  Y.  599. 


Members  —  Stockholders  and  Stock.  209 

which  exist  against  the  assignor ;  and  that  the  doctrine  of  estop- 
pel in  pais  was  not  applicable  to  snch  a  case.^ 

On  this  subject  Mr.  Kedfield  appropriately  observes :  "  What- 
ever may  be  said  of  the  duty  of  corporations  to  ennploy  only 
reliable  directors  and  transfer  agents,  and  of  the  justice  of  the 
company  being  bound  by  their  acts,  within  the  apparent  scope  of 
their  employment,  all  of  which  are  in  general  terms  most  unde- 
niable propositions  ;  still,  something  is  due  to  common  prudence 
and  reasonable  caution,  on  the  part  of  those  who  deal  in  stock,  to 
see  at  least  what  the  charter  and  books  of  the  company  will  at 
once  disclose  to  any  one  who  will  examine.  And  if,  instead  of 
making  a  reasonable  examination  of  matters  obviously  within  his 
reach,  one  sits  down  blindly  to  adventure  millions  upon  a  spurious 
issue  of  stock  in  such  sums  and  at  such  times  as  to  induce  most 
prudent  men  to  hesitate  about  its  genuineness,  it  is  perhaps  not 
unreasonable  that  he  should  be  held  bound  by  such  facts  as  the 
slightest  examination  must  have  disclosed.  This  is  the  rule  in 
regard  to  most  commercial  and  business  transactions,  and  we  see 
no  special  hardship  in  its  application  here  within  reasonable 
limits."  ^ 

'See,  also,  Chicago  City  R.  Co.  v.  Ernest  v.  Nicholls,  6  H.  L.  C.  401.   But 

Allerton,  18  Wall.   283  ;  New  York  &  see  Greenwood's  case,  3  De  G.,  M.  & 

N.  H.  R.  Co.  V.  Schuyler,  34  N.  Y.  30;  G.  471  ;  Athenaeum  Ass.  Co.  v.  Foley, 

Curran  v.  Arkansas.  15  How.  (U.  S.)  1  Giff.  102. 

304  •  Curry  v.  Scott,  54  Penn.  St.  270,  *  3  jje^f.  on  Rail.,  §  234,  11. 

27 


210  Peivate  Corporations. 


CHAPTER   YI. 

DIRECTORS. 

Sec.  131.  Directors  —  election  of . 

Sec.  132.  Relation  of,  to  stockholders. 

Sec.  133.  Powers  of  directors. 

Sec.  134.  Same  continued. 

Sec.  135.  Board  of  directors  or  managers. 

Sec.  136.  General  powers  of.  and  limitations  thereon . 

Sec.  137.  Implied  powers  of. 

Sec.  138.  Acts  not  within  the  scope  of  their  powers. 

Sec.  139.  Powers  conferred  by  the  fundamental  law. 

Sec.  140.  Powers  depend  upon  interpretation. 

Sec.  141.  Powers  not  conferred  upon  directors  remain  in  the  corporate 
body. 

Sec.  143.  The  directors  cannot  change  the  character  and  objects  of  the  cor- 
poration. 

Sec.  143.  Directors  as  agents. 

Sec.  144.  Distinction  in  Massachusetts. 

Sec.  145.  Rule  in  England  as  to  the  authority  of  directors. 

Sec.  146.  Delegation  of  authority. 

Sec.  147.  Ratification  of  agent's  acts. 

Sec.  148.  Same  continued. 

Sec.  149.  Effect  of  knowledge  of  unauthorized  acts. 

Sec.  150.  Effect  of  ratification. 

Sec.  151.  Directors  under  the  national  banking  law. 

Sec.  152.  Personal  liability  of  directors. 

Sec.  153.  Same  continued. 

Sec.  154.  The  fiduciary  character  of  directors- 

Sec.  155.  Same  continued. 

Sec.  156.  They  cannot  manage  the  affairs  of  the  corporation  for  their  per- 
sonal benefit. 

Sec.  157.  Contracts  by  directors  with  corporation . 

Sec.  158.  Instances  where  they  are  not  personally  liable. 

Sec.  159.  Where  they  act  without  authority. 

Sec.  160.  Liability  as  partners. 

Sec.  161.  Directora  de  facto . 

Sec.  162.  Compensation  of. 

Sec.  163.  Cannot  increase  their  own  compensation. 

Sec.  164.  Meetings  of  directors. 


Directors.  211 

Sec.  131.  Election  ofc— The  directors  and  other  elective  officers 
of  a  corporation  must  be  chosen  in  the  manner  required  by  the 
charter,  or  the  general  law  under  which  the  corporation  is  organ- 
ized, and  even  where  the  charter  or  general  law  does  not  designate 
the  length  or  kind  of  notice  to  be  given  of  the  time  and  place  of 
the  meeting  for  such  election,  it  is  obvious  that  a  reasonable  notice 
to  all  the  stockholders  would  be  required,  unless  all  the  stock- 
holders were  present  and  gave  their  assent  either  personally  or  by 
proxy.  And  this  is  the  case  even  in  relation  to  annual  meetings, 
and  although  the  by-laws  fix  the  time  and  place,  of  such  meeting.' 
If  the  meeting  is  required  to  be  called  by  the  clerk,  in  a  certain 
way,  he  alone  has  the  power  to  call  it,  unless  provision  is  made 
for  it  being  called  by  some  other  oificer  in  the  case  of  the  disability 
or  failure  of  the  clerk  to  call  it,  and  the  mode  specified  must  be 
adopted.  Thus  where  notice  of  an  election  was  required  to  be 
given  by  the  directors  of  a  corporation,  it  was  held  that  a  notice 
signed  by  a,  majority  of  the  directors  not  stating  that  it  was  by 
the  order  of  the  board,  and  not  stating  that  the  persons  who  signed 
the  call  loere  directors,  it  was  held  that  the  call  was  not  sufiicient, 
and  could  not  be  the  basis  of  a  legal  meeting.*  In  the  case  last 
cited,  the  strictness  of  this  rule  was  well  illustrated,  and  it  was 
held  that,  where  the  directors  of  a  corporation  are  empowered  to 
designate  the  time  for  holdiDg  an  election,  such  designation  7m(st 
he  hy  the  hoard  when  laioftdly  convened  /  and  a  determination  by 
the  board  or  a  majority  of  the  directors  that  an  election  must  be 
held,  without  fixing  a  time,  does  not  authorize  one  of  them  to 
fix  the  time  and  give  notice  for  such  time.  It  was  also  held  that, 
when  a  charter  directs  that  all  elections  of  directors  after  the  first 
shall  be  held  annually,  at  such  times  as  the  by-laws  shall  direct, 
no  second  election  can  he  held  until  hy-laios  designating  the  time 
have  heen  adoj^ted.  Nor  can  there  be  an  omission  to  hold  an  elec- 
tion such  as  to  authorize  the  directors  to  designate  a  day  for  it 
provided  for  only  in  case  of  such  omission.  The  notice  for  an 
annual  or  other  meeting  of  the  corporation  must  designate  the 
day,  hour  and  place  where  it  is  to  be  held,  and  the  meeting  can- 
not be  held  until  the  hour  designated  in  the  notice,  nor  at  any 

'San   Buenaventura,  etc.,  Mfg.  Co.         '  Johustou  v.  Joues,  23  N.  J.  Eq.  216. 
V.  Vassault,  50  Cal.  534;   People  v. 
Albany,  etc.,  R.  R.  Co.,  55  Barb.  344. 


212  Private  Corporations. 

other  place,  unless  regularly  adjourned.  Thus,  in  a  New  York 
case/  a  part  of  the  stockholders  of  a  corporation  met  fifteen  min- 
utes before  the  hour  for  which  an  election  was  appointed,  and 
organized  as  a  meeting  of  the  corporation,  and  chose  inspectors, 
and  precisely  at  the  hour,  as  they  claimed,  they  adopted  resolu- 
tions to  proceed  with  the  election,  and  confirming  the  selection  of 
inspectors,  and  thereupon  held  an  election ;  while  another  party 
of  stockholders,  in  another  room,  at  or  shortly  after  the  hour  ap- 
pointed, organized  as  a  meeting  of  the  corporation,  appointed  in- 
spectors, and  proceeded  also  to  an  election.  It  was  held  that  the 
proceedings  at  the  former  meeting  operated  as  a  surprise  and 
fraud  upon  the  stockholders  who  did  not  participate  in  the  meet- 
ing, and  as  to  them  was  irregular  and  void  ;  and  such  irregularity 
could  not  be  cured  by  a  reorganization  of  the  meeting  at  the 
proper  time,  where  such  meeting  was  in  fact,  and  in  legal  effect, 
but  a  continuation  of  the  first  meeting.  The  election  at  the  sec- 
ond meeting  was  held  valid,  although  the  polls  were  kept  open 
somewhat  longer  than  the  time  fixed  by  the  notice,  it  appearing 
that  such  action  was  fairly  within  the  exercise  of  a  reasonable  dis- 
cretion, and  for  the  purpose  of  giving  the  stockholders  a  fair 
opportunity  to  vote.  None  but  bona  fide  stockholders,  or  persons 
holding  the  proxies  of  stockholders,  can  vote  at  an  election  of 
officers  of  a  corporation,  and  if  the  list  of  stockholders  exhibited 
and  voted  upon  at  such  election  was  not  a  true  list  of  the  stock- 
holders, and  was  made  up  fraudulently,  and  contained  the  names 
of  persons  not  entitled  to  vote,  the  election  is  not  legal.*     Where 

'  People  V.  Albany,  etc.,  R.    R.   Co.,  invalid,  whether  the  restraining  order 

55  Barb.  344.     Wliere  the  stockhold-  did  or  did  not  bind  the  stockholders, 

ers  of  a  corporation  were  notified  that  State  v.  Bonnell,  35  Ohio  St.  10. 

the  annual  meeting  for  the  election  of  ^  Johnston  v.  Jones,  ante.     But  see 

directors  would  be  held  at  a   certain  People  v.  Albany,  etc.,  R.  R.  Co.,a/iie, 

hour  of  the  day  fixed  by  the   charter,  where  it  was  held  that  a  by-law  of  a 

and    the   corporation    was   restrained  corporation  requiring  that  on  an  elec- 

from  holding  an  election  on  that   day,  tion  day  the  secretary  should  produce 

in  consequence  of  which  no   meeting  the  transfer  books  and  a  list  of  the 

was  held  until  several  hours  after  the  stockholders  entitled  to  vote,  etc.,  and 

time  fixed  in  the  notice,  when  a  small  that  inspectors  should  be  chosen  from 

number  of  stockholders,    without  the  among  the  stockholders,  is  directory, 

knowledge  of  the  others,  met,   organ-  and  an  omission  to  produce  the  books 

ized,  and  adjourned  until  the  next  day,  does  not   invalidate    the    election,   al- 

at  which  time  an  election  was  held  by  though  it  casts    the   burden    of  proof 

a  minority  of  the  stockholders,  with-  upon  the  parties  claiming  under  it,  to 

out  notice  to  others,  who   were  in  the  show  that  voters  challenged  were,  or 

vicinity  for  the  purposes  of  the  meet-  appeared  by  the  books  to  be,    entitled 

ing,  and  might  have  been  readily  noti-  to  vote . 
fied.     Held,    that   such   election   was 


DiKECTOES.  213 

a  meeting  is  legally  convened  for  that  purpose,  unless  the  charter, 
statute  or  by-laws  otherwise  provide,  the  persons  receiving  a  ma- 
jority of  all  the  votes  cast,  although  less  than  one-half  the  stock 
was  represented,  are  legally  elected  as  directors,  and  clothed  with 
all  the  functions  and  powers,  as  well  as  duties  and  liabilities  of 
that  office.^ 

Sec.  132.  Relation  of,  to  stockholders. — The  directors  of  a  corporation 
stand  in  the  relation  of  trustees  to  the  stockholders  and  also  to 
creditors  of  the  coi'poration,  and  will  not  be  permitted  to  speculate 
with  the  funds  or  assets  of  the  corporation  for  their  own  advan- 
tage, or  in  any  manner  by  means  of  the  power  reposed  in  them  to 
receive  any  advantage  for  themselves  over  other  stockholders.* 
There  is  an  inherent  obhgation  implied  in  the  acceptance  of  such 
trust,  not  only  that  they  will  use  their  best  efforts  to  promote  the 
interests  of  the  stockholders,  but  that  they  will  in  no  manner  use 
their  position  to  advance  their  individual  interests  as  distinguished 
from  that  of  the  corporation  or  acquire  interests  that  shall  conflict 
with  the  fair  and  proper  discharge  of  their  trust.^  They  do  not 
represent  any  particular  class  of  stockholders,  but  have  a  duty  to 
perform  as  to  all,*  and  they  will  not  be  permitted  unfairly  to  do 
acts  for  the  benefit  of  one  class  of  its  stockholders  to  the  detriment 
or  disadvantage  of  another  class.  Thus,  where  a  board  of  direct- 
ors of  a  mining  corporation  makes  a  nominal  lease  of  a  mine 
owned  by  the  corporation,  to  a  party  really  acting  in  the  interests 
of  a  minority  of  the  stockholders,  not  in  the  ordinary  course  of 
the  business  of  the  corporation,  but  for  the  purpose  of  with- 
drawing the  mine  from  the  control  of  the  board  of  directors  about 
to  be  elected  at  an  approaching  meeting  of  the  stockholders,  and 
thereby  perpetuating  the  control  of  the  minority,  a  court  of  equity 
will  cancel  the  lease  on  a  bill  filed  by  the  corporation  for  that  purpose,* 
and  generally,  where  a  director,  by  means  of  his  position  as  such. 


'  Brown  V.  Pacific  Mail   Steamship  Md.  598 ;  Hale  v.    Republicau  Bridge 

Co.,  5  Blatchf.  525.  Co.,  8  Kans.  466. 

2  Corbett  v.    Woodward,    6  Sawyer  *  Chase  v.  Vanderbilt,  62  N.  Y.  307. 

(U.  S.  C.  C),  403  ;  European  &  N.  A.  ^  Mahoney  Mining  Co.  v.  Bennett.  5 

R.  Co.  V.  Poor,  59  Me.,  277.  Sawyer  (U.  S.  C.  C),  141. 

^  Cumberland  Coal  Co.  v.  Parish,  42 


214  Private  Corporations. 

secures  any  undue  advantage  for  himself  over  other  stockholders, 
either  directly  or  indirectly,  equity  will  treat  the  tranisaction  as  void,' 
The  president  of  a  corporation,  who  is  also  a  director,  will  not  be 
permitted  to  create  such  a  relation  between  him  and  the  trust 
property  as  will  make  his  own  interest  antagonistic  to  the  bene- 
ficiary, and  where  such  an  officer  bought  a  small  debt  against  the 
corporation  and  took  valuable  property  thereon,  he  was  enjoined 
from  levying  for  the  balance.^ 

Sec.  133.  Powers  of  directors. — The  powers  of  directors  are  such 
as  are  conferred  upon  them  by  the  constating  instruments  or  by- 
laws of  the  body,  and  such  as  are  implied  from  the  nature  of  the 
duties  devolving  upon  them  in  the  particular  corporation  whose 
business  they  direct.  But,  as  a  general  rule,  they  possess  no 
powers  beyond  those  residing  in  the  corporate  body.  And  if 
they  should  exceed  the  powers  conferred  upon  them,  or  perform 
acts  exceeding  their  authority,  they  would  be  ultra  vires  and 
void. 

They  are  the  agents  of  the  corporation  so  far  as  authorized, 
either  expressly  or  impliedly,  by  the  fundamental  law  of  its  be- 
ing. But  they  do  not  possess  powers  not  conferred  upon  it  in  this 
manner,  or  such  as  do  not  come  within  the  usual  powers  of  such 
agents  by  the  common  law.  It  has  been  held  that  the  authority 
to  act  as  directors  will  be  liberally  construed  in  their  favor,  and 
with  a  due  consideration  for  the  best  interests  of  the  company.* 
Thus  in  a  case  where  the  directors  had  authority  to  sell  the  ships 
of  the  company,  it  was  held  that  they  might  sell  all  its  ships.* 
And  where  the  general  powers  of  the  body  of  the  corporation  are 
transferred  to  the  properly  constituted  directors,  they  may,  miless 
restricted,  do  whatever  the  corporation  might ;  and  by  virtue  of 
this  power  they  may  dispose  of  the  corporate  property  in  whole 
or  in  part ;  but  this  general  power  is  held  not  to  extend  to  its 
franchises,  and  unless  they  are  expressly  authorized  by  law  so  to 

'  Corbett  v.  Woodward,  ante;  Farm-  ^  Wilson  v.  Meiers,  10  C.  B.  (N.  S.) 

era  and  Merchants'  Bank  v.   Downe,  348. 

53  Cal.  466.  *  Wilson  v.  Meiers,  10  C.  B.  (N.  S.) 

'■*  Brewster  v.  Stratman,  4  Mo.  Anp.  348. 
41. 


Directors.  215 

do,  they  would  not  possess  the  power  to  dispose  of  them.*  Where, 
by  the  law  of  its  constitution,  the  corporation  has  authority  to 
sell  and  transfer  its  property  or  franchises,  or  to  consolidate  with 
any  other  company,  this  authority  could  be  exercised  by  the 
directors  by  virtue  of  their  express  or  implied  powers.'  But  a  sale 
and  transfer  of  the  rights  of  one  company  to  another,  without 
legislative  authority  by  the  directors,  is  held  to  be  against  public 
policy,  and  courts  will  not  aid  a  transfer  against  such  policy,  or 
in  disregard  of  the  duties  and  the  obligations  of  the  company.^  And 
it  seems  well  settled  that  no  corporation  can,  without  express  leg- 
islative authority,  either  sell  or  mortgage  its  franchises.* 

Sec.  134.  Same  continued.—  A  provision  in  a  bank  charter,  con- 
ferring upon  the  directors  power  to  make  such  by-laws,  rules  and 
regulations  as  shall  be  needful,  touching  "  the  time,  manner  and 
terms  upon  which  discounts  and  deposits  shall  be  made,"  will  be 
construed  as  giving  to  the  directors  power  to  make  by-laws,  etc.,  to 
operate  and  control  merely  the  internal  conduct  of  the  bank,  and 
to  restrain  and  direct  its  own  otBcers  in  the  management  of  its 
affairs  and  not  to  affect  the  public  at  large  or  prejudice  the  rights 
and  interests  of  third  persons.^  But  where  a  charter  provided 
that  the  capital  stock  "  may  be  increased  from  time  to  time  at  the 

'Wood  V.  Belford,  etc.,  R.  Co.,    8        ^Hayesv.  Ottaway,  etc.,  R.  Co.,  61 

Phil.  (Penn.)  94  ;  Middlesex  R.  Co.  v.  III.  432. 

Boston,  etc.,  R.  Co.,  115  Mass.  347  ;  *  York,  etc.,  R.  Co.  v.  Winans,  17 
Enfield  Toll  Bridge  Co.  v.  Connecticut,  How.  (U.  S.)  39  ;  Pullan  v.  Cincinnati, 
etc.,  R.  Co.,  7  Conn.  29;  Abbot  v-  etc.,  R.  Co.,  4  Biss.  35;  Pierce  v. 
Hard  Rubber  Co.,  33  Barb.  587  ;  Fisher  Emery,  32  N.  H.  484  ;  Commonwealth 
V.  Evansville,  7  Ind.  407  ;  State  v.  v.  Smith,  10  Allen,  448 ;  Richardson  v. 
Bailey,  10  id.  46;  Bruffett  v.  Great  Sibley,  11  id.  65;  Hendee  v.  Pinker- 
Western  R.  Co.,  25  111.  353;  Hatcher  ton,  14  id.  381  ;  Troy,  etc.,  R.  Co.  v. 
V.  Toledo,  etc.,  R.  Co.,  42  id.  447 ;  Kerr,  17  Barb.  601 ;  Lauman  v.  Leba- 
Mahaska,  etc.,  R.  Co.  v.  Des  Moines,  non  Valley  R.  Co.,  30  Penn.  St.  43  ; 
etc.,  R.  Co.,  28  Iowa,  437.  Winchester   T.  Co.   v.  Vimont,  5  B. 

'■^  Tread  well  v.  Salisbury  Manf.  Co.,  Monr.  1 ;  Arthur  v.  Commercial  Bank, 

7  Gray,  393  ;  Lauman  v.  Lebanon,  etc.,  9  S.  &  M.  394  ;  Coe  v.  Columbus,  etc., 

R.  Co.,  30  Penn.  St.  42  ;  New  Orleans,  R.  Co.,  10  Ohio  St.  372.    But  compare 

etc.,  R.  Co.  V.  Harris,  27  Miss.    517.  Shepley  v.  Augusta,  etc.,  R.  Co.,  55 

See,  also.   Black  v.  Delaware,  etc.,  R.  Me.   395;    Kennebec,  etc.,    R.  Co.  v. 

Co.,  24  N.  J.  Eq.  455,  where  it  is  held  Portland,  etc.,  R.  Co.,  59  id.  9  ;  Miller 

that  in  case  of  a  lease  or  sale  by  vir-  v.  Rutland,  etc.,  R.  Co.,  36  Vt.  452; 

tue   of  legislative    authority,    unless  Hall  v.  Sullivan  R.  Co.,  2  Redf.  Am. 

provision  is  made  for  compensation  to  R.  Cases,  621. 

such  stockholders  as  dissent,  they  may        ^  Seneca  County  Bank  v.  Lamb,  26 

prevent  it.     But  see  post,  chaj).  16.  Barb.  595. 


216  Private  Ookpobations. 

pleasure  of  said  corporation,"  it  was  held  that  the  directors  alone 
had  no  power  to  increase  it,  although  it  was  further  provided  that 
"  all  the  corporate  powers  shall  be  vested  in  and  exercised  by  a 
board  of  directors  and  such  officers  and  agents  as  said  board  shall 
appoint."  It  was  further  held  that  such  powers  referred  to  ordi- 
nary business  transactions.^ 

Sec.    135.      Board  of  directors  or  managers.  —  We  have  Said  that  it 

is  usually  provided  by  the  fundamental  or  constatory  regulations 
of  the  body,  for  the  election  of  directors  and  the  exercise  of  their 
powers  and  duties.  In  such  cases  these  regulations  must  ordi- 
narily be  considered  in  the  light  of  a  power  of  attorney ;  and 
the  general  j^rinciiDles  applicable  to  agency  are  applicable  to  a 
board  composed  of  such  directors.  Where  their  powers  are  spe- 
cifically defined  by  such  instruments,  they  are  thereby  limited, 
and  cannot  claim,  in  respect  to  the  powers  thus  regulated,  to  have 
the  common-law  powers  of  such  a  body.  To  hold  otherwise 
would  be,  in  the  language  of  Mr.  Justice  Stoey,  "to  suppose 
that  the  common  law  is  superior  to  legislative  authority  ;  and  that 
the  legislature  cannot  dispense  with  forms,  or  confer  authorities 
which  the  common  law  attaches  to  general  corporations."  ' 

Sec.  136.  General  powers  of,  and  limitations  thereon.  —  The 
general  powers  conferred  ujion  the  board  of  directors  gives 
them  control  of  the  property  of  the  corporation  ; '  but  the 
board  would  have  no  power,  by  an  act  or  resolution,  to 
exclude  a  member  from  any  common-law  or  statutory  rights ; 
such  as  to  exclude  him  from  an  examination  of  the  bank  books 
of  the  corporation,  on  the  ground  that  he  was  hostile  to  its  inter- 
ests,* or  indeed  to  do  any  act  which  is  inconsistent  with  the  posi- 
tion he  holds  as  trustee  of  the  stockholders  of  the  company."  The 
powers  of  the  directors  under  a  general  authority  will,  of  course, 
depend  upon  the  nature  and  character  of  the  corporation.  Thus, 
the  board  of  directors  of  a  banking  corporation  may  authorize  its 

'Railway  Co.  v.  Allerton,  18  Wall.  Northampton  Bank  v.  Smith,  2  Cow. 

233.  579. 

'^Fleckner    v.    Bank    of    U.    S.,    8        « People  v.  Throop,  12  Wend.  183. 
Wheat.  338.  ^  Cumberland  Coal  Co.    v.    Parish, 

2  See  Spear  v.   Ladd,  11  Mass.  94;  ara^e;  Chase  v .  Yanderhilt,  ante. 


Directors.  217 

agents  to  borrow  money  ;  ^  fix  the  rates  and  conditions  of  dis- 
counts ; "  pass  resolutions  authorizing  the  stockholders  to  transfer 
their  stock  to  the  bank  in  payment  of  their  debts  to  it ; '  and 
authorize  any  one  of  their  number  to  assign  any  securities  belong- 
ing to  the  bank.* 

The  board  of  directors  may,  ordinarily,  do  any  act,  in  the  gen- 
eral management  of  the  business,  that  the  company  can  do,  unless 
restrained  by  the  creating  or  constating  instruments,  or  the  by- 
laws of  the  body.^ 

Sec.  loT.  Implied  powers  of.  —  It  will  be  manifest  that  the  pow- 
ers of  directors  of  joint-stock,  as  well  as  many  other  corporations, 
are  mostly  imphed,  or  to  be  inferred,  from  grants  of  authority  in 
general  terms.  In  fact,  the  constitution  of  directors  of  a  coi'porate 
body  would  carry  with  it,  by  implication,  a  variety  of  duties  and 
powers,  the  details  of  which  are  seldom  or  never  expressed  in  the 
articles  or  by-laws  of  the  institution.  It  is  difficult  to  lay  down 
any  universal  rules  relating  to  their  powers,  as  they  must  largely 
depend  upon  the  nature,  character  and  objects  of  the  corporation. 
It  may  be  said,  however,  that  they  possess  all  the  powers  to  act, 
which  the  corporation  would  possess  if  it  had  no  directors  ;  unless 
they  are  restrained  by  some  express  law  or  by  the  by-laws  of 
the  corporation,  or  from  implication  necessarily  deduced  there- 
from. But  they  possess  no  powers  by  implication  which  were  not 
necessary  for  an  economical  and  successful  prosecution  of  the 
purposes  of  the  institution,  and  cannot  engage  in  any  business  or 
transactions  foreign  to  the  purposes  and  ordinary  business  of  the 

'"Ridgway  v.  Farmers'   Bank,  12  S.  Harr.    Ch.    106;    Lester   v.    Webb,    1 

&  R.  256  ;  Leavitt  v.  Yates,   4  Edw.  Allen,  34. 
134.  6  Whitwell  v.  Warner,  20  Vt.  425; 

'^Bank  of  U.  S.  v.  Dunn,  6  Pet.  51  ;  Bank  of  Middlebury  v.  Rutland,  etc., 

Bank  of  Metropolis  v.  Jones,  8  id.  16;  R.  Co.,  30  id.  159.     See,  also,  Augusta 

Percy  v.  Millaudon,  3  La.  568  ;  Bank  Bank  v.  Hamblet,  35  Me.  491  ;  Dispatch 

of  Pennsylvania  v.   Reed,  1  W.  &  S.  Line,  etc.,  v,  Bellamy,  12  N.    H.   225; 

101.  Bank  of  Middlebury  v.  Edgerton,  30 

3  Taylor  v.  Miami  Exporting  Co.,  6  Vt.   182;   Miller  v. 'Rutland,   etc.,   R. 

Ohio,  218  ;  City  Bank  of  Columbus  v.  Co.,    36   id.    452  ;    Burrill   v.    Nabant 

Bruce,  17  N.  Y.  507.  Bank,  2  Mete.   163  ;  Sargent  v.  Web- 

*  Spear  v.  Ladd,  11  Mass.  94;  North-  ster,  13  id.  497;  Hoyt  v.  Thompson,  19 

ampton  Bank  V.  Pepoon,  id. 288;  Bank  N.    Y.   207;     Gordon   v.    Preston,    1 

Commissioners    v.   Bank   of   Brest,   1  Watts,  388. 

28 


218  Private  Corporations. 

company.^  But  the  large  increase  of  corporations,  and  the 
almost  infinite  variety  of  business  purposes  for  which  they  are 
created,  and  the  vast  importance  which  they  have  assumed  in  the 
conduct  and  management  of  enterprises  and  industries  so  essential 
to  the  development  of  the  resources  of  every  country,  and  the 
necessity  for  giving  to  the  directors  and  officers  large  discretionary 
powers,  and  the  assumption  of  such  powers  from  necessity,  has  in- 
duced the  courts  to  concede  to  them  much  more  extensive  implied 
powers  than  they  were  formerly  regarded  as  possessing,  and  it 
may  be  said  that  they  are  treated  as  possessing  all  the  powers  re- 
quisite for  the  successful  prosecution  of  the  business  for  which 
they  were  created. 

Sec.  138.  Acts  not  TOithin  the  scope  of  their  powers.  —  The  di- 
rectors of  a  corporation  have  full  authority  and  power  to  act  for 
and  in  the  place  and  stead  of  the  corporation,  in  all  matters 
within  the  scope  of  the  express  or  implied  powers  conferred  upon 
the  corporation  itself,  in  the  prosecution  of  the  business  or  pur- 
poses for  which  it  was  established  ;  but,  beyond  that,  they  have 
no  power  to  bind  the  corporation,  except  where  they  are  specially 
authorized  by  the  stockholders  at  a  proper  meeting  for  that 
pui-pose.  Thus,  it  has  been  held  that  they  have  no  general 
authority  to  apply  to  the  legislature  for  any  change  or  enlargement 
of  the  corporate  powers  ;  *  nor  to  alienate  property  essentially 
necessary  for  the  transaction  of  the  company's  business  ;  ^  nor  to 
destroy  the  corporate  existence,  or  give  away  its  funds,  or  deprive 
it  of  its  means  to  acomplish  the  purposes  of  its  creation.* 

On  this  subject,  Mr.   Justice  Story  once  observed  :    "  Inde- 

'  As  to  the  general  powers  of  direct-  Where  the  directors  of  a  company 

ors  unless  restrained  by  the  laws  of  release    subscribers    from    their    sub- 

the  institution,  see  Whitwel]  v.  War-  scriptions,     the    subscribers    still    re- 

ner,  20  Vt.  425  ;  Bank  of  Middlebury  main  as  contributories  upon  the  wind- 

V.  Rutland,  etc.,   R.   Co.,    30  id.   159;  ing    up    of    the    corporation.     In    re 

Augusta  Bank  V.  Hamblet,  35  Me.  491;  London,   etc..  Coal   Co.,  L.   R.,   5  Ch. 

Dispatch  Line,  etc.  v.  Bellamy  Manuf.  Div.  525  ;  White  Mountain  R.  R.  Co. 

Co.,  12  N.    H.    225  ;  Bank  of  Middle-  v.  Eastman,  34  N.  H.  124. 

bury  V.  Edgerton,  30  Vt.  182  ;  Miller  v.  '^  Abbot  v.    American  Hard  Rubber 

Rutland,  etc.,  R.  Co.,  36  id.  452  ;  Hoyt  Co.,  33  Barb.  587. 

V.  Thompson,  19  N.  Y. 207  ;  Gordon  V.  ^g^rke   v.    Smith,   16    Wall.    395; 

Preston,  1  Watts,  385.  Penobscot,  etc.,  R.  Co.  v.  Dunn,  39  Me. 

'  Marlborough  Manuf.  Co.  v.  Smith,  587  ;  Bedford,  etc.,  R.  Co.  v.  Bowser, 

2  Conn.  579.  48  Penn.  St.  29. 


•  DiBEcroES.  219 

pendent  of  some  special  and  positive  law,  or  provision  in  its 
charter  to  such  an  effect,  I  do  exceedingly  doubt  if  any  corpo- 
ration, at  least  without  the  express  assent  of  all  the  corporators, 
can  rightfully  dispose  of  all  its  property  by  such  a  general  assign- 
ment, so  as  to  render  itself  incapable  in  the  future  of  performing 
any  of  its  corporate  functions."  *  And  where  the  organic  law 
vests  in  the  directors  all  the  corporate  powers,  this  is  construed  to 
relate  to  the  ordinary  transactions  of  tlie  company  and  is  held  not 
to  extend  to  a  reconstruction  of  the  corporation,  or  to  an  enlarge- 
ment of  its  capital/  And  it  has  also  been  held  that  it  is  an 
abuse  of  the  trust  of  directors  wholly  unauthorized,  and  at  war 
with  the  design  of  the  charter,  to  single  out  some  of  the  sub- 
scribers to  the  stock  and  release  them  from  their  liability.*  Mr. 
Justice  Strong  on  this  subject  observes  :  "It  has  been  settled  by 
very  numerous  decisions  that  the  directors  of  a  company  are 
incompetent  to  release  an  original  subscriber  to  its  capital,  or  to 
make  any  arrangement  with  him  by  which  the  company,  its 
creditors,  or  the  state,  shall  lose  any  of  the  benefits  of  his  sub- 
scription. Every  such  arrangement  is  regarded  in  equity  not 
merely  ultra  vires,  but  as  a  fraud  upon  other  stockholders,  upon 
the  public,  and  upon  the  creditors  of  the  company."  * 

Sec.  139.  Powers  conferred  by  the  fundamental  law. —  From  what 
has  already  been  said,  it  is  evident  that  the  powers  of  directors 
may  not  only  be  limited  by  the  regulations  or  fundamental  law  of 
the  corporation,  relating  especially  to  them,  but  by  the  powers  of 
the  corporate  body  itself.  If  the  management  of  its  affairs  are 
committed  to  them  by  the  fundamental  law  of  its  existence,  they 
alone  have  the  power  to  manage  its  concerns ;  and  may  exercise 
their  discretion  without  being  subject  to  the  control  of  the  corpo- 
rate body.^     Nor  have  the  stockholders  any  general  right  to  inter- 

'  Dissenting    opinion  of    Story,  J.,  ■*  Burke  v.  Smith,  16  Wall.  (U.  S.) 

concurred  in  by  Justices  Baxdwin  and  395.     See,   also,   Alford  v.  Miller,  32 

McLe.vn,  inBeaston  v.  Farmers'  Bank,  Conn.  543  ;  Bank  v.  St.  John,  25  Ala. 

12  Pet.  102.  (N.  S.)566  ;  Jones  v.  Terre  Haute,  etc., 

» Railway  Co.  v.  Allerton,  18  Wall.  R.  Co.,  57  N.  Y.  196.     See,  also,  Howe 

233.  V.  Duel,  43  Barb.  508. 

3  Bedford  R.  Co.  v.  Bowser,  48  Penn.  *  Bank  of  the  U.  S.  v.  Dandridge,  12 

St.  29.  Wheat.  113. 


220  Private  Coepokations. 

fere  with  the  management  of  the  affairs  of  the  company  by  the 
directors,  where  they  act  in  good  faith,  and  within  the  scope  of 
the  general  powers  of  the  corporation.  The  remedy  of  the  stock- 
holders for  mismanagement,  or  a  lack  of  ability  or  judgment  on 
the  part  of  these  agents,  would  be  to  make  a  change  of  them  at  a 
proper  meeting,  held  for  that  purpose,  which  is  generally  provided 
for  by  the  laws  of  the  institution.  In  this  way  a  change  of  man- 
agement and  of  the  business  policy  may  be  effected  to  suit  the 
interests  or  the  wishes  of  a  majority  of  the  members. 

On  the  subject  of  the  exclusiveness  of  the  authority  of  the 
directors  of  a  corporation,  and  their  exemption  from  any  inter- 
ference on  the  part  of  the  stockholders,  and  their  right  to  control 
and  manage  the  corporate  affairs,  within  the  scope  of  the  author- 
ity conferred  upon  them,  it  was  recently  observed :  "  It  might 
well  be  doubted  whether  a  general  meeting  of  the  stockholders  of 
the  plaintiff  [the  corporation]  could  be  legally  held  for  any  other 
purpose  than  the  selection  of  a  board  of  directors.  Such  a  meet- 
ing as  to  any  other  purpose  or  object  could  only  be  in  its  purpose 
and  character  advisory  to  the  board  of  directors.  It  would  have 
no  power  to  take  under  its  charge  or  put  under  the  charge  of 
others  the  affairs  of  the  company.  The  president  and  directors  of 
such  a  corporation  as  the  plaintiff  have  been  said  to  be  the  agents 
of  the  stockholders  ;  but  this  expression  must  be  understood  in 
view  of,  and  must  be  limited  to,  the  subject  under  consideration. 
In  any  thing  like  a  general  or  universal  sense,  it  will  be  readily 
seen  that  it  cannot  be  true.  Indeed,  so  far  as  third  persons  and 
especially  the  government  or  creating  power  of  the  corporation 
are  concerned,  the  president  and  the  directors,  and  the  stockhold- 
ers may  rather  be  considered  as  the  members  and  limbs,  each 
acting  within  its  appropriate  sphere,  of  that  artificial  being  or 
entity,  to  which  the  name  and  powers  of  the  corporation  have 
been  assigned  by  the  law  of  its  creation.  When,  therefor,e,  a 
question  arises,  by  whom  the  conferred  powers  are  to  be  exercised, 
it  will  be  determined  rather  by  the  law  of  the  creation  of  the  com- 
pany, showing  in  each  case  on  whom  the  governing  or  controlling 
power  has  been  conferred,  than  by  any  consideration  of  the  rights 
and  interests  of  those  concerned  in  the  corporation  as  among  them- 


DlREOTORS.  221 

selves."  '  If  the  stockholders  are  dissatisfied  with  tlie  manage- 
ment of  the  affairs  of  the  company  they  may  apply  to  a  court  of 
equity  for  relief  in  a  proper  case,  or  in  the  absence  of  any  ground 
upon  which  equitable  interference  can  be  invoked,  they  must 
wait  until  an  opportunity  presents,  and  change  the  management. 
They  have  no  power,  through  stockholders'  meetings  or  other- 
wise, to  take  from  the  directors  any  of  the  express  or  implied 
powers  possessed  by  them. 

Sec.  140.  Powers  depend  upon  interpretation. —  The  powers  of  di- 
rectors must  frequently  depend  upon  the  construction  of  the  fun- 
damental law  of  the  corporation,  and  the  questions  most  frequently 
presented  to  the  courts  are  those  relating  to  tlie  law  creating  and 
constituting  boards  of  directors,  and  the  proper  construction  and 
interpretation  of  the  charter,  articles  of  association,  by-laws,  or 
constating  instruments  of  the  corporation. 

DEC.  141.  Powers  not  conferred  on  directors  remain  in  the  corporate 
body.  —  As  the  directors  of  a  corporation  are,  at  least  in  one  sense, 
agents  of  the  corporation,  being  the  instruments  through  which  tlie 
corporation  acts,  and  unlike  agents  not  subject  to  the  rd  ers  or 
directions  of  the  corporation  —  their  principal  —  or  liable  to  have 
their  powers  revoked  except  by  the  methods  provided  by  law, 
and  receive  their  powers  from  their  appointment  and  the  constat- 
ing instruments,  whatever  power,  in  reference  to  the  management 

'  Opinion  by  Gholson,  J., in  Dayton,  obvious  from    the   charter,    that    the 

etc.,  R.  Co.  V.  Hatch,  1  Disn.  84.   See,  company    could    do    no     act     except 

also,  Whitewell  V.  Warner,  20  Vt.  425;  through    the    directors.        When    the 

Com.  V.  Roman  Cath.  Soc,  6  S.  &  R.  508;  charter  prescribes  the  mode  of  its  ac- 

Ridgway  V.  Farmers'  Bank,  12  id.  256;  tion,  its  injunctions  must    be  rigidly 

Bank  of  Kentucky  V.  Schuylkill  Bank,  pursued.     *     *     *     The  stockholders 

IParis,  Sal.  Cas.  180  ;  State  v.  Bank  of  in  this  case  had  no  power  to  make  a 

Louisiana,  0  La.    745  ;  Salem   Bank  v.  lease  or  do  any    other    administrative 

Gloucester  Bank,  17  Mass.  29,  where  it  act  in  the  management  of  the  affairs  of 

is  held    that,    if  the  general  power  of  the    corporation.      If  a  case  could  be 

making  by-laws  is  left  by  the  charter  made  at  all,  it  could  be  executed  only 

to  the  corporation  at  large,  the  power  in  pursuance  of  an  act  of  the  directors, 

of  the  board  of  directors  may  be  cir-  who  are  appointed  by  the  charter  for 

cumscribed  by  them.  the  management  of  its  affairs.     It  is  no 

In  Conro  v.    Port  Henry   Iron   Co.,  answer  that    individual    stockholders, 

supra,  a  lease  was  made  by  the  stock-  who  were  present  at  the  meeting  when 

holders    instead  of  the  directors,  and  the  lease  was  ordered,  were  also  direc- 

the    charter    provided  for  a   board  of  tors.     They  did  not  meet  or  act  as  di- 

directors  of  the  corporation  with  gene-  rectors,  but  as  stockholders." 
ral  powers  ;  the  court  say  :  "  It  is  quite 


222  Private  Cokpoeations. 

of  its  affairs,  does  not,  by  virtue  of  these,  vest  in  them,  must 
reside  in  the  whole  body ;  and  it  has  been  held  that  in  emergen- 
cies, where  the  charter  failed  to  prescribe  the  mode  of  procedure 
so  as  to  accomplish  the  objects  of  the  corporation,  the  stockholders 
have  a  right  to  act  and  exercise  whatever  power  is  necessary  to 
carry  out  the  purposes  of  the  company  and  preserve  its  corporate 
existence.'  Where  the  charter  or  by-laws  are  silent  as  to  the 
manner  in  which  certain  acts  shall  be  done,  and  they  cannot  be 
said  fairly  to  come  within  the  implied  powers  ot  the  directors, 
they  may  acquire  authority  to  do  the  acts  by  a  vote  of  the  stock- 
holders of  the  corporation  at  a  meeting  legally  called  for  that  pur- 
pose, provided  they  are  acts  which  is  within  the  power  of  the  cor- 
poration to  perform,  and  authority  can  be  acquired  in  no  other 
manner,  and  such  an  act  performed  by  directors  without  this 
special  authority  is  illegal  and  void."^  Thus  directors  have  no 
authority,  unless  specially  conferred,  to  sell  the  entire  movable 
property  of  the  corporation,  when  such  sale  would  prevent  a  con- 
tinuance of  its  business,  and  such  a  sale,  made  without  special 
authority  conferred  upon  them  by  the  stockholders  at  a  legal 
meeting,  would  be  void  as  to  all  stockholders  who  did  not  assent 
thereto ; '  and  in  the  Louisiana  case  cited  supra^  the  same  doctrine 
was  held  where  the  building  committee  of  a  corporation  sold  the 
corporate  property  to  the  builder  in  liquidation  of  his  claim, 
without  special  authority.  In  an  English  case*  it  was  held  that 
authority  reposed  in  directors  to  sell  or  lease  the  works  of  the  cor- 
porations could  not,  without  special  authority,  lease  them,  and  give 
the  lessee  the  option  of  purchasing  within  a  certain  time ;  that 
they  only  had  authority  to  lease  or  to  sell,  and  that  their  author- 
ity was  exhausted  by  leasing  the  property,  and  the  option  given 
the  lessee  to  buy  could  only  become  valid  by  being  ratified  by  the 
members  of  the  company.  From  these  illustrations  it  will  be  seen 
that  the  powers  of  directors  are  not  unlimited  and  are  circum- 
scribed by  the  express  provisions  of  the  charter  and  the  by-laws, 
and  must  be  exercised  only  to  the  extent  warranted  by  the  express 
provisions  of  the  charter,  or  the  nature  and  chai*acter  of  the  busi- 

^  In  re  Wheeler,  2  Abb.  Pr.  (N.  S.)  ^  Abbott  v.  American  Hard  Rubber 

361.  Co.,  33  Barb.  578. 

«  African  M.  E.  Church  v.  Duru,  19  *  Clay  v.  Rufford,  5  De  G.  &  S.  768. 
La.  Ann.  302. 


DlEEOTOKS.  223 

ness,  and  when  their  acts  are  in  excess  of  these  powers,  they  are 
void. 


Sec.  142.  The  directors  cannot  change  the  character  or  objects  of  the 
corporation.  —  The  directors,  by  virtue  of  the  power  they  possess, 
cannot  change  the  entire  character  or  purposes  of  a  corporation. 
Any  attempt  of  this  character  would  be  ultra  vires,  of  which  all 
parties  interested  would  be  required  to  take  notice.  Such  author- 
ity is  not  involved  in  a  general  power  to  manage  its  business,  and 
could  only  be  exercised  with  the  consent  of  each  stockholder,  or 
at  least  upon  full  satisfaction  and  compensation  being  made 
to  such  as  may  dissent.'  No  majority,  however  large,  have  a 
right  to  divert  the  joint  capital  to  any  purpose  not  consistent 
with  the  objects  of  the  corporation.*  And  any  fundamental 
change  or  alteration  of  the  charter  in  respect  to  the  original  ob- 
jects and  purposes  for  which  the  corporation  was  created,  cannot 
be  obligatory  on  any  member  who  objects ;  and  increasing  the 
capital  stock  of  a  corporation  by  a  board  of  directors  beyond  the 
limits  fixed  by  the  charter  would  be  ultra  vires.  If  the  power  to 
change  the  capital  is  expressly  given  to  the  corporation,  it  must 
be  exercised  by  the  stockholders,  and  not  by  the  directors.  On 
this  question  the  supreme  court  of  the  United  States  say :  "  A 
change  so  organic  and  fundamental  as  that  of  increasing  the  capi- 
tal stock  of  a  corporation  beyond  the  limit  fixed  by  the  charter, 
cannot  be  made  by  the  directors  alone,  unless  expressly  authorized 
thereto.  The  general  power  to  perform  all  corporate  acts  refers 
to  the  ordinary  business  transactions  of  the  corporation,  and  does 
not  extend  to  a  construction  of  the  body  itself,  or  to  an  enlarge- 
ment of  its  capital  stock,  *  *  *  Changes  in  the  purpose  and 
object  of  an  association,  or  in  the  extent  of  its  constituency  or 
membership,  involving  the  amount  of  its  capital  stock,  are  neces- 
sarily fundamental  in  their  character,  and  cannot,  on  general  prin- 
ciples, be  made  without  the  express  or  implied  consent  of  the 
members.  The  reason  is  obvious.  First,  as  it  respects  the  pur- 
pose and  objecto     This  may  be  said  to  be  the  final  cause  of  the 

'  Zabriskie  v.  Hackensack,  etc.,  R.     Black  v.  Delaware,  etc.,  R.  Co.,  22  id. 
Co.,  18  N.  J.  Eq.  178.  130. 

5  Kean  v.  Johnson,  9  N,  J.  Eq.  401 ; 


224  Private  Corporations. 

association,  for  the  sake  of  which  it  was  brought  into  existence. 
To  cliange  this  without  the  consent  of  the  associates  would  be  to 
commit  them  to  an  enterprise  which  they  never  embraced,  and 
would  be  manifestly  unjust.  Secondly,  as  it  respects  the  constit- 
uency, or  capital  and  membership.  This  is  the  next  most  impor- 
tant and  fundamental  point  in  the  constitution  of  a  body  corpo- 
rate. To  change  it  without  the  consent  of  the  stockholders 
would  be  to  make  them  members  of  an  association  in  which  they 
never  consented  to  become  such.  It  would  change  the  relative 
influence,  control  and  profit  of  each  member.  If  the  directors 
alone  could  do  it,  they  could  perpetuate  their  own  power.  Their 
own  agency  does  not  extend  to  such  an  act,  unless  so  expressed  in 
the  charter  or  subsequent  enabling  act,  and  such  subsequent  act 
would  not  bind  the  stockholders  without  their  consent  or  assent  to 
it  in  some  form."  ^ 

But,  where  authority  in  this  respect  is^  expressly  conferred  upon 
the  directors  by  the  general  law  of  its  constitution,  or  to  be  in- 
ferred from  the  charter  or  general  acts  of  the  legislature  in  exist- 
ence at  the  time  of  the  creation  of  the  corporation,  the  directors 
would  possess  the  requisite  power  to  accept  an  amendment  of  the 
charter.  And  amendments  of  the  charter,  not  in  violation  of  its 
objects,  may  be  accepted  by  the  shareholders,  but  the  trustees  or 
directors  have  no  powers  in  this  respect,  except  such  as  may  be 
conferred  upon  them ;  and  where  it  is  apparent  that  this  authority 
is  by  law  vested  in  the  directors,  they  could,  undoubtedly,  ac- 
cept an  amendment  of  the  original  charter  or  act  of  incorporation  ; 
for  instance,  an  amendment  authorizing  a  subscription  in  real 
estate  to  be  received  by  the  company.^ 

On  this  subject  Turner,  L.  J.,  observes :  "  The  great  under- 
taking of  these  {i.  e.,  railway  and  similar)  companies  could 
not  be  carried  out  by  private  enterprise,  and  parliament  has, 
therefore,  with  a  view  to  public '  good,  authorized  the  con- 
stitution of  large  bodies,  acting  by  directors,  for  the  purpose 
of  carrying  them  out.  But  these  bodies  have  no  existence 
independent  of   the  acts  which  create  them,  and  they  are  cre- 

^  Railway  Co.  V.  Allerton,  18  Wall.  2 Dayton,  etc.,  R.  Co.  v.  Hatch,  1 
233.  See,  also,  Marlborough  Man.  Co.  Disn.  84;  State  v.  Adams,  44  Mo.  570. 
V.  Smith,  2  Conn.  579. 


DlRECTOKS.  225 

atcd  by  parliament  with  special  and  limited  powers,  and  for 
limited  purposes.  Whether  parliament  has  wisely  limited  their 
powers  for  the  purposes  of  their  incorporation  is  not  for  us  to 
consider.  The  fact  of  their  being  endued  with  such  powers,  and 
incoi-porated  for  such  purposes,  only  shows  that  parliament  did 
not  think  fit  to  intrust  them  with  more  extended  powers,  or  to 
incorjiorate  them  for  other  purposes."  ^ 

Sec.  143.  Directors  as  agents. — It  is  evident  tliat  the  directors 
of  a  corporation,  in  whatever  manner  constitnted,  are  the  agents 
of  the  corporation,  and,  within  the  scope  of  the  authority  con- 
ferred by  the  laws  or  regulations  of  the  company  relating  to 
them,  their  acts  are  the  acts  of  tlie  company.  The  general  princi- 
ples in  fact  of  the  law  of  agency  are  applicable  to  the  relations 
between  the  company  and  its  directors.  But  they  are  agents  only 
so  far  as  they  have  authority,  by  virtue  of  powers  conferred,  and 
of  this  authority  and  the  extent  or  limit  of  it,  parties  dealing  with 
these  or  other  agents  of  the  corporation  would  be  required  to 
take  notice.  These  are  open  to  public  inspection,  and  constitute  the 
power  of  attorney,  and  instructions  to  these  agents,  accessible  to  all 
parties  dealing  with  them.*  The  familiar  doctrine  in  such  cases  is, 
that  although  the  party  dealing  with  an  agent  is  not  required  to  take 
notice  of  private  instructions  communicated  to  him  from  the  princi- 
pal, in  reference  to  his  agency,  he  is  required  to  take  notice  of  a 
written  authority  and  power  of  attorney,  which  he  should  know, 
from  the  circumstances  of  the  case  or  the  character  of  the  agency, 
must  exist.  And  where  there  is  a  special  authority  to  do  a  particular 
act,  or  a  general  authority  to  do  all  acts  relating  to  a  particular 
matter,  the  agent  may  use  all  the  necessary  and  appropriate  means 
to  carry  out  the  purposes  of  the  agency  ;  and  any  person  dealing 
with  such  an  agent  may  rely  upon  the  acts  of  such  an  agent,  in 
executing  the  authority  thus  conferred,  as  obligatory  upon  his  prin- 

'  Shrewsbury,  etc.,  R.  Co.  V.  London,  55;  22  L.  J.  Ex.  304;  Green's  Brice's 

etc.,  R.  Co.,  22  L.  J.  Ch.  682.     On  the  Ultra  Vires,  28  et  seq. 

AociriuQ  ot  vltra  vires  in   such  cases,  ^  Zabriskie  v.  Cleveland,  etc. ,  R.  Co., 

see  Salomons  v.  Laing,  12  Beav.  339;  23    How.  381;    Bank    of   Augusta   v. 

East  Anglian,  etc.,    R.  Co.  v.  Eastern,  Earle,  13  Pet.  587;  Pearce  v.  M.  &  I. 

etc.,  R.  Co.,  11  C.  B.  775;  South  York-  R.  Co.,  21  How.  441. 
shire  R.  Co.  v.  Great  N.  R.  Co.,  9  Ex. 

29 


226  Private  Corpokations. 

cijxil.'  All  })ersons  dealing  with  the  agents  of  a  corporation  must  be 
supposed  to  know  the  provisions  of  the  fundamental  laws  or  con- 
stating instrumentsof  the  corporation,  and  of  the  limitations  therein 
contained  relating  to  the  authority  of  its  agents,  as  these  laws  are 
usually  accessible  to  all  persons.  But  where  agents  act  within  the 
apparent  scope  of  the  authority  conferred  upon  them,  it  will  be  pre- 
sumed that  their  acts  were  authorized  by  the  body  they  represent." 
It  has,  however,  been  held  that  the  doctrine  that  authority  to 
make  a  contract,  by  an  agent  acting  for  an  individual,  will  be 
implied  from  former  employment  of  the  same  agent  for  the  same 
purposes,  has  no  application  where  the  person  assumes  to  act  as 
agent  for  a  corporation.^  The  reason  of  this  distinction  is,  that 
in  the  first  case  the  extent  of  the  authwity  is  generally  known 
only  between  the  principal  and  agent,  but  in  the  latter  the 
authority  is  created  by  statute,  or  is  a  matter  of  record,  to  which 
all  may  have  access  who  have  occasion  to  deal  with  its  officers.'' 

Sec.  144:.  Distinction  in  Massachusetts. — In  Massachusetts  a  dis- 
tinction has  been  made  between  the  provisions  of  the  charter  in 
relation  to  the  authority  of  directors  and  other  officers,  whicli 
parties  are  bound  to  know,  and  of  by-laws,  of  which  actual  notice 
it  is  claimed  should  be  brought  home  to  the  parties  dealing  with 
the  agents.*  This  doctrine  is  based  upon  the  distinction,  that  in 
the  one  case  the  means  of  knowledge  is  open  and  public,  while 
in  the  other,  it  is  private.     This  would,  however,  we  apprehend, 

'  Story  on  Agency,  §  73.  and  one  which  violates  the  provisions 
^Bissell  V.  Michigan  Southern,  etc.,  of  this  organic  act.  The  deed  of  set- 
R.  Co.,22  N.  Y.  258.  In  this  case,  tlement  is  the  private  act  of  the  share- 
SeldON,  J.,  observes:  "  There  are,  in  holders,  and  its  provisions  have  re- 
England,  a  class  of  corporations  organ-  spect  solely  to  their  private  interests, 
ized  under  general  laws,  which  do  not  It  is  a  mere  power  of  attorney,  and 
provide  the  manner  in  which  the  ob-  bears  no  resemblance  to  a  law  enacted 
jects  and  purposes  of  the  corporation  with  a  view  to  the  interests  of  the 
are  to  be  eifected,  but  leave  this  to  be  public.  There  is  evidently  no  ques- 
arranged  by  a  deed  of  settlement  be-  tiou  of  public  policy  involved,  when 
tween  the  corporators  themselves.  By  the  question  is,  whether  the  officers 
this  deed  the  companies  prescribe  and  have  exceeded  their  authority." 
limit  the  powers  and  functions  of  their  ^  Wyman  v.Hallowell  Banik,14  Mass. 
various  officers,  so  far  as  they  are  left  58. 

uncontrolled  by  the   statute  and  the  •*  Salem  Bank  v.  Gloucester  Bank,  17 

general  laws  of   the  kingdom.     Now,  Mass.  1.     See,  also.  State  v.  Commer- 

it  is  plain  that  there  is  no  analogy  be-  cial  Bank  of  Manchester,  14  Miss.  237. 

tween  an  act  which  merely  transcends  ^  Fay  v.  Noble,  12  Cush.  1. 
the  limits  of   this  deed  of  settlement. 


DiEEcroRS.  227 

be  limited  to  those  cases  wliere  tlie  by-laws  were  adopted  by  the 
board  of  directors.  But  iti  this  country  organizations  are  gener- 
ally formed  under  general  statutes,  by  signing  articles  or  certifi- 
cates of  association,  etc.,  and  these  may  provide  for,  and  prescribe 
the  duties  of,  officers  and  agents,  and  thereby  such  regulations 
would  become  a  part  of  its  organic  law.  In  some  cases,  however, 
the  general  doctrine  seems  to  have  been  maintained,  that  parties 
dealing  with  an  agent  would  be  bound  even  to  take  notice  of  the 
limitations  of  his  authority  contained  in  the  by-laws,  as  being 
matters  of  record,  and  subject  to  examination  by  those  dealing 
with  the  corporation.*  But  an  examination  of  the  cases  will  dis- 
close the  fact  that  this  duty  is  only  imposed  upon  third  persons, 
or  as  they  may  be  called,  strangers  to  the  corporation,  when  the 
act  is  one  naturally  incident  to  the  powers  of  directors,  or  one  not 
usually  executed  by  them,  or  when  an  act  was  done  by  some  offi- 
cer of  the  corporation,  which  is  usually  incident  to  the  duties  of 
the  directors.  In  such  cases  the  party  is  fairly  put  upon  inquiry 
as  to  whether  the  act  is  authorized,  and  fails  to  make  proper  in- 
quiry at  his  peril.  This  rule  was  well  illustrated  in  a  New  York 
case,'  in  which  the  plaintiff  sought  to  recover  $50,000  of  the  de- 
fendant corporation  for  alleged  services  for  obtaining  for  and  in- 
troducing to  the  Danville,  etc.,  Railroad  Company,  contractors  who 
would  undertake  to  build  its  road,  and  for  the  conversion  of  cer- 
tain municipal  bonds,  alleged  to  have  been  agreed  to  be  delivered 
by  said  company  in  payment  for  said  services.  The  defend- 
ant corporation  was  formed  in  1869,  under  the  general  laws 
of  Indiana  and  Illinois,  by  the  consolidation  of  the  Indianapolis, 
Crawsfordsville  and  Danville  Railroad  Company  and  the  Danville, 
Urbank,  Bloomington  and  Pekin  Railroad  Company.  By  the  con- 
solidation the  defendant  corporation  assumed  all  the  liabilities  of 
the  constituent  roads.  The  president  of  the  Indiana  and  a  direc- 
tor of  the  Illinois  corporation  conducted  the  negotiation  with  the 
plaintiff  and  the  president  of  the  Illinois  corporation,   and  by 

•  Adriance  V.  Eoome,  53  Barb.  399;  McCulloch  v.  Moss,  5  Denio,  567; 
Wild  V.  Bank  of  Passamaquoddy,  3  Ma-  Dabney  v.  Stevens,  40  How.  Pr.  341; 
son,  505  ;  State  v.  Commercial  Bank,  Salem  Bank  v.  Gloucester  Bank,  17 
14  Jliss.;  Risley  v.  Indiana,  etc.,  R.  Maps.  1  ;  Tjowell  Savings  Bank  v.  Win- 
Co.,  1  Hun,  202  ;  North  River  Bank  v.  Chester,  8  Allen,  109. 
Aymar,  3  Hill,  262;  Mechanics' Bank  V.  '^Risley  v.  Indianapolis,  etc.,  R.  R. 
New  York,  etc.,  R.  Co.,  13  N.  Y.  599  ;  Co.  1  Hun,  202. 


228  Private  Corporations. 

authority  of  the  latter  offered  the  plaintiff  the  sum  named  above 
for  the  services.  The  defendants  resisted  the  suit  upon  the  ground 
that  the  president  had  no  authority  to  make  the  contract  in  ques- 
tion. There  was  no  evidence  from  which  it  could  be  inferred 
that  the  company,  whose  officer  he  was,  had  ever  held  him  out  or 
permitted  him  to  represent  himself  as  having  authority  of  that 
kind,  and  the  court  in  reversing  the  judgment  below  for  the 
plaintiff,  by  Daniels,  J.,  said:  "The  president  with  whom  the 
contract  for  the  payment  to  the  plaintiff  was  made  had  no  special 
or  direct  authority  from  the  company  to  enter  into  any  agreement 
of  that  kind.  *  *  The  circumstance  that  he  was  president  of 
the  company  was  not  of  itself  evidence  of  the  existence  of  such 
authority, /br  it  does  not  ordinarily  appertain  to  the  duties  of 
persons  acting  in  that  capacity.  He  was  at  most  the  agent  of  the 
company  created  and  existing  under  a  special  legislative  act  de- 
fining the  rights  and  privileges  of  the  body  and  the  manner 
in  which  they  should  be  enjoyed.  This  the  plaintiff  is  to  be  re- 
garded as  knowing.  For  all  persons  dealing  with  the  officers  or 
agents  of  corporations  are  bound  to  know  that  they  act  either 
under  its  charter  or  by-laws,  or  the  usages  which  may  be  shown  to 
exist,  defining  the  extent  of  their  authority.  They  must,  in  doubt- 
ful cases,  acquaint  themselves  with  the  extent  of  that  authority,  or 
otherwise  submit  to  the  consequences  resulting  from  their  omission 
to  do  that.^  The  charter  of  the  company  gave  the  immediate  gov- 
ernment and  direction  of  its  affairs  to  a  board  of  thirteen  directors, 
having  power  to  elect  one  of  their  number  president,  a  majority 
of  whom  constituted  a  quorum  for  the  transaction  of  business. 
But  it  conferred  no  authority  on  the  person  who  should  be  elected 
president  to  bind  the  company  by  his  contracts. 

His  power  in  that  respect  appears  to  have  been  defined  exclu- 
sively by  the  by-laws  enacted  by  the  company.  And  it  was  re- 
stricted to  the  management  of  all  negotiations  with  other  corpo- 
rations, companies  or  individuals,  touching  their  mutual  interests 
and  the  claims  of  either  party  on  the  other,  and  to  entering  into 
or  concluding  all  such  agreements  or  contracts,  with  any  of  such 

'  North  River  Bank  v.  Aymar,  3  Hill,  Adriance  v.  Roome,  52  Barb.  399  ;  Dab- 

263;  Mechanics'  Bank  v.  New  York  &  ney  v.  Stevens,  40  How.  Pr.  341,  345, 

N.  H.  R.  R.  Co.,  13  N.  Y.  599,  631,  634;  346. 
McCulloch    V.   Moss,    5    Denio,   567 ; 


Directors.  229 

parties  as  should  be  approved  by  the  board  of  the  executive  com- 
mittee. This  entirely  withheld  the  power  to  make  contracts  bind- 
ing on  the  company,  unless  the  approval  of  the  executive  connnittee 
was  first  obtained  for  that  pur2)ose.  And  it  deprived  him  of  the 
power  of  entering  into  the  agreement  which  the  referee,  upon 
sufficient  evidence,  has  found  was  made  by  him  with  the  plaintifE 
for  the  payment  of  the  $50,000.  The  case  of  the  Merchants^ 
Bank  V.  State  Bank  ^  was  relied  upon  as  sustaining  the  validity 
of  all  contracts  entered  into  by  officers  of  corporations.  But  it 
clearly  could  not  have  been  intended  by  that  decision  to  sanction 
so  broad  an  extension  of  the  law  affecting  transactions  of  this  de- 
scription. Yery  broad  propositions,  it  must  be  confessed,  were 
stated  in  the  opinion,  but  perhaps  none  too  much  so  for  the  facts 
and  evidence  in  the  case  which  the  court  then  decided.  The  one 
chiefly  relied  upon  to  sustain  the  contract  in  this  case  states  the 
law  to  be,  "that  where  a  party  deals  with  a  corporation  in  good 
faith,  the  transaction  not  being  idtra  vires,  and  he  is  unaware  of 
any  defect  of  authority  or  other  irregularity  on  the  part  of  those 
acting  for  the  corporation,  and  there  is  nothing  to  excite  suspicion 
of  such  defect  or  irregularity,  the  corporation  is  bound  by  the  con- 
tract, although  such  defect  or  irregularity  in  fact  exists."  But 
even  this  does  not  extend  as  far  as  the  pm'poses  of  the  plaintiff's 
case  require,  in  order  to  sustain  his  recovery,  for  the  president  of 
the  company  was  not  invested  with  a  defective  or  irregular  au- 
thority to  bind  the  company  by  his  contracts.  He  had  no  author- 
ity whatever  for  that  purpose.  And  where  that  is  the  case,  and 
the  officer  has  not  been  permitted  to  act  as  though  he  had  the 
authority,  there  is  nothing  in  that  decision  holding  that  he  can 
bind  the  company. 

But  this  proposition  is  inapplicable  to  the  present  case,  because 
there  was  a  circumstance  brought  to  the  plaintiff's  knowledge, 
according  to  his  own  evidence,  which  ought  to  have  excited  his 
suspicions  that  the  president  had  no  power  to  bind  the  company  by 
the  agreement ;  for  he  says  that  Griggs,  the  president,  and  Wil- 
son, one  of  the  directors  acting  with  him,  had  not  brought  with 
them  proper  evidence  of  their  authority  to  contract  for  the  build- 

>  10  Wall.  604. 


230  Private  Corporations. 

ing  of  this  and  the  other  road,  and  it  was  decided  that  the  execu- 
tion should  be  adjourned  over  for  them  to  go  home,  convene  their 
boards  of  directors,  and  get  them  to  do  whatever  was  necessary  to 
be  done  about  the  contract  for  building  the  roads.  If  they  could 
not,  for  want  of  power,  enter  into  contracts  for  the  construction  of 
the  road,  which  was  a  substantial  part  of  what  the  corporation 
was  created  to  do,  it  is  difficult  to  see  how  it  could,  with  any  pro- 
priety, be  assumed  that  the  power  existed  without  any  action  of 
the  board,  which  would  authorize  the  president  to  make  the  con- 
tract with  the  plaintiff  upon  which  he  has  been  allowed  to  recover. 
The  fact  that  the  president  could  not,  without  specific  authority, 
bind  the  company  by  one  agreement  should  have  been  accepted 
as  quite  conclusive  evidence  of  some  w^ant  of  authority  to  render 
the  other  obligatory  upon  it.  One  was  a  fair  inference  from  the 
other. 

Sec.  145.  Rule  in  Sngland  as  to  the  authority  of  directors. — The 
English  doctrine  in  reference  to  the  authority  of  directors  is, 
"  that  persons  dealing  with  a  registered  company  are  bound  to  ac- 
quaint themselves  with  the  limits  imposed  by  the  deeds  of  settle- 
ment or  articles  of  association,  on  the  authority  of  the  directors ; 
yet,  strangers  to  the  company,  dealing  with  directors,  cannot  be 
affected  by  by-laws,  which  may,  under  the  articles,  be  from  time 
to  time  made  and  varied  by  the  directors,  unless  notice  of  such 
by-laws  is  proved."  ' 

Sec.  146.  Delegation  of  their  authority.—  The  general  principles 
of  the  laws  of  agency  in  respect  to  the  delegation  of  the  authority 
of  the  agent  are  applicable  to  the  agents  of  corporations.  Mr. 
Story  on  this  subject  says :  "  One  who  has  a  bare  power  or 
authority  from  another  to  do  an  act  must  execute  it  himself,  and 
cannot  delegate  his  authority  to  another  ;  for  this  being  a  trust  or 
confidence  reposed  in  him  personally,  it  cannot  be  assigned  to  a 
stranger  whose  ability  and  integrity  might  not  be  known  to  the 

^  Buckley,  p.  427.  See,  also,  Ernest  by-laws  are  sometimes  deemed  direct- 
V.  Nicholls,  6  H.  L.  C.  401  ;  Fountaine  cry  only.  Bank  of  U.  S.  v.  Dan- 
V.  Carmarthen  R:  Co.,  L.  R.,  5  Eq.  316;  dridge,  12  Wheat.  64  ;  U.  S.  v.  Kirk- 
Royal  Bank  of  India's  Case,  L.  R.,  4  patrick,  9  id.  720 ;  U.  S.  v.  Van  Zandt, 
Ch.  252.   Provisions  of  the  charter  and  11  id.  184. 


Directors.  281 

principal,  or  who,  if  known,  niiglit  not  be  selected  by  liini."  ' 
And  it  has  been  held  in  reference  to  tlie  powers  of  directors  as 
agents,  that  where  power  is  conferred  upon  them  involving  the 
exercise  of  personal  judgment  and  discretion,  they  cannot,  with- 
out some  express  authority  for  the  purpose,  delegate  this  authority 
to  anotlier  person. 

In  a  case  in  New  Hampshire,  iuvolving  the  question,  the  court 
says  :  "  According  to  the  uniform  current  of  authorities,  it  would 
seem  quite  clear  that  an  agent  cannot  delegate  to  anotlier  any 
portion  of  his  power  requiring  the  exercise  of  discretion  or  judg- 
ment, unless  in  the  power  conferred  upon  the  agent  is  involved 
the  power  of  substitution  by  the  agent,  in  express  terms,  or  at 
least  by  necessary  implication.  But  no  such  power  of  substitu- 
tion was  conferred  upon  the  directors  in  the  present  case.  The 
by  laws  to  be  sure  allowed  '  the  exercise  of  a  general  superintend- 
ence and  control  by  the  directors,  or  a  majority  of  them,  over  the 
affairs  of  the  corporation.'  But  this  did  not  include  the  right 
to  confer  authority  upon  others  to  exercise  the  same  power. 
Here  was  clearly  no  express  power  of  substitution  given  to  the 
directors,  and  there  was  nothing  in  the  nature  of  the  authority  to 
be  exercised  which  could  render  the  aid  of  others  necessary.  No 
power  of  substitution  is,  therefore,  to  be  implied."  '' 

But  the  question  whether  the  authority  conferred  and  delegated 
calls  for  the  exercise  of  such  judgment  or  discretion,  as  comes 
within  the  general  rule  in  such  cases,  or  is  a  merely  ministerial 
act,  is  frequently  one  that  is  difficult  to  determine.  And  in 
Massachusetts  it  was  held  that :  "  A  board  of  directors  of  the 
banks  of  Massachusetts  is  a  body  recognized  by  law.  By  the  by- 
laws of  these  corporations,  and  by  a  usage  so  general  and  uniform 
as  to  be  regarded  as  a  part  of  the  law  of  the  land,  they  have  the 
general  superintendence  and  active  management  of  all  the  concerns 
of  the  bank,  and  constitute,  to  all  purposes  of  dealings  with  otiiers, 
the  corporation.  We  think  they  do  not  exercise  a  delegated 
authority,  in  the  sense  in  which  the  rule  applies  to  agents  and 

'  Story  on  Agency,  §  13.  power  of  discounting  notes  and  bills 

-  Gills  V  Bailey,  31  N.  H.  149.     See,  was  vested  iu  the  board  of  directors, 

also,  Re  Leeds  Banking,  L.  R.,  1  Ch.  they  could  not  delegate  this  trust  to 

App.  563.     In  Percy  v.   Millaudon,  3  an  agent. 

La.  568,  it  was  held  that,  where  tlie 


232  Private  Corporations. 

attorneys,  who  exercise  the  powers  especially  conferred  upon  thera 
and  no  others.  We  think,  therefore,  that  a  board  of  directors 
may  delegate  authority  to  a  committee  of  their  own  number,  to 
alienate  or  mortgage  real  estate."  '  The  charter  or  organic  laws 
of  the  corporation  usually  confers  the  exclusive  power  of  manag- 
ing its  affairs  upon  a  board  of  directors.  This,  however,  does 
not  constitute  it  the  corporation,  and  tlieir  acts  evidenced  by  their 
votes,  as  shown  by  the  record,  are  as  complete  authority  to  all  its 
agents  as  if  the  appointment  were  by  deed  or  other  written  in- 
strument and  authenticated  by  the  corporate  seal.^ 

Sec.  147.  Ratification  of  directors'  acts.  —  It  is  a  familiar  principle 
of  the  law  of  agency,  that  the  principal  may  ratify  an  unauthor- 
ized act  of  an  agent.  This  principle  is  also  applicable  to  corpora- 
tions and  their  agents.  This  ratification  may  be  by  a  direct  and 
express  sanction  of  it,  or  by  such  action  and  conduct  on  its  part, 
subsequent  to  the  act,  as  to  authorize  the  presumption  that  it  has 
accepted  or  ratified  the  agent's  acts.^  But  if  the  act  done  by  the 
agent  is  entirely  beyond  any  authority  of  the  corporation  to  per- 
form, it  would  be  ultra  vires,  and  generally  void.*  The  ratifica- 
tion of  the  acts  of  an  agent  is,  however,  generally  inferred  from 
the  acts  of  the  corporation  and  the  circumstances  of  the  case. 
If  the  board  of  directors,  or  other  agents  on  behalf  of  the  cor- 
poration, make  a  contract  and  the  corporation  receives  the 
benefits  of  such  contract  without  objection,  it  would  ordinarily  be 
treated  as  a  ratification  of  it,  and  the   contract   of  the   corpora- 

'  Burrill  v.  Naliant   Bank,    2   Mete.  Mass.  221  ;    ThompsoQ   v.    Toung,    2 

(Mass.)  163.     See,  also,  Percy  v.  Mil-  Ohio,   334. 

laudon,  3  La.  568  ;  Weston  .  Bank  v.  '^  Bank  of  the  U.  S.  v.  Dandridge,  12 

Gilstrap,  45  Mo.  419  ;  Commissioners  Wheat.   64  ;  Fleckner  v.  Bank  of  the 

V.    Bank    of    Buffalo,    6   Paige,    497.  U.  S.,  8  id.  338. 

Directors  have  authority  to  empower  ^  Lowell's  Case  ;    Re  New    Zealand 

one   of  their    number   to  assign   any  Banking  Co.,  L.  R.,  3  Ch.  131. 

securities  belonging  to  the  company.  *  Peterson  v.  Mayor,  etc.,  17  N.  Y. 

Stevens  v.  Hill,  29  Me.  133  ;  Spear  v.  449  ;  Dill,  on  Corp..  §§  385,  386.    Rati- 

Ladd,  11  Mass.  94  ;  Northampton  Bank  fication  may  be   by  express  assent  or 

V.   Pepoon,    id.   288.     And   where  di-  conduct  of  the  principal,  inconsistent 

rectors    have    authority    to     appoint  with  any  other   supposition  than  that 

agents  their  authority  does  not  neces-  he  intended  to  adopt  and  own  the  act 

sarily  cease  with  the  termination  of  done  in  his  name.     Story  on  Agency, 

the  authority  of  the  board  appointing  §§  239,  252.     But  no  amount  of  ratifi- 

them.   Anderson  v.  Longden.l  Wheat,  cation  can  give  validity  to  an    act  pro- 

85;  Exeter  Bank  v.   Rogers,  7  N.  H.  hibited  by  law.     Martin  v.  Zellerbach, 

33;  Brown  v.  County  of  Somerset,  11  38  Cal.  300. 


Directors. 


233 


tion.^  Thus,  where  the  directors  of  a  railroad  company  allowed 
the  president  to  purchase  locouiotives,  and  give  bills  in  payment 
therefor,  and  they  were  used  on  the  road  of  the  company  for 
more  than  three  years,  during  the  management  thereof  by  the 
president,  who  had  authority  from  the  directors  to  manage  the 
same  in  his  discretion,  and  the  directors  afterward  resumed  the 
management,  this  acquiescence  was  held  to  be  such  a  ratification  as 
to  be  evidence  of  authority  in  the  president  to  bind  the  company 
for  the  payment  of  the  bills  issued  by  the  president  in  payment 
for  such  locomotives."  And  in  another  case  where  a  coqjoratioa 
allowed  its  ofKcers  to  give  notes  for  property,  where  the  right  to 
do  so  was  doubtful,  still  the  property  having  been  taken  posses- 
sion of  by  the  corporation,  who  used  the  same  for  legitimate  cor- 
porate purposes,  this  was  held  to  be  a  ratification  of  the  acts  of 
the  officers.'  But  a  ratification  of  an  act  cannot  be  inferred  un- 
less the  stockholders  kneio  what  the  act  was.     The  rule  is,  that. 


'  On  the  subject  of  ratification  of 
unauthorized  acts  of  agents,  see  Trott 
V.  Warren,  11  Me.  227  ;  Episcopal 
Charitable  Soc.  v.  Episcopal  Church, 
1  Pick.  372  ;  Bank  of  Columbia  v.  Pat- 
terson, 7  Cranch,  299  ;  Randall  v.  Van 
Vechten,  19  Johns.  60  ;  Qooday  v.  The 
Colchester,  etc.,  R.  Co.,  15  Eng.  L.  & 
E.  596  ;  Magill  v.  Kauffman,  4  S.  &  R. 
317  ;  Canal  Bridge  v.  Gordon,  1  Pick. 
297  ;  Bank  of  the  U.  S.  v.  Dandridge, 
12  Wheat.  89;  Union  Bank  of  Mary- 
land v.  Ridgely,  1  Harr.  &  G.  392; 
Barriugton  v.The  Bank  of  Washington, 
14  S.  &  R.  421 ;  Wild  v.  Passamaquod- 
dy,  3  Mason  (C.  C),  505  ;  Smith  v.  Gov- 
ernor, etc.,  Bank  of  Scotland,  1  Dow. 
(Pari.)  27  ;  Perkins  v.  Washington  Ins. 
Co.,  4  Cow.  645  ;  Troy,  T.  &  R.  Co.  v. 
McChesney,  21  Wend.  296  ;  Warren  v. 
Ocean  Co.,  16  Me.  429  :  Badger  v.  Bank 
of  Cumberland,  26  id.  428;  Davidson 
V.  Bridgeport,  8  Conn.  472  ;  Farmers'  & 
M.  Bank  v.  Chester,  6  Humph.  458  ; 
Hall  V.  Carey,  5  Ga.  239  ;  Litchfield 
Iron  Co.  V.  Bennett,  7  Cow.  234  ;  Clark 
V.  Boston  Man nf.  Co.,  15  Wend.  256; 
Lohman  v.  New  York,  etc.,  R.  Co.,  2 
Sandf.  39  ;  City  of  Detroit  v.  Jackson, 
1  Doug.  (Mich.)  106  ;  Bank  of  the  State 
V.  Comegys,  12  Ala.  772. 

5  Olcott'v.  Tioga  Railway  Co.,  27  N. 
Y.  546. 

30 


3  Moss  V.  Averell,  10  N.  Y.  449.  See, 
also.  Corning  v.  Southland,  3  Hill,  552; 
Moss  V.  Rossie  Lead  Co.,  5  id.  137 ; 
Conro  V.  Port  Henry  Iron  Co.,  12  Barb. 
27  ;  Clark's  Ex'rs  v.  Van  Riemsdyk,  9 
Cranch,  158 ;  Church  v.  Sterling,  16 
Conn.  388;  Chicago  Building  Soc.  v. 
Crowell.  65  111.  453  ;  Williams  v.  St. 
George's  Harbor  Co.,  2  De  G,  &  J.547  ; 
Edwards  V,  Kilkennv,  etc.,R.  Co.,  26 
L.  J.  C.  P.  224 ;  Phosphate  of  Lime 
Co.  V.  Green,  L.  R..7C.  P.  43;  Athe- 
naeum Life  Assurance  Co.  v.  Poolev,  3 
DeG.  &  J.  294;  L.  J.  Ch.  119. 

Whatever  may  be  authorized  by  a 
corporation  to  be  done  may  be  ratified 
when  done  by  an  agent  in  excess  of,  or 
without  authority.  McLaughlin  v. 
Detroit,  etc.,  R.  Co.,  8  Mich.  100. 

Ratification  of  the  unauthorized  acts 
of  the  president,  where  he  executed  a 
mortgage  purporting  to  be  on  corpo- 
rate property,  individually,  and  sealed 
it  with  his  private  seal  without  special 
authority,  may  be  presumed  from  the 
knowledge  of  the  members  of  the 
board  of  directors,  and  their  long  con- 
tinued acquiescence.  Sherman  v. 
Fitch,  98  Mass.  59  ;  Lyndeborough 
Glass  Co.  v.  Massachusetts  Glass  Co., 
Ill  id.  315;  Brown  v.  Winnissimmet 
Co..  11  Allen,  326  ;  Krider  v.  Western 
College.  31  Iowa,  547. 


234  Private  Corporations. 

before  an  act  can  be  treated  as  the  ratification  of  anotlier, 
the  party  acting  must  have  some  knowledge  or  information  at 
least  of  the  existence  of  the  act  in  all  its  essential  details. 
Thus,  in  a  case  the  leading  features  of  which  are  given  in 
a  previous  section,'  one  of  the  grounds  upon  which  the  plaint- 
iff sought  to  enforce  his  claim  was,  that  the  president,  at 
the  time  the  contract  sought  to  be  enforced  was  entered  into, 
accepted  an  order  drawn  by  the  contractors  upon  him,  payable  to 
the  plaintiff  for  county,  city  and  township  bonds,  to  the  amount 
of  $S6,GGiJ.GQ,  bearing  ten  per  cent  interest.  The  claim  of  the 
plaintiff,  and  the  rules  applied  thereto  are  clearly  stated  by 
Daniels,  J.,  and,  as  the  case  is  well  considered,  and  is  believed 
to  embody  the  true  rule  in  such  cases,  we  give  it  here.  He  said  : 
"  The  plaintiff,  however,  insists  that  the  making  of  the  contract 
for  the  construction  of  the  road,  and  with  the  authority  afterward 
conferred  for  the  purpose  by  the  company,  in  effect  adopted  and 
ratified  the  agreement  which  the  president  made  with  him  for  the 
payment  of  the  $50,000.  But  that  cannot  be  so,  because  there 
was  nothing  in  the  agreement  made  for  building  the  road,  by  which 
even  the  existence  of  the  one  made  with  him  was  assumed.  It, 
in  no  way,  entered  into  the  agreement  for  the  construction  of  the 
road,  and  was  not  brought  to  the  notice  of  the  board  of  directors 
in  any  way  whatever.  And  they  cannot,  with  any  propriety,  be 
held  to  have  adopted  or  ratified,  by  that  act,  another  of  an  entirely 
different  nature,  which  they  knew  nothing  about.  The  fact  that 
it  was  brought  to  Wilson's  notice,  at  the  time  when  the  agree- 
ment with  the  plaintiff  was  made,  was  not  notice  to  the  company, 
or  the  board  of  directors,  for  any  such  purpose.  The  board  was 
the  body  which  acted,  and  no  notice  was  given  to  it  of  the  presi- 
dent's attempt  to  bind  the  company  for  the  payment  of  the  money 
to  the  plaintiff.  Before  one  act  can  be  accepted  as  the  ratification 
or  confirmation  of  another,  the  party  acting  must  have  some 
knowledge  or  information,  at  least,  of  its  existence.''  Another 
circumstance  relied  upon  as  a  ratification  of  the  act,  by  which  the 
agreement  with  the  plaintiff  was  made,  is  the  admission  contained 

'Risley  V.  Indianapolis,  etc.,   R.  R.   'Hays  v.  Stone,  7    Hill,  128,    lol,  132; 
Co.,  ante.  Ke'eler  v.    Salisbury,  33    N.  Y.   G48  ; 

••'Brass  v.    Worth,   40    Barb.    648;     Smith  v.  Tracy,  36  id.  79. 


Directors.  235 

in  tlic  answer,  that  the  order  received  hy  liim  was  accepted  by 
the  company.  But  this  admission  is  not  sufficient  for  the  purpose, 
because  it  in  no  way  concedes  that  the  order  had  any  connection 
with  the  agreement.  It  is  not  admitted  that  the  order  was  drawn, 
accepted  or  received  to  secure  the  performance  of  the  agreement, 
or  that  it  had  any  rehition  whatever  to  it,  or  that  the  company 
knew  any  thing  of  it.  The  admission  is  that  it  promised,  at  the 
request  of  the  contractors,  to  deliver  the  plaintiff  the  bonds,  pro- 
vided they  became  entitled  to  them  by  the  performance  of  their 
contract;  certainly  no  ratification  of  the  agreement  with  the 
plaintiff  can  be  inferred  from  such  a  promise.  And  there  is 
nothing  in  the  evidence  extending  its  effect  in  that  respect.  The 
order  was  drawn  by  the  contractors  who  agreed  to  build  the  rail- 
road, and  it  requested  and  directed  the  delivery  to  the  plaintiff 
of  a  portion  of  the  bonds  which  they  were,  by  their  contract,  to 
receive  by  way  of  compensation  for  what  they  were  to  do  in  its 
performance.  It  indicated  a  payment  by  them  upon  some  obliga- 
tion they  had  incurred  to  the  plaintiff,  instead  of  the  securing  or 
settlement  of  a  demand  existing  in  favor  of  the  plaintiff  against 
the  railroad  company.  Neither  by  the  import  or  terms  of  the 
order  could  the  company  have  inferred  from  it  that  it  was  given 
or  accepted  to  secure  any  debt  the  plaintiff  claimed  to  have  against 
the  company.  And  for  that  reason,  as  long  as  the  conipany,  or 
its  hoard  of  directors^  had  no  notice  that  it  was  to  he  held  hy  the 
plaintiff  as  security  for  the  payment  of  his  demand^  its  acceptance^ 
or  the  promise  admitted  in  the  answer^  constituted  no  ratification 
or  confirmation  of  that  demand.  The  circumstances  under  which 
the  order  seems  to  have  originated  exclude  the  presumption  that 
notice  of  its  purpose  or  use  could  not  have  been  given  to  the 
board  of  directors.  Wilson,  who  aided  the  plaintiff  in  procuring 
the  contractors  who  were  to  build  the  road,  and  received  an  order 
himself  for  $10,000  of  the  county,  city  and  town  bonds,  and  who 
evidently  had  no  motive  to  misrepresent  the  facts,  was  sworn  and 
examined  as  a  witness  on  his  behalf.  And  in  the  course  of  his 
evidence,  he  stated  that  the  contractors  agreed  at  first  to  build 
the  railroad  for  $5,000  per  mile,  in  county,  city  and  town  bonds, 
in  addition  to  the  other  compensation  it  was  agreed  they  should 
receive.     And  after  that,  without  making  any  reduction  in  the 


236  Private  Cokpokations. 

other  amount,  tlie  payment  in  those  bonds  was  increased  to  $6,- 
500  per  mile.  This,  he  said,  was  done  at  the  instance  of  Clark 
R.  Griggs,  who  was  the  president  of  the  company.  And  the 
object  was  to  charge  the  excess  upon  the  company  for  building 
its  road,  and  through  the  contractors  to  divide  the  excess  between 
himself,  Wilson,  a  director  and  president  of  the  other  railroad 
company,  the  plaintiflP,  and  the  contractors.  And  he  stated  that 
the  division  was  so  far  made,  at  that  time,  as  to  have  orders 
drawn  for  $120,000,  in  round  numbers,  by  the  contractors,  one 
being  in  his  own  favor  for  $10,000,  and  the  residue  for  equal 
amounts,  one  in  favor  of  the  president  of  the  company,  another 
in  favor  of  Wilson,  one  of  its  directors,  and  the  other  in  favor  of 
the  plaintiff.  And  these  orders  were  then  accepted  by  Mr. 
Griggs,  and  delivered  to  the  persons  who  were  to  receive  them, 
he  receiving  the  one  intended  for  himself.  The  witness  was  cor- 
roborated in  this  statement,  by  the  evidence  of  the  defendant's 
witness,  Alton,  who  was  one  of  the  contractors.  For  he  says  that 
the  price  in  bonds  was  first  fixed  at  $5,000  per  mile  for  building 
the  road,  and  afterward  advanced,  on  the  contractors'  learning 
that  the  work  would  probably  prove  more  expensive  than  at  first 
it  was  supposed  to  be,  so  that  they  should  receive  $200  or  $300 
more  per  mile  in  bonds.  Then  he  said,  that  Griggs  said  they 
could  raise  $6,500  per  mile.  That  he  understood  how  much  the 
contractors  were  to  have  net,  and  that  they  were  to  ipa-y  a  certain 
amount  for  himself,  the  plaintiff  and  others,  of  the  bonds,  as  a 
commission  or  brokerage.  And  that  it  was  arranged  between 
Griggs,  Wilson  and  Risley,  that  a  certain  portion  was  to  be 
allowed  to  them.  He  then  added  that  he  was  very  confident, 
that,  in  the  arrangement  he  had  with  Griggs,  it  was  not  spoken 
of,  until  it  was  arranged  between  them  how  it  was  to  be  divided. 
To  carry  it  out,  he  stated  that  an  order  was  first  drawn  for  the 
entire  $120,000,  and  accepted  by  Griggs.  But  that  was  afterward 
divided  into  the  four  orders  mentioned  by  Wilson,  so  that  each 
could  have  his  own  share  at  once,  without  being  at  all  dependent 
upon  the  honor  which  is  supposed  to  exist  in  such  cases,  but 
nevertheless,  has  sometimes  proved  to  be  disregarded.  The  cir- 
cumstances very  decidedly  sustain  the  probabilities  of  these  state- 
ments.    For,  the  orders  were  all  made  out  by  the  plaintiff,  signed 


Directors.  237 

by  the  contractors,  accepted  by  Grigpjs,  and  distributed  in  the 
manner  mentioned  at  the  time  when  tlie  contract  was  entered  into. 
The  plaintiff,  thougli  afterward  on  the  stand  as  a  witness,  made 
no  attempt  to  deny  these  statements,  but  simply  left  the  case  upon 
his  former  evidence,  in  Avhich  he  said  that  he  did  not  know 
whether  the  contractors  received  any  consideration  for  drawing 
these  orders ;  and  Griggs,  while  he  denies  being  a  party  to  any 
such  arrangement,  still  admits  that  the  orders  were  drawn,  accepted 
and  divided  as  the  others  stated  they  were,  and  tliat  he  received 
one  for  between  $36,000  and  $37,000.  He  also  says  that  he  did 
not  inform  the  board  of  directors  that  he  had  received  such  an 
order,  neither  was  the  counsel  of  the  company,  who  was  with  him 
in  the  city  attending  to  the  completion  of  the  contract  to  build 
the  road,  informed  of  it,  or  of  the  ai'rangement  made  for  this 
division  of  $120,000  of  the  bonds.  In  view  of  the  great  im- 
probability that  the  contractors  would  voluntarily  have  proposed 
to  give  away  so  large  a  portion  of  their  compensation,  if  it  had 
even  been  designed  they  should  receive  it  as  such,  and  the  reasons 
which  must  have  operated  upon  Mr,  Griggs,  by  way  of  inducing 
him  to  deny  his  complicity  in  this  piece  of  inexcusable  knavery, 
the  direct  evidence  of  the  two  witnesses,  swearing  to  the  contrary, 
and  the  inherent  probability  of  the  truth  of  their  statements,  no 
reliance  can  be  placed  upon  his  denial.  The  whole  weight  of  the 
case  is  against  him  on  this  subject,  and  it  must  be  concluded,  that, 
for  a  consideration  he  provided  the  contractors  with,  he  enabled 
them  to  compensate  himself  and  Wilson  for  a  shameless  violation 
of  the  duties  which  the  confiding  stockholders  and  directors  had 
intrusted  them  with  performing.  After  being  implicated  in  that 
misconduct,  no  reason  could  exist  for  supposing  that  he  would  so 
far  explain  the  matter  to  the  board  of  directors  as  to  secure  any 
action  of  theirs  amounting  to  a  ratification  of  that  portion  of  the 
transaction  in  which  the  plaintiff  was  allowed  even  the  appearance 
of  profiting.  And  certainly  his  acceptance  of  the  orders  as  presi- 
dent of  the  company  could  be  attended  with  no  such  results,  for, 
as  long  as  he  had  no  authority  to  make  the  agreements  to  pay  the 
plaintiff  the  $50,000  for  procuring  the  contractors,  he  was  equally 
without  authority  to  bind  the  company  by  a  ratification  of  it." 


238  Private  Corporations. 

Sec.  148.  Instances  of  acts  which  amount  to  a  ratification.  —  Where 
an  insurance  company,  whose  capital  was  iixed  hj  its  charter, 
which,  liowever,  gave  authority  to  tlie  stockliolders  to  increase 
the  stock  to  a  certain  amount,  and  the  directors  issued  the 
additional  amount  without  a  formal  or  lawful  vote  of  the  stock- 
holders, but  they  had  received  dividends  upon  the  basis  of  the 
additional  stock,  having  knowledge  thereof,  it  was  held  to 
constitute  a  complete  ratification  of  the  issue.  In  a  case  in- 
volving this  question,  Dillon,  J.,  observes  :  "  It  is  our  opinion 
that  the  original  charter  of  the  company  contemplated  that  any 
increase  of  the  capital  stock  beyond  $1,000,000  should  be  assented 
to  by  the  stockholders  as  distinguished  from  the  directors.  It 
being  admitted  tliat  the  shares  of  stock  owned  by  the  defendant 
were  no  part  of  the  $1,000,000  first  issued,  but  were  part  of  the 
stock  issued  by  it  in  excess  of  the  $1,000,000,  and  prior  to  the 
amended  charter  of  March  25,  1869,  this" stock  would  not  be  legal, 
and  no  action  could  be  maintained  to  recover  the  price  of  it, 
unless  the  stock  had  become  legal  stock  by  matters  subsequently 
occurring,  or  unless  the  defendant,  under  the  facts  proved,  is 
estopped  to  set  up  this  objection.  The  legislature  authorized  a 
capital  of  $5,000,000,  but  required  the  assent  of  the  stockholders 
to  any  increase  beyond  one  million.  The  amount  issued  at  no 
time  had  reached  the  $5,000,000.  No  mode  of  procuring  the 
assent  of  the  stockholders  to  the  increase  of  stock  is  prescribed  by 
the  charter.  It  is  conceded  that  in  a  meeting  of  the  stockholders 
of  the  original  million  of  stock,  duly  convened,  a  majority  might 
determine  upon  such  increase  and  bind  the  minority.  On  Janu- 
ary 9,  1868,  the  directors  resolved  upon  an  increase  of  the  capi- 
tal stock  to  $5,000,000.  On  November  6,  1868,  the  de- 
fendant subscribed  for  his  stock.  On  the  13th  of  January,  1869, 
there  was  a  regular  annual  meeting  of  the  stockholders,  to  which 
a  report  was  made,  showing  that  $3,000,000  of  stock  had  up  to 
that  time  been  issued,  and  $3,116,000  of  stock  was  voted  at  that 
meeting  for  directors.  The  evidence  shows  that  over  $800,000, 
or,  in  round  numbers,  four-fifths  of  the  first  million  of  stock- 
holders, were  present  in  person  or  by  proxy,  and  voted  at  this 
meeting  for  directors.  No  objection  then  or  ever  was  made  to 
the  increase  of    stock,  and  the  old  stockholders    and    the    new 


Directors.  239 

voted  indiscrimiiiatelj,  and  tlie  proceeds  of  all  sales  of  stock 
were  treated  and  invested  by  tlie  directors  as  capital  until  tin; 
company  ceased  to  do  business.     Two  dividends  were  made  in 

1869,  and  one  in  1870,  upon  all  the  stock,  which  in  each  of  those 
years    exceeded     $4,000,000.       The    defendant    in    February, 

1870,  received  two  of  these  dividends.  On  the  25th  of 
March,  1869,  tlie  charter  was  amended,  authorizing  inter  alia,  the 
directors  to  increase  the  stock. 

After  this,  as  well  as  before,  the  directors  repeatedly  and  al- 
ways recognized  the  validity  of  all  the  stock  which  had  been 
issued.  The  defendant,  it  may  be  admitted,  had  no  personal 
knowledge  of  any  increase  of  capital  stock,  or  of  the  passage  of 
the  amended  charter,  until  after  this  suit  was  brought,  although 
the  agent  who  acted  for  him  in  his  absence  in  respect  to  his  stock 
had  such  knowledge.  *  *  *  From  the  proof  in  this  case  we 
find  that  at  least  four-fifths  of  the  original  million  of  stockholders 
did  know  of  and  assent,  as  early  as  January,  1869,  to  this  in- 
crease of  stock,  and  are  of  the  opinion  that  the  requisite  assent 
of  the  stockholders  can  be  shown  by  their  conduct  and  acqui- 
escence, and  need  not  be  established  by  any  formal  vote  or  reso- 
lution." 1 

Sec.  14:9.  Effect  of  knowledge  of  unauthorized  acts. —  It  is  a  well- 
settled  rule  of  the  law  of  agency,  that  where  the  agent  exceeds  his 
authority,  but  the  principal,  with  knowledge  of  the  fact,  neglects 
to  promptly  disavow  the  act,  it  is  a  ratification  of  what  has  been 
done,  and  is  equivalent  to  an  original  authority  to  the  agent ;  and 
this  rule  is  as  applicable  in  case  a  corporation  is  the  principal  as  in 
other  cases.^  And  where  the  president  of  a  railroad  company  es- 
tablished and  advertised  tariffs  or  rates  of  fare  and  freight  on  the 
railroad,  and  the  corporation  received  and  appropriated  the  rates 
tlnis  established  without  objection,  this  was  held  to  be  a  ratification 
of  the  acts  of  the    president,  and  equivalent  to  an  original  au- 


»  Parson   v.  Stoever,  2    Dill.    (C.  C.)  St.  436;  Bredin  v.  Dubarry,  14  S.  &  R. 

427.  See,  also,  New  Hope&  D.  B.  Co.  v.  30;  Gordon  v.  Preston,  I'Watts.  387; 

Phoenix   Bank,  3    N.  Y.  156;    Salem  Bank  of  Penn.  v.  Reed,  1  W.  &  S.  101; 

Bank  v.  Gloucester  Bank,  17  Mass.  1.  Christian  University  v.  .Tordon,  29  Mo. 

-  Kelsev  v.  National  Bank,  69  Penn.  68. 


240  Private  Corporations, 

thority.^  A  recent  case  in  California  illustrates  the  doctrine 
of  ratification  of  the  acts  of  an  agent  by  the  directors.  The  presi- 
dent of  a  ditching  company,  who  was  its  general  managing 
agent,  purchased,  in  the  name  of  the  company,  a  house  for  the 
purpose  of  using  it  for  offices  and  the  meetings  of  the  company, 
and  also  as  a  boarding-house  for  its  laborers ;  and  executed  a 
mortgage  for  the  purchase -money  in  its  name,  sealed  with  the 
corporate  seal.  As  agent  of  the  company,  he  took  possession  of 
it,  and  it  was  used  several  times  for  the  meetings  of  its  directors 
and  for  other  corporate  purposes.  About  six  weeks  after  its  pur- 
chase, a  resolution  was  offered  at  a  meeting  of  the  directors,  de- 
claring the  contract  of  purchase  legal  and  valid,  but  it  failed  to 
be  adopted.  Subsequently,  the  house  was  consumed  by  fire,  and 
a  suit  was  brought  against  the  company  to  recover  the  balance  of 
the  purchase-money.  The  court  say  :  "  The  authority  of  Nixon 
[the  president]  to  make  the  contract,  as  the  agent  of  the  company, 
we  think  sufficiently  appears,  and  if  this  point  were  doubtful,  the 
acts  of  the  company  amounted  to  a  ratification.  Nixon,  as  agent 
of  the  defendants,  entered  into  possession  immediately  after  the 
purchase;  the  trustees  held  their  meeting  in  the  house,  nothing 
is  said  as  to  his  want  of  authority  till  some  six  weeks  afterwards 
wdien,  at  a  meeting  held  on  the  premises,  the  resolution  approv- 
ing the  contract  w^as  offered  and  rejected.  The  entry  of  this  reso- 
lution comes  in  a  very  questionable  shape,  and  is  entitled  to  but 
very  little  weight,  *  *  *  and  is,  at  least,  a  very  singular  mode  of 
repudiating  a  contract.  It  would  have  been  more  in  accordance 
with  correct  notions  of  propriety  and  justice  if  a  resolution  refus- 
ing to  accept  the  contract  had  been  passed,  accompanied  by  an 
offer  to  cancel  the  deed,  which  had  not  been  recorded,  and  a  re- 
turn of  the  property  of  which  they  were  in  jjossession. "  ^ 

'  Hilliard  v.  Goold,   34   N.    H.   230;  If  the  principal  enjoys  tbe  benefit 

Pennsylvania,  etc.,  Co.  v.  Dandridge,  8  of  the  agent's  acts,  it  would  not  con- 

G.  &  J.  248.  stitute  a  ratification  unless  it  was  done 

But  ratification  will  not  be  presumed  with  a  knowledge  of  the  character  of 

unless   the  directors  or   trustees  had  them.      Yellow    Jacket    Min.    Co.    v. 

full   knov^ledge  of  the   act.     Dedham  Stevenson,  5  Nev.  224.    See,  also,  Ris- 

Savings  Institute    v.   Slack,   6  Cush.  ley  v.  Ind.  R.  R.  Co.,  aiite. 

408.  "^  Shaver  v.  Bear  River,  etc.,  Co.,  10 

And  an  officer  or  agent  cannot  ratify  Cal.  396. 
his  own  act  and  thereby  bind  the  prin- 
cipal. Hotchiu  V.  Kent,  8  Mich.  526. 


DiRECTOKS.  241 

Seo.  150.  Effect  of  ratification. — Tlie  general  doctrine  in  refer- 
ence to  the  unauthorized  acts  of  agents  is,  that  the  ratification  is 
equivalent  to  original  authority  to  act  in  the  matter  which  has 
been  ratified.  If  a  corporation  ratify  the  unauthorized  acts  of  its 
agent,  the  ratification  is  equivalent  to  a  previous  authority,  as  in 
case  of  natural  persons.  No  maxim  is  better  settled  in  reason  and 
law  tlian  the  maxim  omnis  ratihdbitio  retrotrahitur^  et  mandato 
priori  equiparahir  y  at  all  events,  when  it  does  not  prejudice  the 
rights  of  strangers.^  And  this  doctrine  is  equally  applicable  to  the 
directors  as  to  other  agents  of  a  corporation. 

The  ratification  operates  as  though  the  authority  to  do  the  act 
had  previously  existed.  But  the  intervening  rights  of  third  par- 
ties cannot  be  affected  by  the  subsequent  ratification.* 

Sec.  151.  Directors  under  the  national  banking  law. — Under  our 
national  banking  laws  it  is  provided  that  the  associations  incor- 
porated thereunder  sliall  have  power  "  to  elect  or  appoint  direct- 
ors, and  by  its  board  of  directors  to  appoint  a  president,  vice- 
president,  cashier  and  other  officers,  define  their  duties,  require 
bonds  of  them,  and  fix  the  penalties  thereof,  dismiss  such  officers, 
or  any  of  them,  at  pleasure,  and  appoint  others  to  fill  their 
places."  ' 

They  also  provide  that  such  a  body  corporate  shall  have  power 
"  to  prescribe,  by  its  board  of  directors,  by-laws  not  inconsistent 

"  Fleckner  v.  United  States  Bank,  8  156  ;  Everett  v.  United  States,  6  Port. 

Wheat.  363;  Essex  T.  Corp.  v.  Collins,  (Ala.)  166;  Medomak  Bank  v.  Curtis. 

8  Mass.  299;  Hadeu  v.  Middlesex  T.  24  Me.  38;  Wbitwell  v.  Warner,   20 

Corp.,    10  id.    403;     Salem    Bank   v.  Vt.  425  ;  City  of  Detroit  v.  Jackson,  1 

Gloucester  Bank,   17  id.  28 ;  White  v.  Doug.    (Mich.)  106;    Merchants' Bank 

Westport    Cotton    Man.    Co.,    1    Pick.  v.  Central  Bank,  1  Ga.   428 ;  Hoyt  v. 

220;  Bulkley  V.  Derby  Fishing  Co.,  2  Bridgewater,   etc.,   Co.,    6  N.   J.  Eq. 

Conn.    252  ;    White  v.   Same,  id.  260;  253  ;  Stuart  v.  London  R.  Co.,  15  Beav. 

Hoyt  V.  Thompson,  19    N.    Y.    207  ;  513  ;  10  Eng.  L.  &  Eq.  57  ;  Maclae   v. 

Peterson  v.  Mayor  of  New  York,  17  id.  Sutherland,  3  E.  &  B.  1 ;  25  Eug.  L.  & 

449;    Baker  v.   Cotter,  45   Me.   236;  Eq.  92  ;  Renter  v.  flectric  Tel.  Co.,  6 

Church  V.  Sterling,  16  Conn.  388;  Bank  E.  &  B.  341  ;  37   Eng.  L.  &  Eq.   189  . 

of  Pennsylvania  v.   Reed,  1  W.  &  S.  Emmet  v.  Reed,  8  N.Y.  312.  See,  also, 

101;  Hay  ward  v.  Pilgrim  Society,  21  Baker  v.  Cotter,  45  Me.  236  ;  Walworth 

Pick.  270;  Dispatch  Line  of  Packets  Co.  Bank  v.  Farmers'  L.  &  T.  Co.,  16 

V.Bellamy  Man.   Co.,  12  N.   H.   205;  Wis.  629. 

Planters'  Bank  v.  Sharp,  4  S.  &  M.  75;         '^  Cook  v.  Tullis,  18  Wall.  332;  Wood 
Burrill  v.  Nahant  Bank,  2  Mass.  167;  v.  McCann,  7  Ala.  806  ,  Taylor  v.  Rob- 
Fox  V.  Northern  laberties,   3  W.  &  S.  inson,  14  Cal.  396 ;  McCracken  v.  San 
103  ;  Bank  of  Kentucky  v.  Schuylkill  Francisco,  16  id.  591. 
Bank,  1  Pars.  Sal.  Cas.  267;  New  Hope        »  u.  S.  Rev.  Stat.,  1874,  p.  999. 
Bridge  Co.  v.  Phoenix  Bank,    3  N.  Y. 
31 


242  Private  Corpokations. 

with  law,  regulating  the  manner  in  which  its  stock  shall  be  trans- 
ferred, its  directors  elected  or  appointed,  its  officers  appointed,  its 
property  transferred,  its  general  business  conducted,  and  the  privi- 
leges granted  to  it  by  law  exercised  and  enjoyed."  ^ 

They  further  provide  that  such  corporations  shall  have  power 
'•  to  exercise,  by  its  board  of  directors,  or  duly  authorized  officers 
or  agents,  subject  to  law,  all  such  incidental  powers  as  shall  be 
necessary  to  carry  on  the  business  of  banking,  by  discounting 
and  negotiating  promissory  notes,  drafts,  bills  of  exchange,  and 
other  evidences  of  debt ;  by  receiving  deposits ;  by  buying  and 
selling  exchange,  coin  and  bullion  ;  by  leaving  money  on  personal 
security ;  and  by  obtaining,  issuing  and  circulating  notes."  * 

Sec.  152.  Personal  liability  of  directors. — We  have  said  that  the 
directors  of  a  corporation  are  the  agents  of  it.  But  as  a  general 
rule  they  are  only  required  in  the  management  of  its  affairs  to 
keep  within  the  limits  of  the  powers  conferred  upon  them,  and 
to  exercise  good  faith  and  honesty.  They  only  undertake,  by  vir- 
tue of  the  duties  which  they  assume,  to  perform  these  duties  ac- 
cording to  the  best  of  their  judgment,  and  with  reasonable  dili- 
gence ;  and  a  mere  error  in  judgment  on  the  part  of  a  director, 
will  not  ordinarily  subject  him  to  personal  liability  therefor.  And 
unless  there  has  been  some  violation  of  the  charter  or  the  con- 
stating instruments  of  the  company,  or  unless  there  is  shown  to 
be  a  want  of  good  faith,  or  a  willful  abuse  of  discretion,  there  will 
be  no  personal  liability,  nor  can  the  acts  of  such  officers  be  con- 
trolled by  any  court  at  the  instance  of  a  stockholder.  ^ 

1  U.  S.  Rev.  Stat.,  1874,  p.  999.  technical  trustees.     They  can   only  be 

^  Id.  regarded  as  mandataries,  persons  who 

^  Smith  V.  Prattville  Manuf.  Co.,  29  have  gratuitously  undertaken  to  per- 
Ala.  503.  form  certain  duties,  and  who  are,  there- 

in Spering's  Appeal,  71  Penn.  St,  11,  fore,  bound  to  apply  ordinary  skill  and 
Judge  Sharswood  observes  :  diligence,  but  no  more.     Indeed,  as  the 

"  It  is  by  no  means  a  well-settled  directors  are  themselves  stockholders, 
point  what  is  the  precise  relation  interested  as  well  as  all  others  that  the 
which  directors  sustain  to  the  stock-  affairs  and  business  of  the  corporation 
holders.  They  are,  undoubtedly,  said  should  be  successful,  when  we  ascer- 
in  many  authorities  to  be  trustees,  but  tain  and  determine  that  they  have  not 
that,  as  I  apprehend,  is  only  in  a  gene-  sought  to  make  any  profit  not  common 
ral  sense,  as  we  term  an  agent  or  any  to  all  the  stockholders,  we  raise  a 
bailee  intrusted  with  the  care  and  strong  presumption  that  they  have 
management  of  the  property  of  an-  brought  to  the  administration  their 
other.     It  is  certain  that  they  are  not  best  judgment  and  skill.      Ought  they 


DiKEOTORS. 


243 


"Where  the  directors  of  an  insurance  corporation  had  fraud- 
ulently permitted  false  statements  to  be  officially  made  as  to  the 
condition  of  the  company,  it  was  held  that  they  were  personally 
liable  to  a  party  who  had  suffered  damage  thereby.'  But  it  has 
been  held  that  a  director  was  not  liable  for  a  representation  false 
in  fact,  made  in  published  circulars  of  the  corporation  on  which 
his  name  appeared  as  a  director,  but  which  representation  was 
not  known  to  him  to  be  false.  ^ 


to  be  lield  responsible  for  mistakes  of 
judgment  or  want  of  skill  and  knowl- 
edge ?  *  *  *  We  are  dealing  with 
their  responsibility  to  stockholders,  not 
to  outside  parties,  creditors  and  depos- 
itors. Upon  a  close  examination  of  all 
the  reported  cases,  although  there  are 
many  dicta  not  easily  reconcilable,  yet 
I  have  found  no  judgment  or  decree 
which  held  directors  to  account,  except 
when  they  have  themselves  been  per- 
sonally guilty  of  some  fraud  on  the 
corporation,  or  have  known  and  con- 
nived at  some  fraud  in  others,  or  where 
such  fraud  might  have  been  prevented 
had  they  given  ordinary  attention  to 
their  duties.  I  do  not  mean  to  say  by 
any  means  that  their  responsibility  is 
limited  to  these  cases  ;  there  may  exist 
such  a  case  of  negligence  or  of  acts 
clearly  ultra  vires  as  would  make  per- 
fectly honest  directors  personally  lia- 
ble. *  *  *  While  directors  are  per- 
sonally responsible  to  the  stockholders 
for  any  losses  resulting  from  fraud, 
embezzlement,  or  willful  misconduct, 
or  breach  of  trust,  for  their  own  bene- 
fit and  not  for  the  benefit  of  the  stock- 
holders, for  gross  inattention  and  neg- 
ligence, by  which  such  fraud  has  been 
perpetrated  by  agents,  officers  or  direct- 
ors ;  yet  they  are  not  liable  for  mis- 
takes of  judgment,  even  though  they 
may  be  so  gross  as  to  appear  to  be  ab- 
surd and  ridiculous,  provided  they  are 
honest,  and  provided  they  are  fairly 
within  the   scope   of  the   powers   and 

'Salmon  v.  Richardson,  30  Conn. 
360  ;  Calhoun  v.  Richardson,  id.  229 
Peck  V.  Gurney,  L.  R.,  6  H.  L.  377 
Cornell  v.  Hay,  L.  R.,  8  C.  P.  328 
Hallows  V.  Fernie,  L.  R.,  3  Eq.  520 
Henderson  v.  Sacon,  L.  R.,  5  Eq.  249 
Stewart  v.  Austin,  L.  R.,  3  Eq.  299 
Ship  Crosskill,  L.  R.,  10  Eq.  73 
Mabey  v.  Adams,  3  Bosw.  346. 

And   where   a   corporation   has   no 


discretion  confided  to  the  managing 
body.  *  *  *  Conceding  that  the 
directors  did  violate  the  charter,  it  was 
a  question  upon  which  with  all  due 
care  they  might  have  made  an  honest 
mistake,  and,  moreover,  it  appears  that 
they  acted  throughout  by  advice  of 
their  counsel.  It  is  well  settled  that 
trustees  will  be  protected  from  respon- 
sibility under  such  circumstances." 

The  same  doctrine  is  maintained  in 
Scott  V.  De  Peyster,  1  Edw.  Ch.  513. 
See,  also,  Godbold  v.  Mobile  Bank,  11 
Ala.  191 ;  Bank  of  St.  M.  v.  St.  John, 
25  id.  566  ;  Smith  v.  Prattville  Man. 
Co.,  29  id.  503;  Pontchartrain  R.  Co. 
V.  Paulding,  11  La.  41  ;  Christ  Church 
V.  Barksdale,  1  Strobh.  Eq.  197; 
Williams  v.  Gregg,  2  id.  316  ;  Gratz 
V.  Redd,  4  B.  Mour.  178;  Lexington 
R.  Co.  V.  Bridges,  7  id.  559  ;  Bayless 
V.  Orne,  1  Freem.  (Miss.)  Ch.  174; 
Hodges  V.  New  England  Screw  Co., 
1  R.  I.  312 ;  Knowlton  v.  Congress 
Spring  Co.,  57  N.  Y.  518  ;  Re  European 
C.  R.  Co.,  Syke's  Case,  L.  R.,  13  Eq. 
255 ;  Green's  Brice's  Ultra  Vires,  408 
et  seq. 

A  cause  of  action  against  the  officers 
of  a  corporation  individually  is  as- 
signable. Bonnell  v.  Wheeler,  16  Abb. 
Pr.  (N.  S.)81. 

Where  officers  may  maintain  actions 
for  contribution  from  other  officers, 
see  Nickerson  v.  Wheeler,  118  Mass. 
295. 


authority  to  borrow  money,  but  the  di- 
rectors receive  money,  and  give  a  re- 
ceipt therefor  as  if  lent  to  the  corpo- 
ration, they  are  personally  liable 
therefor.  Richardson  v.  Williamson, 
L.  R.,  6  Q.  B.  276  ;  Weeks  v.  Propert, 
L.  R.,  8  C.  P.  427. 

2  Wakeman  v.  Dalley,  61  N.  Y.  27. 
See,  also,  Bruff  v.  Mali,  36  id.  200  ; 
Arthur     v.    Griswold,     55    id.     400  ; 


244 


Private  Corporations. 


Sec.  153.  The  directors  are  generally  only  bound  in  the  man 
agement  of  the  affairs  of  the  corporation  to  use  reasonable  dili- 
gence and  prudence,  that  is,  to  such  diligence  and  prudence  as 
men  usually  exercise  in  the  management  of  their  own  affairs  of  a 
similar  nature,  and,  if  they  act  in  good  faith,  they  are  not  person- 
ally responsible  to  the  stockholders  for  a  loss  that  may  be  sustained 
thereby.^  But  a  director  may  be  liable,  personally,  in  damages 
for  his  fraudulent  acts ;  ^  and  he  may  be  sued  by  one  damaged 
by  his  assent  to  a  dividend  amounting  to  more  than  the 
profits,  even  without  joining  with  him  the  company  as  a  defend- 
ant.' And  it  has  been  held  that  a  director  is  personally  respon- 
sible, not  only  for  fraud  and  willful  malfeasance,  but  also  for  his 
negligence,  especially  gross  negligence.  Thus,  it  has  been  held 
that  every  director  would  be  personally  liable  for  the  fraudu- 
lent action  of  a  board  which  he  might  have  averted  by  an  attend- 


Cazeau  v.  Mali,  25  Barb.  578  ;  New- 
berry V.  Garland,  31  id.  121  ;  Cross  v. 
Sackett,  2  Bosw.  617;  Mabey  v. 
Adams,  3  id,  346  ;  Morse  v.  Swits,  19 
How.  Pr.  275. 


As  to  tlie  liability  of  directors  to 
stockholders  and  creditors  in  equity, 
see  post,  chap.  16. 


1  Scott  V.  De  Peyster,  1  Edw,  Ch. 
(N.  Y.)  513  ;  Hodges  v.  N.  E.  Screw 
Co.,3R.  1.9. 

But  they  cannot  benefit  themselves 
to  the  prejudice  of  creditors.  Richards 
V.  New  Hampshire  Ins.  Co.,  3  Wend. 
130  ;  People  v.  Ballon,  12  id.  277  ; 
Talmadge  v.  Fishkill  Iron  Co.,  4  Barb. 
882  ;  Butts  v.  Wood,  38  id.  181. 

The  directors  of  a  banking  or  other 
corporation  are,  in  the  management  of 
its  aifairs,  only  trustees  for  its  credi- 
tors and  stockholders,  and  are  bound 
to  administer  its  affairs  according  to 
the  term  of  its  charter  and  in  good 
faith.  If  they  fail  in  either  respect 
they  are  liable  to  the  party  in  interest, 
who  is  injured  by  it,  for  a  breach  of 
trust,  and  may  be  required  to  account 
to  him  in  a  court  of  chancery. 

Hodges  V.  New  Eug.  Screw  Co.,  1 
R.  I.  312;  Bank  of  St.  Mary's  v.  St. 
John,  25  Ala.  566.  But  see  Patterson 
V.  Baker,  34  How.  Pr.  180 ;  Winter  v. 
Baker,  id.  183. 

The  members  of  the  governing  body 
are  the  agents  of  the  corporation  ;  and 
if  they  exercise  their  functions  for  the 
purpose  of  injuring  its  interests  and 


alienating  its  property,  they  are  per- 
sonally liable  for  any  loss  occasioned 
thereby.  Attorney-General  v.  Wilson, 
1  Craig  &  Ph.  1 ;  10  L.  J.  (N.  S.)  53  ; 
4Jur.  1174. 

And  if  a  director  of  a  manufacturing 
company  has  assented  to  a  dividend  of 
more  than  the  profits,  he  may  be  sued 
for  such  violation  of  duty  without 
joining  with  him  the  company  as  co- 
defendant  .  Hill  V.  Frazier ,  22  Penn, 
St.  320.  See,  also,  Kimmel  v.  Stoner, 
18  id.  155. 

2  Crook  v.  Jewett,  12  How.  Pr.  19. 

If  a  director  of  a  corporation  know- 
ingly issues  or  sanctions  a  prospectus 
containing  false  statements  of  material 
facts,  the  natural  tendency  of  which  is 
to  deceive  and  to  induce  the  public  to 
purchase  the  corporate  stock,  he  is  lia- 
ble to  the  damages  sustained  by  one 
who,  relying  upon  and  induced  by  the 
statements,  makes  such  a  purchase. 
And  it  is  sufficient  to  sustain  the  ac- 
tion that  the  false  statements  were  one, 
although  not  the  sole  inducement  to 
the  purchase.  Morgan  v.  Skiddy,  62 
N    Y,  319. 

3  Hill  v.  Frazier,  22  Penn^St.  320. 


Directors.  245 

ance  at  a  board  meeting,  but  by  reason  of  liis  negligence  or  will- 
ful inattention  to  his  duty,  lie  failed  to  do ;  or  if  he  attends  the 
meeting,  but  fails  to  use  his  best  judgment  in  opposing  fraudulent 
acts,  he  would  be  liable  for  all  the  injurious  consequences  of  his 
failure  of  duty,  and  which  he  might  with  reasonable  care  have 
averted.  "Every  absent  director,"  observes  Justice  Martin,  "is 
equally  responsible  in  case  of  extreme  neglect  in  his  attendance 
at  the  board,  or  in  case  after  the  act  comes  or  must  have  come  to 
his  knowledge,  had  he  used  due  diligence,  he  does  not  labor  to 
avert  its  injurious  consequences."  '  But,  although  directors  may 
be  liable  and  required  to  indemnify  parties  injured  on  account  of 
their  fraud  and  abuse  of  trust,  they  cannot  be  held  personally 
responsible,  where  the  injury  is  the  result  of  mere  misjudgment, 
or  only  unwise,  extravagant,  improvident,  slightly  negligent,  or  a 
simple  error  in  the  performance  of  their  duties.  The  only  effect- 
ual remedy  in  such  cases  is  to  change  the  board  and  thereby  the 
management  of  the  corporate  affairs. 

Sec.  154.  The  fiduciary  character  of  directors. — It  will  be  appar- 
ent from  what  has  been  said  that  the  relation  not  only  of  princi- 
pal and  agent  exists  between  the  corporation  and  the  directors, 
but  also  the  relation  of  trustee  and  cestui  que  trust  exists 
between  them  and  the  stockholders  and  creditors.     Accordingly 

^     '  Per  Martin,   J.,  in  Percy  v.  Mil-  out  any  proof  of  actual  warranty,  as 

laudon,  3  La.  575.     See,   also.   United  that  would  be  implied   from  the  ap- 

Society  v.  Underwood,  9  Bush,  617.  pointment  of  the  agent.  Colonial  Bank 

2  Sears  V.  Hotchkiss,  25  Conn.  171;  v.    Cherry   &  McDougall,    17  W.    R. 

Howe  V.  Duel,  43  Barb.  504  ;  Belmont  1031.     So,  directors  may  be  liable  for 

V    Erie  R.  Co.,  52  id.   637;  Western  the   fraudulent   acts   of    co-directors. 

Bank  of    Scotland  v.    Baird3,    L.    R.,  which    they   might    have    prevented. 

4   Ch.  381  ;    Turquand     v.    Marshall,  Joint-Stock  Discount  Co.  v.  Brown,  17 

id.JS'6;    Green's   Brice's  Ultra  Vires,  W.  R.  1037. 

406%  ft'^q.;  Spering's  Appeal,  71  Pa.  Where  the  directors  of  a  railway 
St.  11;  Qodboldv.  Mobile  Bank,  11  Ala.  assumed  to  act,  by  accepting  bills 
191  ;  Smith  v.  Prattville  Man.  Co.,  29  of  exchanga,  thev  were  held  person- 
Ala.  503  ;  Bank  of  St.  M.  v.  St.  Johns,  ally  liable.  Owen  v.  Van  Ulster,  IOC. 
25  Ala.  (N.  S.)  566;  Pon'chartrain,  etc.,  B."318;  Roberts  v.  Button,  14  Vt.  195. 
R.  Co.  V.  Paulding,  11  La.  41.  See,  also,  Turquand  v.  Marshall,  L.  R., 

It  has  recently  been  held  in  England  6  Eq.  112.     As  to  personal  liability  of 

that  where  directors  assume  to  act  for  directors  for  a  check  drawn  by  them 

a   company,    they   impliedly   warrant  in   the   name   of    the    company,    and 

their   authority   so   to   do ;    and    that  signed    by    their    individual    names, 

where    they    stated     that    they    had  where  they  were  held  personally  lia- 

appointed  an  agent  with  certain  pow-  ble,  see  Serrell  v.  Derbyshire,  etc.,  R. 

ers,  they  were  personally  liable  with-  Co.,   19  L.  J.    371;  S.  C,  9  C.  B.  811. 


246  Private  Cokporations. 

they  have  no  right  to  enter  into  or  participate  in  any  combination 
the  object  of  which  is  to  divest  the  company  of  its  property  and 
obtain  it  for  themselves,  to  the  prejudice  of  the  members  or  cred- 
itors.^ Nor  are  they  entitled  to  any  share  of  capital  stock,  or 
to  any  dividends  of  the  profits,  until  its  creditors  are  paid.  The 
property  of  the  corporation,  in  equity,  is  regarded  as  held  in  trust 
for  the  payment  of  its  debts ;  and  a  sale  of  its  capital  stock,  and 
a  division  of  the  proceeds  among  the  directors,  will  not  defeat 
the  rights  of  creditors ;  but  they  may  proceed  in  equity  to  com- 
pel the  directors  to  contribute  jpro  rata  out  of  the  moneys  so 
received  and  in  their  hands.  ^  On  this  subject  the  supreme  court 
of  the  United  States  say :  "  Equity  regards  the  property  of  a 
corporation  as  held  in  trust  for  the  payment  of  the  debts  of  the 
corporation,  and  recognizes  the  right  of  creditors  to  pursue  it  into 
whosoever  possession  it  may  be  transferred,  unless  it  has  passed 
into  the  hands  of  a  hona  fide  purchaser ;-  and  the  rule  is  well  set- 
tled that  the  stockholders  are  not  entitled  to  any  share  of  the 
capital  stock  nor  to  any  dividend  of  the  profits,  until  all  the  debts 
of  the  corporation  are  paid." 

Sec.  155.  Same  continued.  —  This  doctrine  would,  of  course,  be 
applicable  in  all  cases  of  fraudulent  or  wrongful  disposition  or 
appropriation  of  the  corporate  funds  or  property,  by  directors. 
For  as  agents  and  trustees  of  the  corporation  as  well  as  the  stock- 
holders and  creditors,  they  would  be  bound  to  perform  their 
duties  and  administ  er  the  trust  in  good  faith  ;  and  any  portion  of 
the  corporate  property  wrongfully  received  by  them  would  be 
liable  to  the  satisfaction  of  the  claims  of  creditors  and  stockholders  ; 
and  such  directors  would  be  required,  in  a  proper  proceeding,  to 

I  Jackson  v.Ludeling,  21  Wall. 616.         '^  Story's  Eq.  Jur.,  §  1253;  Mumma 

But  if  a  corporation  fails  to  legally  v.  Potomac  Company,  8  Pet.  286;  Wood 

organize    under   the   provisions   of   a  v.  Dummer,   3  Mason,   308;    Voce  v. 

statute,  and  does  not    become  a  corpo-  Grant,  15  Mass.  522;  Spear  v.  Grant, 

ration (Ze/iire,  and  cannot  legally  issue  16   id.    14;    Curran   v.    Arkansas,    15 

stock,  the  issue  of  such  stock  by  the  How.  307. 

directors  will  not  alone  make  the  ^  The  Chicago,  etc.,  R.  Co.  v.  How- 
directors  liable  for  a  fraudulent  con-  ard,  7  Wall.  392.  See,  also.  Hale  v. 
spiracy  to  issue  worthless  stock .  Nor  Bridge  Co.,  8  Kaus.  466;  Jones  v. 
can  an  intent  to  deceive  be  inferred  Terre  Haute  E.  Co.,  29  Barb.  359; 
from  these  circumstances,  and  the  fact  Barton  v.  Port  Jackson  R.  Co.,  17  id. 
that  the  nominal  is  largely  in  excess  397. 
of  the  actual  capital.  Nelson  v.  Lul- 
ing,  62  N.  T.  645. 


DiEEOTORS.  247 

account  for  the  same.  They  have  no  right  to  enter  into  or 
participate  in  any  combinations  the  object  of  which  is  to  divest 
the  corporation  of  its  property,  and  obtain  it  for  themselves,  to 
the  prejudice  of  the  members  or  creditors. ' 

Neither  have  they  the  power  to  give  away  the  corporate  funds, 
or  deprive  the  corporation  of  its  means  to  accomplish  the  purposes 
for  which  it  was  chartered ;  ^  or  dispose  of  the  stock  at  less  price 
than  fixed  by  the  charter  ; '  or  in  a  manner  not  provided  by  the 
charter  ;  *  or  to  disregard  a  by-law  imposing  limitations  on  their 
powers ;  or  to  amend  such  by-laws  or  other  regulations  of  the 
corporate  body,  so  as  to  confer  greater  authority  upon  them. 
And  a  breach  of  duty  in  these  respects  would  subject  thera  to 
personal  liability.''  And  a  resolution  of  a  board  of  directors,  the 
design  and  effect  of  which  is  to  transfer  the  property  of  the  com- 
pany to  themselves,  by  way  of  inducement  to  pay  their  just  debts 
to  the  company,  is  void.'  So,  for  any  willful  breach  of  their  trust, 
or  misapplication  of  the  corporate  funds,  or  for  any  gross  neglect 
of  or  inattention  to  their  duties  as  trustees  or  directors,  they  are 
liable  to  any  person  who  is  damaged  thereby.^ 

Sec.    156.      They  cannot  manage  the  a£fairs  of  the  corporation  for  their 

personal  benefit.— The  fiduciary  character  of  directors  referred  to 
is  such  that  the  law  will  not  permit  them  to  manage  the  affairs  of 
the  corporation  for  their  personal  and  private  advantage,  when 
their  duty  would  require  them  to  work  for,  and  use  reasonable 
efforts  for  the  general  interests  of  the  corporation  and  its  stock- 
holders and  creditors.  The  confidence  reposed  in  them  cannot  be 
thus  abused  with  impunity;  and  they  cannot  use  their  position  to 
promote  their  own  interest  in  respect  to  any  thing  thus  intrusted 
to  thera ,  to  the  prejudice  of  creditors  or  other  members.  "  Nor 
is  it  possible  to  limit  the  duty  of  a  director  of  a  coi'poration,  in 
this  respect,  to  the  time  while  he  was  acting  as  director  under  any 

'  Jackson  v.  Ludeling,  21  Wall.  616.        ■"  Robinson  v.  Smitli,  3  Paige.   233. 

See  post,  chap.  14.  See,  also,    Hodges   v.    New   England 

2  Bedford  R.  Co.  v.  Bowser, 48  Penn.  Screw  Co.,  1  R.  I.  313 ;  Butler  v.  Corn- 

St.  29.  well  Iron  Co.,  3  Conn.  335;  Colquitt 

^  Sturges  V.  Stetson,  3  Phil.  (Penn.)  v.  Howard,  11  Ga.  556  ;  Percy  v.  Mil- 

304.  laudon.  3  La.  568  ;  United  Society  v. 

♦  Royalton  v.  Turnp.  Co.,  14  Vt.  311.  Underwood,  9  Bush,  617.     See,   also, 

5  Stevens  V.  Davison,  18  Gratt.  819.  cases   cited   under   the   two   previous 

« Hilles  V.  Parrish,  14  N.  J.  Eq.  380.  sections. 


248  Private  Corporations. 

special  delegation  of  power,  or  in  attendance  at  meetings  of  the 
board.  He  cannot,  while  director,  divest  himself  of  the  knowl- 
edge which  he  has  acquired,  in  confidence,  of  corporate  affairs,  or 
of  the  value  of  corporate  property,  nor  be  allowed  to  use  it  to  his 
own  advantage.^ 

Sec.  157.  Contracts  by  directors  with  corporations.  —  CoUJ'ts  of 
equity  will  regard  with  great  jealousy  the  contracts  made  be- 
tween directors  and  the  corporation.  And  as  a  general  rule  such 
contracts  are  voidable  at  the  instance  of  the  company  or  stock- 
holders ;  and  this  rule  has  been  held  to  apj^ly  to  cases  where  the 
majority  of  the  directors  in  one  corporation  contract  with  another 
corporation,  in  which  they  are  also  directors.^  It  is  their  duty  to 
act  for  the  best  interests  of  the  company,  and  if  they  enter  into 
a  contract  with  the  company,  their  duty  as  officers  is  in  conflict 
with  their  duty  as  individuals.  And  the  same  doctrine  has  been 
held  to  apply,  whether  they  are  a  party  to  the  contract  in  its  in- 
ception, or  whether  they  subsequently  acquire  an  interest  in  it ; ' 
as  the  rule  is,  that  directors  cannot  acquire  an  interest,  directly 

1  Hoyle  V.  Plattsburgb,  etc.,  R.  Co.,  Pr.  (N.  S.)  438  ;  Buffalo,  etc.,  R.  Co.  v. 

54  N.  Y.  314.     See,   also,   Koebler  v.  Lampson,  47  Barb.   533;  Fremont  v. 

Black  River  Falls  Co.,  2  Black  (U.  S.  Stone,  42  id.  169;  Cumberland   Coal 

C.  C),  715  ;  Risley  v.  Indiana,  etc.,  R.  Co.  v.  Sberman,  30  id.   553  ;  Couro  v. 

Co.,  1  Hun,  202  ;  Gray  v.   N.  Y.  &  V.  Port  Henry  Iron  Co..  12  Baib.  64. 

S.  Co.,  3  id.  383;  Redmond  v.  Dicker-  Nor  can  a  stockholder,  who  is  also 

son,   1    Stockt.  597;    Hoffman   Steam  a  creditor  of  the  corporation,  in  case 

Coal  Co.   V.   Cumberland  Cual  Co.,  16  of  the    insolvency   of    the   company, 

Md.  456 ;  Goodin  v.  Whitewater  Canal  or    in    the    event    that    it    is    being 

Co.,  18  Ohio  St.  169  ;  Port  v.  Russell,  wound  up  under  the  management  of 

36  Ind.  60 ;  Buell  v.  Buckingham,  16  a  receiver,  be  entitled  to  set  off  the 
Iowa,  284  ;  San  Francisco  R.  Co.  v.  Bee,  amount  due  him,  against  lawful  calls, 
48  Cal.  398  ;  Drury  v.  Cross,  7  Wall,  nor  to  set  off  against  such  calls,  antici- 
302  ;  Chicago,  etc.,  R.  Co.  v.  Howard,  pated  or  probable  dividends.  Green's 
id.  392 ;  Jackson  v.  Ludeling,  21  id.  Brice's  Ultra  Vires,  553  ;  Ex  parte 
616  ;  Heath  v.  Erie  R.  Co.,  8  Blatchf.  Henry  Winsor,  3  Story, 411 ;  Cutler  v. 
347;  European,  etc.,  R.  Co.  v.  Poor.  Middlesex  Factory  Co,  14  Pick.  483; 
59  Me.  277;  Richards  v.  New  Hamp-  McLaren  v.  Pennington,  1  Paige,  102 ; 
shire  Ins.  Co.,  43  N.  H.  263;  Fuller  v.  Osgood  v.  Ogden,  4  Keyes,  70, 
Dame,  18  Pick.  472  ;  Peabody  v.  Flint,  ^  San  Diego  v.  San  Diego,  etc.,  R. 
6  Allen,  52;  Hodges  v.  New  England  Co.,  44  Cal.  106  ;  Abbot  v.  American 
Screw  Co.,  1  R.  I.  312;  Butts  v.  Woods,  H.  R.  Co.,  33  Barb.    578  ;  St.    James' 

37  N.  Y.  317 ;  S.  C,  38  Barb.  181  ;  Church  v.  Church  of  the  Redeemer, 
Coleman  v.  Second  Ave.  R.  Co.,  38  N.  45  id.  356  ;  Polar  Star  Lodge  v.  Polar 
Y.  201  ;  Ogden  v,  Murray,  39  id.  207  ;  Star  Lodge,  16  La.  Ann.  76  ;  Paine  v. 
Bliss  V.  Matteson,  45  id.  22;  S.  C,  53  Lake  Erie,  etc.,  R.  Co.,  31  Ind.  283. 
Barb.  348  ;  Scott  v.  De  Peyster,  1  Edw.  ^  Poor  v.  European,  etc. ,  R .  Co.  59 
Ch.  513;  Blatchford  v.   Ross,  5  Abb.  Me.  270. 


Directors. 


•24-9 


or  indirectly,  adverse  to  the  corporation,  and  that,  if  they,  taking 
advantage  of  their  knowledge  and  position,  make  an  advantageous 
bargain  in  the  purchase  of  a  claim  against  the  corporation,  tlie 
profits  thus  made  will  be  treated  as  held  in  trust  for  tlie  company.' 


'  European,  etc.,  R.  Co.  v.  Poor,  59 

Me.  277. 

The  general  principle  is  that  no  man 
can  faithfully  serve  two  masters  whose 
interests  are  or  may  be  in  conflict. 
The  law,  therefore,  will  not  permit 
one  who  acts  in  a  fiduciary  capacity 
to  deal  with  himself  in  his  individual 
capacity.  It  may  be  regarded  as  a 
prevailing  principle  of  the  law,  that 
an  agent  must  not  put  himself,  during 
his  agency,  in  a  position  which  is  ad- 
verse to  that  of  his  principal.  For  even 
if  the  honesty  of  the  agent  is  unques- 
tioned, and  if  his  impartiality  between 
his  own  interest  and  his  principal's 
might  be  relied  upon,  yet  the  princi- 
pal has  in  fact  bargained  for  the  exer- 
cise of  all  the  skill,  ability  and  in- 
dustry of  the  agent,  and  he  is  entitled 
to  demand  the  exertion  of  all  this  in 
his  own  favor. 

The  principle  has  found  expression 
in  a  large  number  of  cases  involving  a 
great  variety  of  circumstances,  and  it 
applies  equally,  whether  one  deals 
.with  himself,  acting  as  sole  trustee, 
or  with  a  board  of  trustees,  of  which 
he  is  a  member,  or  with  the  directors 
of  a  corporation,  of  whom  he  is  one. 

Thus,  in  Dobson  v,  Racey,  3  Sandf. 
Ch.  63,  Dobson,  being  the  owner  of 
certain  real  estate,  mortgaged  it  to  Ra- 
cey, and  then  executed  a  power  of  at- 
torney to  him,  authorizing  him  to  sell 
and  convey  the  premises  in  such  man- 
ner as  he  might  deem  proper,  and  out 
of  the  proceeds  of  the  sale,  after  pay- 
ing the  mortgage  debt,  to  pay  over 
the  surplus  to  the  wife  of  Dobson. 
Dobson  went  abroad  and  died.  Shortly 
after  Dobson  left,  Racey,  by  virtue  of 
the  power  of  attorney,  conveyed  the 
premises  to  one  Harrison,  who,  with- 
out paying  or  agreeing  to  pay  any 
thing  therefor,  two  days  thereafter  re- 
conveyed  to  Racey.  Racey  satisfied 
the  mortgage,  and  paid  $100 
to  the  widow  of  Dobson.  The 
action  was  commenced  by  the  heirs  of 
Dobson,  claiming  that  the  sale  to  Har- 
rison was  inoperative  and  void.     The 

32 


court,  after  declaring  that  it  is  now  a 
settled  rule,  both  in  England  and  in  thi.s 
country,  that  no  party  can  be  permitted 
to  jiurchase  an  interest  when  he  has 
a  duty  to  perform  which  is  inconsistent 
with  his  character  of  purchaser,  says: 
"  The  law  declares  tlu;  sale  unwarrant- 
able, on  grounds  of  public  policy, 
irrespective  of  any  proof  of  injury  or 
intentional  wrong."  See,  also,  Boyd 
V.  Blaukman,  29  Cal.  19. 

In  Pickett  v.  School  District  No.  1, 
etc.,  25  Wis.  552,  the  plaintiff,  who 
was  the  trustee  of  a  school  district, 
entered  into  a  contract  with  the  other 
two  trustees,  to  build  for  the  district 
a  school-house.  The  stipulated  price 
not  being  paid,  he  brought  his  action 
on  the  contract.  The  court  said:  "  We 
think  there  is  one  fatal  objection  to 
the  plaintiflF's  right  to  maintain  this 
action,  which  renders  it  unnecessary 
to  consider  any  of  the  other  questions 
discussed.  That  is,  that,  inasmuch  as 
it  appears  that  the  plaintiS"  was  liim- 
self  the  director  of  the  district  at  the 
time  the  contract  was  let,  and  took 
part  as  such  in  the  proceedings  to  let 
it,  it  was  against  public  policy  to 
allow  him,  while  holding  that  fiduciary 
relation  to  the  district,  to  place  him- 
self in  an  antagonistic  position,  and 
obtain  the  contract  for  himself  from 
the  board  of  which  he  was  a  member." 

In  Cumberland  Coal  Company  v. 
Sherman,  30  Barb.  553,  the  president 
and  secretary,  in  pursuance  of  a  vote 
of  the  directors  of  the  corporation,  sold 
and  conveyed  to  the  defendant,  who 
was  one  of  the  directors,  a  large  tract 
of  land.  The  action  was  commenced 
to  have  the  deed  declared  void  aiid 
canceled.  After  a  very  elaborate  and 
searching  review  of  the  authorities, 
the  court  came  to  the  conclusion  that 
the  deed  could  not  be  sustained. 
Among  other  things,  it  said  :  "  There 
can  be  no  question,  I  think,  at  the 
present  time,  that  a  director  of  a  cor- 
poration is  the  agent  or  trustee  of  the 
stockholders,  and  as  such  has  duties 
to  discharge  of  a  fiduciary  nature  to- 


250 


Private  Corporations. 


In  a  recent  case  in  Pennsylvania,  where  a  bill  was  filed  by  a 
minority  of  stockholders  to  set  aside  a  sale  of  property  of  an  in- 
solvent corporation,  made  to  certain  creditors,  some  of  whom  were 
also  directors,  it  was  observed  by  Strong,  J.,  as  follows  :  "  I  come 
then  to  consider  the  facts  that  the  purchasers  were  the  same  per- 
sons as  those  who  as  directors  sold,  and  as  stockholders  authorized 
the  sale.  It  is  often  said,  and  truly,  that  the  same  persons  cannot 
be  both  buyers  and  sellers  in  the  same  transaction.  They  were 
not  strictly  in  this.  All  the  purchasers  were  not  directors  who 
made  the  sale.  But  I  make  no  account  of  that.  Still,  why  may 
not  directors  of  a  corporation  sell  to  themselves  ?  Each  director 
has  an  interest  distinct  and  antagonistic  to  his  interest  as  a  mere 
man.  There  is  an  identity  of  person  but  not  of  interest.  There 
must  be  many  things  which  directors  can  do  for  their  individual 
benefit,  which  are  binding  upon  a  corporation  of  which  they  are 
directors.  If  they  have  advanced  money,  I  cannot  doubt  they 
may  pay  themselves  with  the  corporate  fuiids.      If  they  have 


ward  hia  principal,  and  is  subject  to 
the  obligations  and  disabilities  inci- 
dental to  that  relation. 

"  Neither  are  the  duties  or  obliga- 
tions of  a  director  or  trustee  altered 
from  the  circumstance  that  he  is  one 
of  a  number  of  directors  or  trustees, 
and  that  this  circumstance  diminishes 
his  responsibility,  or  relieves  him 
from  any  incapacity  to  deal  with  the 
property  of  his  cestui  que  trust.  The 
same  principles  apply  to  him  as  one  of 
a  number  as  if  he  was  acting  as  a  sole 
trustee.  It  is  not  doubted  that  it  has 
been  shown  that  the  relation  of  the 
director  to  the  stockholders  is  the 
same  as  that  of  the  agent  to  his  prin- 
cipal, the  trustee  to  \i\s  cestui  que  trust, 
and  out  of  the  identity  of  these  rela- 
tions necessarily  spring  the  same  du- 
ties, the  same  danger,  and  the  same 
policy  of  the  law." 

In  Aberdeen  Railway  Company  v. 
Blaikie,  1  McQueen,  461,  the  house  of 
lords  held  that  a  contract  entered  into 
by  a  manufacturer  for  the  supply  of 
iron  furaisliings  to  a  railway  company, 
of  which  he  was  a  director,  or  the 
chairman,  at  the  date  of  the  contract, 
could  not  be  enforced  against  the  com- 
pany. Lord  Ckanworth,  delivering 
the  opinion  of  the  court,  says:  "  A 
corporate  body  can  only  act  by  agents, 


and  it  is,  of  course,  the  duty  of  those 
agents  so  to  act  as  best  to  promote  the 
interests  of  the  corporation  whose 
affairs  they  are  conducting.  Such  an 
agent  has  duties  to  discharge  of  a 
fiduciary  character  toward  his  princi- 
pal, and  it  is  a  rule  of  universal  appli- 
cation, that  no  one  having  such  duties 
to  discharge  shall  be  allowed  to  enter 
into  engagements  in  which  he  has 
or  can  have  a  personal  interest  con- 
flicting, or  which  may  possibly  conflict, 
with  the  interests  of  those  whom  he 
is  bound  to  protect.  So  strictly  is  this 
principle  adhered  to,  that  no  question 
is  allowed  to  be  raised  as  to 
the  fairness  or  unfairness  of  a  con- 
tract so  entered  into.  It  obviously 
is,  or  may  be,  impossible  to  demon- 
strate how  far,  in  any  particular  case, 
the  terms  of  such  a  contract  have  been 
the  best  for  the  cestui  que  trust  which 
it  was  possible  to  attain.  It  may  some- 
times happen  that  the  terms  on  which 
a  trustee  has  dealt  or  attempted  to 
deal  with  the  estate  or  interests  of 
those  for  whom  he  is  a  trustee  have 
been  as  good  as  could  have  been  ob- 
tained from  any  other  person  ;  they 
may  even  at  the  time  have  been  bet- 
ter. But  still,  so  inflexible  is  the  rule 
that  no  inquiry  on  that  subject  is  per- 
mitted. 


Directors.  251 

become  liable  as  sureties  for  the  corporation,  they  may  provide 
for  their  indemnity.  And  though  ordinarily  the  law  frowns  upon 
contracts  made  by  them  in  their  representative  character  witli 
themselves  as  private  persons,  such  contracts  are  not  necessarily 
void.  They  are  carefully  watched,  and  their  fairness  must  be 
shown.  But  I  repeat  the  question,  why  may  not  directors  sell 
to  themselves  in  any  case  ?  It  is  because  of  the  danger  that  the 
interests  of  stockholders  may  suffer,  if  such  sales  be  permitted, 
for  want  of  antagonism  between  the  parties  to  the  contract.  But 
such  sales  are  supported  in  equity  where  the  fiduciary  relation  of 
the  purchasers  has  ceased  before  the  purchase,  where  the  purchase 
was  made  with  the  full  consent  of  the  stockholders,  or  where 
stockholders  have,  by  their  acquiescence,  debarred  themselves  from 
questioning  the  transactions.  I  do  not,  however,  deem  it  neces- 
sary to  decide  that  the  rule  in  this  case  was  absolutely  indefeasi 
ble.  The  utmost  the  complainants  claim  is  that  it  was  voidable. 
Certainly  nothing  more  can  be  claimed.  Let  it  be,  then,  that  it 
might  have  been  set  aside  at  the  instance  of  the  corporation,  or 
even  of  a  stockholder,  as  against  the  policy  of  the  law  and  con- 
structively fraudulent.  Still,  it  was  valid  in  equity  as  well  as  in 
law,  unless  one  or  the  other  cjiose  to  avoid  it ;  and  in  all  cases 
in  which  an  attempt  is  made  to  fasten  a  constructive  trust  upon 
a  purchaser,  the  attempt  must  fail  unless  made  in  a  reasonable 
time."  '  The  leading  doctrine  thus  clearly  set  forth  has  been 
also  held  by  recent  cases  in  other  states,  where  contracts  are  made 
with  directors  or  officers  of  a  railroad  company  for  the  purpose  of 

'  Ashurst's   Appeal,    60    Penn.    St.  there  was?  a  contract,  not  with  a  direc- 

291.     See,  also,  Chester  v.  Dickerson,  tor  or  officer  of  the  corporation,   but 

54  N.  Y.  1  ;  Getty  v.  Devlin,  id.  403  ;  with  a  member  merely,  for  a  payment 

Barton    v.    Plankroad   Co.,    17  Barb,  of  a  pecuniary  consideration  to  such 

397.  corporation  on  the  location  of  a  depot 

Where  a  contract  in  which  two  of  in  a  specified  place  ;  that  such  a  con- 
the  directors  were  interested  was  made  tract  was  aa^ainst  public  policy  was 
with  the  company,  it  was  held  "that  held  on  tlie  ground  that  the  interests 
nothing  short  of  a  ratification  by  tl'e  of  the  corporation  and  the  public  were 
board  after  a  full  explanation  and  identical  ;  that  each  member  was  re- 
knowledge  of  their  interest  and  all  the  quired  to  use  his  best  and  unbiased 
circumstances,  could  render  such  a  judgment  upon  the  question  of  the  fit- 
contract  binding  upon  the  company."  ness  of  the  location  without  the  influ- 
Per  Christiancy,  J.,  in  Flint,  etc.,  ence  which  such  arrangement  might 
R.  Co.  v.  Dewey,  14  Mich.  477.  have  ;  and  that  the  question   involved 

This  doctrine  was  carried  to  great  was  one  of  good  faith,  to  be  left  to  the 

extremes   in    the    case   of    Fuller    v.  jury.     Starli    Bank   v.    United   States 

Damp,   18   Pick.    472,    in   which   case  Pottery  Co.,  34  Vt.  144. 


252 


Private  Coeporations. 


securing  their  influence  or  interest  in  attaining  the  location  of 
depots  or  machine  shops,  or  the  construction  of  the  road  so  as  to 
promote  private  interests  ;  and  especially  would  this  be  the  case 
where  the  interest  of  the  director  under  the  contract  thus  made 
would  depend  upon  the  location  as  desired.  The  corporation,  as 
well  as  the  stockholders  and  creditors,  would  be  not  only  entitled 
to  the  unbiased  judgment  of  the  director,  which  could  not  be 
expected  under  the  above  state  of  facts,  but  also  to  the  benefit  of 
his  influence  and  argument  in  deciding  such  questions  as  a  mem- 
ber of  the  board,  which,  of  course,  would  be  unreasonable  to  ex- 
pect under  the  facts  supposed.'  And  such  a  course  would  tend 
to  sacrifice  both  the  public  rights  and  the  interests  of  stock- 
holders.' 


'  Pacific  R.  Co.  V.  Seely,  45  Mo.  212  ; 
Linder  v.  Carpenter,  62  111.  399  ;  Ogden 
V.  Murray,  39  N.  Y.  202  ;  Re  Union 
Pacific  R.  Co.,  1  Cent.  L.  .J.  582. 

^  In  the  case  of  European,  etc.,  R. 
Co.  V .  Poor,  59  Me.  277,  Appleton, 
C.  J.,  said  :  "A  trustee  is  one  in 
whom  property  is  vested  in  trust  for 
others.  Every  person  is  to  be  deemed 
a  trustee  to  whom  business  and  inter- 
ests of  others  are  confided,  and  to 
whom  the  management  of  their  affairs 
is  intrusted.  The  general  rule  is  that 
a  trustee,  so  far  as  the  trust  extends, 
can  never  become  a  purchaser  of  the 
property  embraced  within  the  trust, 
save  with  the  consent  of  all  parties  in- 
terested. The  underlying  principle  is 
that  no  man  can  serve  two  masters. 
He  who  is  acting  for  others  cannot  be 
permitted  to  act  adversely  to  his  prin- 
cipals. The  agent  to  sell  cannot  be- 
come a  purchaser  of  that  which  he  is 
the  agent  to  sell,  for  his  position  as 
selling  agent  is  adverse  to  and  incon- 
sistent with  that  of  a  purchaser.  So, 
the  agent  to  purchase  cannot,  at  the 
same  time,  occupy  the  position  of  a 
seller.  It  is  not  that  in  particular  in- 
stances the  sale  or  the  purchase  may 
not  be  reasonable.  But  to  avoid  temp- 
tation the  agent  to  sell  is  disqualified 
from  purchasing,  and  the  agent  to 
purchase  from  selling.  In  all  such  con- 
tracts the  sales  or  the  purchases  may 
be  set  aside  by  him  for  whom  such 
agent  is  acting.  The  cestui  que  trust 
may  confirm  all  such  sales  or  pur- 
chases if  he  deems  it  for  his  interest. 


The  affirmance  or  disaffirmance  rests 
with  him,  and  the  trustee,  when  buy- 
ing trust  property  from  or  selling  it  to 
himself,  must  assume  the  risk  of  hav- 
ing his  contracts  set  aside,  if  the  cestui 
gwe^rif.sf  is  dissatisfied  with  his  action." 

The  directors  are  not  sureties  for  the 
fidelity  of  the  oSicers  of  the  corpora- 
tion which  they  may  be  authorized  to 
appoint.  If  they  exercise  reasonable 
diligence  in  the  appointments  of  agents 
and  officers,  this  is  all  that  is  required. 
But  if  they  should  knowingly  appoint 
a  person  of  bad  character  to  a  place  of 
trust,  they  would  be  personally  re- 
sponsible. See  Scott  v.  Depeyster,  1 
Edw.  Ch.  513.  See,  also,  Burbridge 
V.  Morris,  34  L.  J.  (N.  S.)  131. 

The  rule  of  equity  is  liberal,  em- 
bracing within  its  purview  all  fidu- 
ciary relations,  as  those  of  principal 
and  agent,  attorney  and  client,  solici- 
tors, executors,  guardians,  etc. 

The  president  and  directors  of  a  cor- 
poration must  be  held  as  occupying  a 
fiduciary  relation  to  the  stockholders, 
for  and  on  behalf  of  wliom  they  act. 
"  The  relation  between  the  directors 
of  a  corporation  and  its  stockholders," 
observes  Johnson,  J.,  in  Butts  v. 
Wood,  38  Barb.  188,  "  is  that  of  trus- 
tee and  cestui  que  trust."  "  The  direct- 
ors," remarks  RoMiLLY,  M.  R.,  in  the 
York  &  Midland  Railway  Co.  v.  Hud- 
son, 19  Eng.  L.  &  Eq.  365,  "  are  per- 
sons selected  to  manage  the  business 
of  the  company  for  the  benefit  of  the 
shareholders.  It  is  an  office  of  trust, 
which,  if  they  undertake  it,   is  their 


Directors. 


253 


Sec.  158.  instances  where  they  are  not  liable,  etc.  —  But  the  mere 
fact  of  being  a  director  will  not  render  a  party  personally  liable 
for  the  frands  and  misrepresentations  of  the  active  managers. 


duty  to  perform  fully  and  entirely." 
Persons  who  become  directors  and 
managers  of  a  corporation  place  them- 
selves in  the  situation  of  trustees  ;  and 
the  relation  of  trustees  and  cestui  que 
trust  is  thereby  created  between  them 
and  the  stockholders.  Scott  v.  De- 
peyster,  1  Edw.  Ch.  518  ;  Verplanck  v. 
Mercantile  Ins.  Co.,  id.  85.  All  acts 
done  by  the  directors  officially  should 
be  for  the  interests  of  the  cestui  que 
trust.  Holding  a  fiduciary  relation, 
they  cannot  be  permitted  to  acquire 
interests  adverse  to  such  relation. 

In  European,  etc.,  R.  Co.  v.  Poor, 
supra,  the  court  say  :  "  The  bill  al- 
leges that  '  at  a  meeting  of  the  di- 
rectors of  said  company  (the  E.  &  N. 
A.  Railway  Co.),  holden  on  the  25th 
day  of  August,  1865,  a  contract  previ- 
ously made  between  said  company 
and  a  certain  firm,  under  the  name  of 
Pierce  &  Blaisdell,  and  signed  by  said 
defendant,  as  president  of  said  com- 
pany, and  by  Pierce  &  Blaisdell,  for 
the  construction  of  said  railroad,  was 
approved,  adopted  and  confirmed. 
That  said  Pierce  &  Blaisdell  did  pro- 
ceed, under  said  contract,  in  the  con- 
struction of  said  railroad,  and  received 
large  sums  of  money  under  the  same 
contract,'  and  '  that  there  was  an 
agreement  between  said  defendant 
while  he  was  president  and  director, 
as  aforesaid,  and  said  firm  of  Pierce  & 
Blaisdell,  or  one  of  the  members  of 
said  firm,  that  said  defendant  should 
receive  a  large  sum  of  money  for  or  on 
account  of  said  contract,  or  a  part  of 
the  profits  which  might  be  received  by 
said  Pierce  &  Blaisdell,  under  and  by 
their  performance  of  said  contract 
for  the  construction   of  said  railroad.' 

"  To  this  portion  of  the  bill  the  de- 
fendant has  demurred,  thereby  ad- 
mitting, for  the  purposes  of  the  present 
argument,  his  interest  in  the  contract 
of  Pierce  &  Blaisdell,  with  the  corpo- 
ration of  which  he  was  president  and 
a  director,  made  when  he  was  acting 
as  such,  and  in  the  profits  of  which 
he  was  a  participant  while  holding 
those  positions.  As  the  agent  to  sell 
cannot  purchase  what  he  is  to  sell, 
nor  the  agent   to   purchase    buy    of 


himself,  so  the  agent  to  contract  can- 
not, as  agent,  contract  with  himself 
as  principal.  The  interest  of  the  i)ar- 
ties  to  a  contract,  whether  of  purchase, 
a  sale,  or  for  work  or  labor,  are  ad- 
verse and  inconsistent  with  eacli  other. 
It  is  the  duty  of  the  directors  of  a  cor- 
poration to  act  for  the  best  interests 
of  such  corporation.  If  a  director  be 
a  party  to  a  contract  entered  into  with 
himself,  his  duty  as  an  officer  is  in 
conflict  with  his  interests  as  an  indi- 
vidual. This  is  equally  so,  whether 
be  enters  into  the  contract  on  its  in- 
ception, or  subsequently  acquires  an 
interest  in  it.  If  he  enters  originally 
into  the  contract  as  director  with  him- 
self as  a  party,  it  is  not  difficult  to 
perceive  who  would  have  an  advantage 
in  the  bargain.  If  he  subsequently 
becomes  a  partner,  he  places  himself 
in  a  position  in  which,  when  any 
questions  arise  as  to  its  performance, 
his  interest  as  a  party  to  the  contract 
conflicts  with  his  duty  as  an  officer. 
The  general  rule  is,  that  directors 
cannot  legitimately  acquire  an  interest 
adverse  to  the  corpoi'alion,  and  that 
if  they  purchase  any  claim  against 
the  company  it  is  in  trust  for  the  com- 
pany." 

In  the  Great  Luxembourg  Railway 
Co.  v.  Magnay,  35  Beav.  586,  the 
master  of  the  rolls  says:  "I  have, 
upon  various  occasions,  stated  what 
I  considered  to  be  the  duties  and  func- 
tions of  a  director  of  a  joint-stock 
company.  He  is,  in  point  of  fact,  not 
merely  a  director,  but  he  also  fills  tlie 
character  of  a  trustee  for  the  share- 
holders, and  he  is,  in  regard  to  all 
matters  entered  into  in  their  behalf,  to 
be  treated  as  an  agent ;  therefore  there 
attaches  to  a  director,  for  the  benefit 
of  the  shareholders,  all  the  liabilities 
and  duties  which  attach  to  a  trustee 
or  agent .  Accordingly,  if  a  director 
enters  into  a  contract  for  the  company, 
he  cannot  personally  derive  any  bene- 
fit from  it.  I  accordingly  held,  in  the 
case  of  the  Midland  Railway  Co.  v. 
Hudson,  that  the  defendant,  as  di- 
rector and  trustee,  was  bound  to  give 
to  the  company  the  benefit  of  a  large 
contract  entered  into  by  him  for  iron, 


254 


Fkivate  Corporations. 


Without  knowledge  of,  and  participation  in  the  fraudulent  act, 
as  by  lending  his  name  and  influence  to  promote  the  fraud,  or 
some  willful  or  negligent  violation  of  duty,   he  cannot  be  held 


which  had  been  used  on  the  railroad , 
and  to  render  to  them  the  pecuniary 
advantage  which  he  had  derived  from 
it.  If,  as  in  the  case  of  the  North 
Midland  Railway  Co.  v.  Hudson,  a 
director  of  a  railway  company  enter 
into  a  contract  for  the  purchase  of  a 
large  quantity  of  iron  in  the  shape  of 
rails,  but  before  it  is  wanted  and  be- 
fore it  has  been  actually  delivered  (for 
it  took  some  time  in  that  case  to  per- 
form the  contract  with  the  iron  master) 
the  price  of  iron  should  happen  to 
rise,  the  trustee  is  not  at  liberty  to 
put  into  his  pocket  the  diiference  be- 
tween the  market  price  of  the  iron 
when  delivered  and  that  at  which  it 
was  purchased.  He  cannot  sell  it 
again  to  the  company  as  if  it  were 
his  own  property.  The  whole  benefit 
must  go  to  the  shareholders  and  not 
to  the  director." 

In  Benson  v.  Heathorn,  1  T.  &  Coll. 
826,  the  defendant,  being  director  of 
a  joint-stock  company,  established  for 
the  building,  purchasing,  hiring,  and 
employment  of  steam  vessels,  pur- 
chased a  vessel  for  £1340,  and  after- 
ward sold  it  to  the  company  as  from 
a  stranger,  for  £1500,  charging  the 
company  with  commission  at  £1  per 
cent,  the  broker's  earnest  money  and 
the  expenses  of  a  bill  of  sale  to  him- 
self, there  being  but  one  bill  of  sale. 
It  was  held  that  such  a  transaction 
could  not  stand  in  equity. 

In  Flint  &  P.  M.  R.  Co.  v.  Dewey, 
14  Mich.  477,  it  appeared  that  the  de- 
fendant, the  secretary,  and  another 
director  had  been  appointed  a  com- 
mittee by  the  company  for  building 
and  equipping  the  road.  The  com- 
mittee entered  into  a  preliminary  con- 
tract with  a  certain  party  and  on  the 
same  day  that  party  assigned  to  the 
defendant's  secretary  three-eighths  of 
said  agreement  and  four-tenths  of  a 
contract  to  be  thereafter  entered  into , 
also,  providing  that  they  should  be 
at  three-eighths  the  expense  of  nego- 
tiating the  bonds  of  the  company 
which  were  to  be  received  by  the  con- 
tractor. 


In  a  suit  by  the  complainant  to  com- 
pel the  delivery  of  said  bonds,  it  was 
held  that  the  transaction  under  which 
the  defendant  claimed  was  clearly 
fraudulent  and  void  as  against  the 
complainant,  that  it  was  his  duty 
(with  the  other  members  of  the  com- 
mittee) on  letting  the  contract,  to  use 
his  best  efforts  and  judgments  to  se- 
cure the  best  terms  he  could  for  the 
company;  but  in  joining  with  the  con- 
tractor in  taking  this  very  contract 
which  they  were  employed  to  let,  it 
became  his  interest  to  let  the  contract 
at  the  highest  price.  "It  is  possi- 
ble," observes  Christiancy,  J. ,  "  that 
there  may  have  been  no  actual  fraud, 
and  that  the  contract  would  not  have 
been  let  on  better  terms  ;  but  the  prin- 
ciple of  law  applicable  to  such  a  con- 
tract renders  it  immaterial,  under  the 
circumstances  of  the  case,  whether 
there  has  been  any  fraud  in  fact,  or 
any  inj  ury  to  the  company .  Fidelity 
in  the  agent  is  what  is  aimed  at,  and 
as  a  means  of  securing  it  the  law  will 
not  permit  the  agent  to  place  himself 
in  a  situation  in  which  he  may  be 
tempted  by  his  own  private  interest  to 
disregard  that  of  his  principal  ;  and 
if  such  contracts  were  to  stand  until 
shown  to  be  fraudulent  and  corrupt, 
the  result,  as  a  general  rule,  would  be 
that  they  must  be  enforced  in  spite  of 
fraud  and  corruption." 

"  The  general  rule  of  law,"  observes 
Wayne,  J.,  in  Michoud  v.  Girod,  4 
How.  (IJ.  S.)  555,  "stands  upon  our 
great  moral  obligation  to  refrain  from 
placing  ourselves  in  relations  which 
ordinarily  excite  a  conflict  between 
self-interest  and  integrity.  It  restrains 
all  agents,  public  and  private." 

To  give  eifect  to  these  views  in  Eng- 
land it  is  provided  by  the  Companies' 
Clause  Consolidation  Act,  8  and  9 
Vict.,  chap. 16,  that  no  person  interested 
in  a  contract  with  the  company  shall 
be  a  director ;  and  if  any  director, 
subsequent  to  his  election,  shall  be- 
come concerned  in  any  contract,  the 
oiBce  of  director  shall  become  vacant 
and  he  shall  cease  to  act  as  such. 


DlREOTORS.  255 

personally  responsible.^  But  the  relation  they  occupy  to  the  com- 
pany and  its  creditors  will  not  prevent  directors  or  other  officers 
and  agents  from  protecting  themselves  as  creditors  of  the  com- 
pany by  the  same  means  that  are  open  to  others.  Thus,  where 
the  president  and  two  directors  of  a  company  constituted  a 
quorum,  and  they,  being  the  only  stockholders  at  the  time,  sold 
corporate  property  to  the  president  in  consideration  of  past  in- 
debtedness, and  an  agreement  by  him  to  pay  other  specified  debts 
of  the  corporation,  and  a  judgment  debtor  levied  upon  the  prop- 
erty thus  sold,  it  was  held  that  he  might  be  enjoined  from  pro- 
ceeding under  his  levy.  Dillon,  J.,  in  an  Iowa  case,  observes  : 
"  Being  an  officer  of  the  corporation  did  not  deprive  Buel  [the 
plaintiff]  of  the  right  to  enter  into  competition  with  other  credit- 
ors, and  run  the  race  of  vigilance  with  them,  availing  himself,  in 
the  contest,  of  his  superior  knowledge,  and  of  the  advantage  of 
his  position,  to  obtain  security  for  or  payment  of  his  debt.  The 
act  of  Buel  was  not  legally  or  constructively  fraudulent,  in  con- 
sequence of  his  being  an  officer  or  member  of  the  company."  * 

Sec.  159.  where  they  act  without  authority.  —  The  general  rule 
of  personal  liability  of  agents,  where  they  act  without  the  author- 
ity which  they  assume  to  have,  has  also  been  applied  to  persons 
assuming  authority  in  making  contracts  for  a  corporation  which 
liad  no  legal  existence.^  The  general  principle  is  thus  stated  by 
Mr.  Story  :  "  Wherever  a  party  undertakes  to  do  an  act  as  the 
agent  of  another,  if  he  does  not  possess  any  authority  from  the 
principal  therefor,  or  if  he  exceeds  the  authority  delegated  to  him, 
he  will  be  personally  responsible  therefor  to  the  person  with  whom 
he  is  dealing  for  or  on  account  of  his  principal."*     And  whether 

'  But   it   is   lield   in   Blancliard   v.  Hay  ward  v.  Pilgrim  Soc,  21  Pick.  270; 

Kaull,  44  Cal.^440,  that  the  signing  of  Smith  v.  Lansing,  22  N.  Y.  526;  Strat- 

a  note   by  parties  as  trustees  did  not  ton   v.  Allen,  16  N.  J.  Eq.  229  ;    City 

render   them   personally    liable   even  of  St.  Louis  v.  Alexander,  23  Mo.  483; 

where  there  was  no  corporation.     As  Murray  v.  Vanderbilt,  39  Barb.  140, 

to  fraudulent  overissue  of  stock,  see  Van  Hook  v.  Sonierville  Mauuf.  Co.,  5 

BruflF  V.  Mali,  36  N.  Y.  200  ;    Cazeaux  N.  J.  Eq.  137,  633. 
V.  Mali,  25   Barb.  578;    Shotwell  v.         *  Herod  v.  Rodman,  16  Ind.  241.  See, 

Mali,  38  id.  445.  also,  Gratz  v.  Redd,  4  B.  Monr.  178. 

2  Buell  V.  Buckingham,  16  Iowa,  284.        *  Story  on  Agency,  §  264  ;  Paley  on 

See,  also,  Merrick  v.  Peru  Coal  Co.,  61  Agency,  by  Lloyd,  386  ;  2  Kent's  Com. 

Ill .  472  ;  Sargent  v.  Webster,  13  Mete.  629. 
497  ;  Whit  well  v.  Warner,  20  Vt.  425; 


256  Private  Corporations. 

the  assumed  agency  is  honafide  or  Tnalafide^  the  personal  Habihty 
would  exist  for  damages  sustained  thereby,  on  the  plain  principle 
not  only  of  equity  but  of  justice,  that  where  one  of  two  innocent 
parties  must  suffer  a  loss,  it  ought  to  be  borne  by  the  one  who  in- 
duced the  other,  by  false  assumptions  and  representations,  to  enter 
into  relations  by  which  the  loss  is  sustained.'  The  effect  of  acting 
without  authority  in  making  contracts,  etc.,  has  already  been  con- 
sidered. 

Sec.  160.  Liability  of  partners — It  may  also  occur  that  parties, 
assuming  to  act  as  directors  of  a  corporation  when  they  are  not, 
or  where  there  is  no  corporation,  may  render  themselves  liable  as 
partners  to  those  with  whom  they  contract.  But  in  such  a  case 
it  must  appear,  in  order  to  hold  any  one  of  them  as  such,  that  he 
was  so  acting  at  the  time  the  contract  was  made.* 

Sec.  161.  Directors  de  facto.—  It  is  a  general  principle  of  the 
law,  that  persons  acting  as  directors  of  a  corporation,  and  generally 
recognized  as  such,  are  at  least  directors  de  facto  ;  and  their  acts 
are  valid  until  they  are  ousted  in  some  direct  proceedings  there- 
for.' And  a  board  of  directors  de  facto,  in  possession  of  the  fran- 
chises of  a  corporation,  may  maintain  an  action  against  persons 
claiming  to  constitute  a  board  of  directors,  for  any  trespass  relating 
to  the  corporate  property ;  and  the  acts  of  such  de  facto  officers 
cannot  be  collaterally  impeached.* 

'  See  ante,  chap  9,  g  199  et  seq.  See,  «  Fuller  v.  Rowe,  57  N.  T.  23 ;  S.  C. 

also,  chap.  14.  59  Barb.   344;  Wells  v.  Gates,  18  id. 

The  most  effectual  remedy  in  such  554.     But  see  Blanchard  v.  Kaull,  44 

cases  is  by  injunction  to  restrain  the  Cal.  440. 

wrongful  act.    Thus,  where  they  have  '  Vernon  v.   Hills,  6  Cow.   26  ;  All 

authority  to  issue  convertible  bonds  Saints'  Church  v.   Lovett,  1  Hall,  191. 

for   the   legitimate   purpose   of   com-  *  Atlantic,  etc.,  R.   Co.  v.  Johnston, 

pleting  and  operating  a  railroad,  they  70  N.   C.   348.     The  regularity  of  an 

will  be  restrained  from   issuing  them  organization  that  has  for  years  acted 

as   a   part   of  a  fraudulent  device  to  as  a  corporation  cannot  De  questioned 

increase  the  stock  ;  or  when  so  issued,  collaterally  but  only  by  quo  icarranto 

a  person  affected  with  notice  thereof,  or  scire  facias.     Thompson  v.  Candor, 

and  that  they  do  not  represent  &  bona  60  111.   244.     See,   also,   She  waiter  v. 

fide  indebtedness,  may  likewise  be  re-  Pirner,  55  Mo.  218  ;  Walker  v.   Flem- 

strained    by    injunction.      See,    also,  ing,  70   N.   C.   483 ;   Mahony  v.  East 

where  various  other  acts  of  directors  Holyford,  L.    R.,  7  H.  L.  869  ;  In    re 

will    be    restrained     by    injunction  ;  County  Life  Assurance  Co.,  L.   R.,  5 

Belmont  v.  Erie  R.  Co.,  52  Barb.  637.  Ch.  App.  288. 


DiUECTORS. 


257 


Sec.  162.  Compensation  of.—  Directors  arc  entitled  to  such  com- 
pensation as  may  be  provided  by  the  constitution  or  by-laws  of 
the  association.  But  it  has  been  held  that  e.xtra  ami  (jratuitous 
service  rendered  by  such  officer  does  not  raise  any  ini[)lied  pronii.se 
that  they  are  rendered  at  the  request  of  tlie  party  benefited  by 
them,  or  entitles  him  an  action  to  maintain  therefor.'  It  seems 
to  be  the  rule,  that  in  the  absence  of  any  provision  of  the  charter 
or  by-laws  for  the  compensation  of  directors  as  sucli,  the  law 
raises  no  implied  promise  to  pay  them  therefor,*  They  stand  in 
the  same  position  in  this  respect  as  trustees  at  connnon  law,  and 
must,  unless  the  charter  or  by-laws  provide  for  their  proper  com- 
pensation, see  to  it,  that  by  contracts,  their  compensation  is  pro- 
vided for,  or  they  can  recover  none.^  \jwt,for  the pei'formance 
of  duties  not  pertaining  to  the  office  of  director,  he  is  entitled  to 
recover  compensation  the  same  as  any  other  agent."     Thus,  where 


1  Loan  Association  v.  Stonemetz,  29 
Peun.  St.  584.  See,  also,  Barstow  v. 
City  l\.  Co.,  42  Cal.  405.  They  are  not 
entitled  to  compen.sation,  unless  some 
provision  is  made  therefor  in  the  con- 
stitution or  by-laws,  or  for  extra  ser- 
vices, unless  unquestionably  beyond 
the  range  of  hi.s  official  duties.  New 
York,  etc.,  R.  Co.  v.  Ketchum,  27 
Conu.  170.  See,  also,  where  there  was 
a  delay  in  claiming  for  extra  services, 
Iltica  Ins.  Co.  v.  Bloodgood,  4  Wend 
652. 

'^  Qridley  v.  Lafayette,  etc.,  R.  R.  Co., 
71111.200;  American,  etc.,  R.  R.  Co.  v. 
Miles,  52  id.  174  ;  Holder  v.  Lafayette 
R.  R.  Co.,  71  id.  105;  Manx  Ferry 
Gravel    Co.  v,    Branigan,  40  Ind.    o61. 

*  American,  etc.,  R.  R.  Co.  v.  Miles, 
52  111.  174. 

*  Gridle  v,  Lafayette,  etc  ,  R.  R.  Co., 
71111.206.  In  this  case  it  appeared, 
that  about  the  month  of  September, 
1867,  appellant  was  elected  president 
of  the  board  of  directors  of  the  defend- 
ant company,  and  served  in  that  capac- 
ity until  the  last  of  January,  1873. 
Neither  prior  to  his  election,  nor  at 
any  time  afterward,  did  the  board  of 
directors  prescribe,  by  resolution  or  by- 
law, what  sum,  if  any,  the  president 
should  receive  for  services  he  should 
render  ;  but  it  seems  to  have  been 
understood,  at  the  time  of  his  election, 
that  he  should  receive  a  fair  compensa- 
tion.    An  executive  committee  was  ap- 

33 


pointed,  with  power  to  manage  and 
direct  the  business  affairs  of  the  com- 
pany as  they  should  deem  best,  in  all 
cases  where  no  specific  directions 
should  be  given-by  the  board  of  di- 
rectors, and  to  take  a  general  super- 
vision of  the  finances  of  the  company  ; 
and  it  was  imposed  as  a  duty  of  the 
committee  to  examine,  and,  if  proper, 
to  audit  all  bills  and  accounts,  or 
vouchers  paid  or  to  be  paid  by  the 
treasurer,  and,  so  far  as  practicable, 
such  examination  was  required  to  be 
made  before  payment.  Appellant  was 
appointed  a  member  of  that  committee. 
He  was,  at  the  organization  of  the  com- 
pany, elected  a  director,  and  was  annu- 
ally re-elected  to  that  position,  as  well 
as  president,  and  continued  a  member 
of  the  executive  committee.  During 
the  time  appellant  was  president  and  a 
member  of  the  executive  committee,  he 
made  several  trips  to  Ohio,  and  went  to 
New  York,  for  the  purpose  of  con- 
tracting for  the  construction  of  the 
road,  and  aided  in  leasing  it  at  Toledo, 
under  which  lease  it  was  constructed. 
He  also  made  several  trips  in  other 
places  and  aided  in  procuring  local 
subscriptions,  by  carrying  elections  for 
the  purpose.  He  made  out  his  ac- 
count at  .$5,000,  which  was  audited  by 
the  executive  committee,  of  which  he 
was  a  member,  but  in  which  he  seems 
to  have  taken  no  part,  and  an  order  was 
passed  on  the  treasurer  for  that  sum. 


258 


Private  Corporations. 


a  director  of  a  railroad  company  was  ay>poiiited,  by  resolution,  an 
agent  to  obtain  subscriptions  of  stock,  to  procure  a  right  of  way, 
and  duties  outside  of  his  office  as  director,  it  was  held  that  he 
might  recover  a  i-easonable  compensation  therefor,  but  for  services 
rendered  by  him  as  a  member  of  an  executive  connnittee,  or  in  efforts 


and  a  warrant  of  attorney  was  given, 
and  a  judgment  was  afterward  con- 
fessed, but,  on  a  motion  made  by  the 
company,  it  was  set  aside,  and  the  cor- 
poration was  let  in  to  plead.  It  also 
appears,  that  at  the  time  the  road  was 
leased,  the  sum  of  $25,000  was  re- 
served and  set  apart  for  the  payment 
of  the  salaries  of  the  president,  treas- 
urer, secretary,  and  other  officers  of 
the  company. 

A  trial  was  had  by  the  court,  by  con- 
sent, without  the  intervention  of  a 
jury.  The  issues  were  found  for  plaint- 
iff and  his  damages  assessed  at  $3,000, 
and  a  j  udgmeut  rendered  for  that  sum. 
Both  parties  appeal  the  case  to  this 
court  and  assign  errors  on  the  record, 
and  the  two  cases  were  consolidated 
and  considered  as  one,  with  assignment 
of  cross  errors. 

Walker,  J.,  said  :  "  In  the  case  of 
Holder  v.  The  Lafayette,  Bloomington 
&  Mississippi  Railway  Co.,  71  111.  106, 
it  was  held,  upon  a  careful  examina- 
tion of  the  authorities,  that  the  direct- 
ors of  such  a  company,  having  the  con- 
trol of  its  finances  and  property,  were 
not  entitled  to  compensation  for  ser- 
vices pertaining  to  the  oifije,  unless 
the  salary  was  fixed  by  the  by-laws  or 
a  resolution  of  the  board  before  the 
services  were  performed  ;  that  in  such 
cases  the  directors  were  managers  or 
governors  of  the  aifairs  of  the  company 
and  occupied  the  position  of  trustees 
of  the  fund,  and  as  such  were  not, 
under  the  common  law,  entitled  to 
make  any  profit  or  derive  any  advan- 
tage from  the  position.  And  the  presi- 
dent, being  a  director  and  one  of  the 
managers  of  the  company,  and  when 
acting  as  president  only  aiding  the 
board,  of  which  he  is  the  head,  in 
executing  the  trust,  must,  for  the  same 
reason,  fall  within  and  be  governed  by 
the  same  rule.  * 

"  In  the  case  of  Kilpatrick  v.  The 
Penrose  Ferry  Co.,  49  Penn.  St.  121, 
which  is  must  like  this,  it  was  held, 
that  the  president  and  treasurer  could 


not  recover  on  the  quanhim  meruit. 
In  the  opinion,  the  court  said  :  '  Com- 
pensation of  corporate  otHcers  is  usual- 
ly fixed  by  a  by-law  or  resolution, 
either  of  the  directors  or  stockholders  ; 
but  where  no  salary  is  fixed  none  can 
be  recovered.  These  offices  are  usual- 
ly filled  by  the  chief  promoters  of  the 
corporation,  whose  interest  in  the  stock 
or  other  incidental  advantages  is  sup- 
posed to  be  a  motive  for  executing  the 
duties  of  the  office  without  compensa- 
tion, and  this  presumption  prevails 
until  overcome  by  express  pre-arrauge- 
ment  of  salary.'  And  The  Common- 
wealth V.  Crane,  6  Mete.  (Mass.)  64,  was 
referred  to,  and  it  was  held  the  rule 
was  just  as  applicable  to  the  president 
and  treasurer,  or  other  officers,  as  to 
directors.  And  it  was  further  said  : 
"  That  they  may  not  consume  what 
they  were  appointed  to  preserve  ;  their 
compensation  must  be  expressly  ap- 
pointed before  it  can  be  recovered  at 
law."  Th's,  and  the  authorities  re- 
ferred to  in  Holder  v.  The  Lafayette, 
Bloomington  &  Mississippi  Railway 
Co. ,st/prn,  establish  beyond  doubt  that 
the  president,  for  the  performance  of 
his  duties  as  Ruch,has  no  claim  for  com- 
pensation, as  it  was  not  fixed  before  he 
discharged  the  duties.  Nor  does  the 
fact  that  the  finance  committee  audited 
the  account  and  drew  an  order  for  its 
payment,  as  was  held  in  Duston  v. 
The  Imp'l  Gas  Co.,  3  B.  &  Aid.  125. 
bind  the  company,  as  it  was  illegal  to 
allow  the  claim. 

"It  has  been  held,  and  the  rule  is  rea- 
sonable, that  where  such  an  officer  per- 
forms extraordinary  duties  not  per- 
taining to  his  office,  he  may  recover  a 
reasonable  compensation.  Hall  v.  Vt. 
&  Mass.  R.  R.  Co.,  28  Vt.  401.  But 
the  evidence  shows  no  such  service 
performed.  Or,  had  the  president  or 
officers  expended  moneys  of  their  own 
while  discharging  the  duties  pertain- 
ing to  their  office,  there  can  be  no 
question  but  that  they  could  recover 
therefor." 


Directors.  259 

to  contract  for  tlie  construction  of  the  road,  including  time  and 
travel,  lie  cannot  recover."  But  it  seems  that  a  direct<jr  who 
serves  as  treasu7'er,  without  a  previous  vote  that  he  sliall  have 
compensation  therefor,  is  not  entitled  to  recover  for  such  service, 
even  though  there  was  an  understanding  with  the  other  directors 
that  he  should  ultimately  have  compensation  therefor,  because  the 
directors  have  no  power  to  fix  the  compensation  of  an  officer,  and 
also,  because  the  duties  of  treasurer,  when  so  held  by  a  director 
without  any  vote  fixing  compensation,  will  be  treated  as  incident 
to  his  duties  as  director.^  But  in  Minnesota'  it  is  held,  that  when 
a  director  renders  services  as  secretary  under  a  resolution  of 
appointment  which  does  not  specify  his  compensation,  he  is,  never- 
theless, entitled  to  recover  a  reasonable  compensation  therefor,  and 
this  certainly  seems  the  most  sensible  and  just  rule. 

It  was  held  in  Indiana,  that  where  no  provision  is  made  in  the 
organic  law  or  the  by-laws  of  the  corporation,  nor  any  special  con- 
tract made  relating  to  compensation  for  services,  none  could  be 
recovered  ;  and  that,  in  the  absence  of  any  such  provisions,  where 
the  board  of  directors  made  an  allowance  to  themselves  for  ser- 
vices, and  issued  orders  of  the  company  therefor,  these  were 
invalid."  And  where  a  board  of  directors,  in  addition  to  their 
fixed  salary,  voted  a  certain  compensation  for  all  special  services 
performed  by  any  director,  it  was  held  that  a  director  could  not 
recover  beyond  the  regular  salary,  provided  the  services  could 
have  been  performed  by  the  party  as  such  director.* 

Sec.  1G3.  Cannot  increase  their  own  compensation. — As  one  of  the 
relations  between  the  director  and  the  corporation,  as  we  have 
seen,  is  that  of  a  trustee  and  cestui  que  trust,  if  a  director  claims 
an  increase  of  compensation  beyond  that  provided  by  law,  he  is 
disqualified  from  acting  on  the  question,  and  if  he  is  necessary  to 

'  Cheney  v.    Lafayette,  etc.,    R.    R.  *  Hodges  v.  Rutland,  etc.,  R.  Co.,  29 

Co.,  68  111.  57.  Vt.  220.     See,  also,  New  York,  etc.,  K. 

■^  Holder  v.  Lafayette,  etc.,  R.  R.  Co.,  Co.  v.  Ketchum,  27  Conn.  170;  Henry 

ante.  v.  Rutland,  etc.,   R.  Co.,  27  Vt.   435; 

s  Rogers   v.    Hastings,  etc.,    R.    R.  Shakelford  v.   N.  0.  R.  Co.,   37  Miss. 

Co.,  22  Minn.  25.  202  ;   Hall  v.  Vermont,  etc.,  R.  Co.,  28 

•*  Maus   Ferry  Gravel  Road  Co.  v.  Vt.  401  ;   Loan  Association  v.   Stone. 

Branegan,  40  Ind.  361.     See,  al.'^o,  Hall  metz,  29  Penn.  St.  534. 
V.   Vermont,  etc.,  R.  Co.,   28  Vt.  401 ; 
Pierson  v.  Thompson,  1  Edw.  Ch.  212. 


260  Private  Corporations. 

constitute  II  quorum,  in  the  vote  on  such  claim,  the  acts  of  the 
board  so  constituted,  increasing  the  compensation,  would  be  in- 
valid, and  would  not  bind  the  corporation/ 

In  the  absence  of  provisions  in  the  charter  or  by-laws  of  the 
body,  or  any  regulation  thereof,  by  custom,  on  the  subject, 
directors  in  England,  it  appears,  are  not  entitled  to  recover  any 
compensation  for  services. 

It  has  been  held  in  Pennsylvania,  that  a  director  who 
was  elected  to  serve  without  compensation  cannot  recover  for 
such  services,  even  though  a  resolution  passed  by  the  corpora- 
tion, after  they  are  rendered,  provides  that  they  shall  be 
paid.°  The  reason  for  this  rule  is  two-fold, ^rs;^,  because  by  accept- 
ing the  olBce  without  any  promise  of  compensation,  and  occupying 
to  the  stockholder  and  the  creditors  of  the  company  the  position 
of  trustee,  he  cannot  be  permitted  to  im_pair  the  trust  property  as 
to  either,  without  the  consent  of  both,  by  taking  compensation  for 
his  own  benefit  and  second^  because  to  permit  him  to  use  his  position 
as  director  to  influence  the  stockholders  to  vote  him  compensa- 
tion for  services  gratuitously  rendered,  might  result  in  disastrous 
consequences,  not  only  to  the  corporation,  but  also  to  its  creditors. 
By  accepting  the  office  loithoiU  any  comjpensation  l>eing  fixed  or 
provided  for^  no  implied  promise  to  pay  can  be  raised,  and  any 

'  Butts  V.  Wood,  37  N.  Y.  317.  And  ing  a  corporation  before  its  existence, 
■where  a  director  of  a  railroad  corpo  the  policy  of  the  law  wholly  discoiin- 
ratioa  rendered  special  services  in  tenances  such  arrano:ements.  New 
procuring  subscriptions  to  the  stock  of  York,  etc.,  R.  Co.  v.  Ketchum.  27  Conn, 
the  company  in  its  organization,  which  170.  See,  also,  Branch  Bank  Ala.  v. 
services  were  rendered  by  him  in  ex-  Collins,  7  Ala.  (N.  S.)  95, 
pectation  of  a  compensation,  and  the  In  relation  to  the  compensation  of 
stockholders,  in  consideration  thereof,  municipal  officers,  Mr.  Dillon  observes: 
voted  him  a  free  pass  over  the  road  for  "  There  is  no  such  implied  obligation 
himself  and  family  during  his  life  ;  on  the  part  of  municipal  corporations, 
which,  although  an  inadequate  com-  and  no  such  relation  between  them 
pensatiou,  was  accepted  by  him  as  and  officers,  which  they  are  required 
such  ;  but  some  years  afterward  tiie  by  law  to  elect,  as  will  oblige  them  to 
stockholders  rescinded  the  vote,  and  make  compensation  to  such  officers, 
an  action  was  brought  by  the  company  unless  the  right  to  it  is  expressly  given 
to  recover  the  fares;  it  was  held  that  by  law."  Dill,  on  Mun.  Corp.,  §  169; 
the  services  rendered  created  no  in-  Sikes  v.  Hatfield,  13  Gray,  347;  Barton 
debtedness,  and  could  not  constitute  a  v.  New  Orleans,  16  La.  Ann.  317  ;  Gar- 
consideration  for  the  contract ;  that  it  nier  v.  St.  Louis,  37  Mo.  554  ;  Smith  v. 
would  have  made  no  difference  if  the  Commonwealth,  41  Penn.  St.  335  ;  De- 
services  had  been  rendered  upon  an  voy  v.  New  York,  39  Barb.  169  ;  Bladen 
express  understanding  with  his  asso-  v.  Philadelphia,  60  Penn.  St.  464;  Phila- 
ciates  that  he  was  to  be  paid  by  the  delphia  v.  Given,  id.  136. 
company  after  its  organization,  as  aside  '■'  Loan  Ass'n  v.  Stonemetz,  29  Penn. 
from  the  technical   difficulty  of  bind-  St.  534. 


Directors.  261 

compensation  subsequently  voted  is  a  naked  gratuity  not  based 
upon  any  legal  consideration.  The  Connecticut  case'  heretofore 
cited  is  illustrative  of  these  propositions.  In  that  case,  the  de- 
fendant, who  was  a  director  of  the  jjlaintiff,  had  rendered  valuable 
services  in  procuring  subscriptions  to  its  stock,  for  which  he  had 
never  been  paid  and  for  which  no  promise  to  ])ay  had  ever  been 
made.  In  April,  1847,  the  board  of  directors  ])a3sed  resolutions 
as  follows  : 

"  Resolved,  unanimously,  that  this  board  do  highly  appreciate 
the  zeal,  activity  and  perseverance  evinced  by  Morris  Ketchum, 
Esq.,  a  member  of  this  board,  in  his  efforts  to  secure  subscriptions 
to  the  capital  stock  of  this  company,  and  to  commend  the  project 
to  the  favorable  consideration  of  the  public,  and  that  to  his  ex- 
ertions we  are,  in  a  great  degree,  indebted  for  the  filling  up  of 
the  stock  and  securing  the  immediate  construction  of  the  road  at 
so  early  a  period. 

"  Resolved,  unanimously,  that  as  a  permanent  evidence  of  our 
estimate  of  the  services  of  Mr.  Ketchum,  and  as  a  consideration 
in  some  degree  therefor,  this  board  doth  hereby  assign  and  grant 
to  him  the  right  to  a  free  passage  in  the  cars  of  this  company  over 
its  road,  for  himself  and  family,  during  his  natural  life. 

"  Resolved,  that  the  secretary  be  directed  to  transmit  to  Morris 
Ketchum,  Esq.,  a  copy  of  the  foregoing  resolutions." 

A  copy  of  these  resolutions  was  soon  afterward  presented  to 
Mr.  Ketchum.  The  free  passage  was  not  granted  to  him  nor  re- 
ceived by  him  as  a  gratuity,  but  as  a  compensation,  to  some 
extent,  for  his  services.  Before  the  passage  of  the  resolutions, 
conversation  was  had  in  relation  to  the  subject  between  Mr. 
Ketchum  and  the  pi'esident  and  some  of  the  directors,  and  it  was 
expressly  understood  that  the  consideration  expressed  in  the 
resolutions  was  the  actual  consideration  upon  which  the  grant 
was  made,  and  that  the  services  of  Mr.  Ketchum  were  a  full  and 
adequate  consideration  for  the  right  and  privilege  granted.  After 
the  passage  of  the  resolutions,  and  in  consequence  thereof,  Mr. 
Ketchum  made  no  other  or  further  claim  against  the  company 
for  his  above-mentioned  services.  From  the  time  when  the  road 
went  in  operation   in  January,  1849,  Mr.  Ketchum  and  his  wife, 

'  New  York  &  New  Haven  R.  R.  Co.  v.  Ketcliuiu,  27  Coun.  170. 


262  Private  Corporations. 

children  and  servants,  were  accustomed  to  travel  upon  it  between 
Westport  and  New  Yoi'k,  whenever  they  chose  so  to  do,  without 
paying  fare,  claiming  a  right  so  to  do  by  virtue  of  the  resolutions 
above  set  forth.  This  was  done  with  the  knowledge  and  consent 
of  the  company  until  the  time  hereinafter  mentioned,  and  with- 
out any  demand  for  fare  by  the  company,  and  without  any  claim 
by  the  company  that  any  of  those  persons  were  liable  to  pay  any 
passage-money.  The  facts  above  stated  were  known  to  the  stock- 
holders, and  were  discussed  at  one  of  their  meetings  in  which  the 
president  explained  to  them  that  the  privilege  so  granted  to  Mr. 
Ketchum  and  his  family  had  been  given  by  way  of  compensation 
for  his  valuable  services,  yet  no  action  was  then  taken  in  refer- 
ence to  revoking  the  privilege.  No  further  action  was  taken 
upon  the  subject  until  the  10th  day  of  May,  1855,  when  a  meet- 
ing of  the  stockholders  passed  the  following  vote  :  — 

"  Whereas,  the  board  of  directors  of  tlie  New  York  and  New 
Haven  Railroad  Company,  at  some  time  prior  to  this  date,  granted 
to  Morris  Ketchum  and  family,  and  to  others,  the  right  to  pass 
and  repass  upon  the  road  of  said  company,  free  of  charge,  for  all 
time,  or  without  limit  —  now,  therefore,  Resolved,  that  the 
president  of  this  company  be  instructed  to  annul  all  such  grants, 
and  give  notice  to  all  persons  claiming  under  such  grants." 

The  fact  of  the  passage  of  this  resolution  was  not  communi- 
cated to  Mr.  Ketchum,  and  he  had  no  knowledge  of  it,  and  no 
action  was  taken  by  the  president  in  relation  to  it.  Mr.  Ketchum 
continued  to  enjoy  the  benefit  of  the  free  passage  as  before,  until 
after  the  18th  day  of  August,  1856,  on  which  day  the  board  of 
directors  passed  the  following  vote  :  — 

"  Resolved,  that  the  resolution  of  this  board,  passed  the  8th  day 
of  April,  1847,  granting  to  Morris  Ketchum,  Esq.,  the  right  to  a 
free  passage  in  the  cars  of  this  company  over  its  road  for  himself 
and  his  family  during  his  natural  life,  be,  and  the  same  is  hereby 
rescinded  and  annulled,  and  this  company  will  hereafter  exact  from 
the  said  Ketchum  and  from  the  members  of  his  family  the  usual 
and  ordinary  fares  for  passage  over  said  road." 

This  resolution  was  duly  communicated  to  Mr.  Ketchum,  with 
notice  that  it  would  be  enforced  against  him  from  and  after 
August   25,  1856.     From  and  after  that  day  until  the  date  of 


Directors. 


2G3 


the  commencement  of  this  suit,  February  5,  1857,  fare  was  de- 
manded by  the  company  from  Mr.  Ketchum  for  the  passages  of 
himself  and  family  and  servants  whenever  they  traveled  upon  the 
road,  but  payment  thereof  was  refused  under  tlie  claim  of  a  right 
to  pass  without  payment. 

It  was  claimed  by  the  plaintiff'  that  the  grant  of  the  free  pass 
for  himself  and  friends  was  not  a  gratuity,  but  was  in  considera- 


'  Ellsworth,  J.,  said  :  "  The  plaint- 
iffs say  in  the  first  place  in  support  of 
their  view,  that  the  defendant  has  at 
no  time  rendered  service  to  them,  but 
that  whatever  was  done  by  him  was 
done  in  behalf  of  three  or  four  indi- 
viduals, who,  together  with  himself, 
undertook  to  accomplish  certain  ends 
of  their  own,  before  the  plaintiSs  were 
a  c()r])oration,  and  for  which  the  com- 
pany was  not  liable,  and  in  fairness  to 
those  who  afterward  became  stock- 
holders ought  never  to  be  held  liable, 
either  with  or  without  a  vote  of  the 
directors.  They  say  secondly,  that  if 
it  be  otherwise,  and  the  services  were 
rendered  to  the  plaintiffs,  they  were 
not  performed  under  any  agreement 
or  uuderstanding  with  the  plaintiffs 
that  the  defendant  was  to  be  paid  for 
them  ;  and  that  he  was  a  mere  di- 
rector chosen  because  of  his  position, 
experience  and  financial  ability,  and 
especially  his  great  pecuniary  interest 
in  carrying  the  road  through,  and  in 
all  that  he  did  was  merely  acting  as 
such  director.  They  insist  that  he  did 
nothing  beyond  what  his  official  re- 
lation to  the  company  required  him  to 
do,  and  no  more  than  was  expected  of 
a  director.  They  say  thirdly,  that  di- 
rectors have  no  right  by  grants,  free 
tickets,  commissions  or  otherwise  to  re- 
munerate themselves  for  official  ser- 
vices. These  objections,  involving,  as 
they  do,  important  questions  of  a 
somewhat  general  nature,  cover  sub- 
stantially the  whole  ground  of  contro- 
versy, and,  if  sustained  by  the  facts  in 
the  case,  make  a  decisive  answer  to 
the  defendant's  claim.  Let  us  then 
look  at  the  facts. 

"  It  appears  that  from  the  13th  day 
of  August,  1844,  when  certain  persons 
attempted  to  form  a  company  under 
the  charter  granted  by  the  legislature, 
to  December,  184G,  when  the  stock 
was  really  taken  up  by  bona  fide. 
stockholders,    and  the  company   per- 


fected, the  corporation  was  in  an 
anomalous  and  inchoate  state.  Noth- 
ing had  been  done  that  was  binding 
upon  the  so-called  stockholders,  be- 
yond the  payment  of  one  dollar  per 
share.  The  proceedings,  thus  far, 
seem  to  us  to  be  open  to  very  serious 
objection  in  their  relation  to  the  exist- 
ence of  the  corporation,  if  the  legisla- 
ture had  seen  fit  to  interfere  in  that 
stage  of  the  affair  :  but  it  did  not  do 
so,  and  since  we  have  no  occasion  to 
inquire  into  the  validity  of  these  in- 
cipient proceedings,  we  shall  look  at 
them  only  in  their  relation  to  the 
other  objections  already  stated. 

"  The  service  for  which  it  is  claimed 
that  the  plaintiffs  were  liable  to  pay 
the  defendant  were  rendered  between 
the  first  of  October  and  the  last  of 
December,  1846,  at  a  time  before  the 
stock  was  taken  up  in  conformity  to 
the  charter,  and  before  the  company 
had  a  proper  existence.  Hence  it  is 
not  easy  to  see  how  they  Could  be 
rendered  for  or  at  the  request  of  the 
company  (or  rather  perhaps  the  first 
bona  fide  stockholders,  for  they  must 
be  looked  at  as  the  company),  and 
if  they  were  not  so  rendered,  then 
how  the  company  could  be  liable  for 
them,  upon  any  known  principle  of 
law.  We  are  aware  that  it  is  no  un- 
common practice  for  corporations  to 
assume  and  pay  these  preliminary 
and  antecedent  charges,  after  the 
company  has  become  organized,  but 
we  do  not  see  how  the  company,  if  it 
should  object,  could  be  compelled  to 
pay  them,  and  in  some  cases  it  would 
be  most  inequitable  to  require  it.  Can 
a  few  persons  combine  for  their  own 
interest  to  get  up  a  railroad  —  agree 
with  one  of  their  number  to  give  him 
a  large  commission  or  bonus  for  every 
stockholder  he  can  allure  into  the 
company,  and  privately  make  this 
commission  or  bonus  a  cliarge  on  the 
corporation  when  formed  V  This  would 


264: 


Private  Cokporations. 


tion  of  the  services  rendered  by  liiin  for  the  company  to  an 
amount  niiicli  greater  than  tlie  nature  of  tlic  thing  granted,  but 
the  court  held  that  tlie  grant  of  the  pass  was  a  mere  gratuity,  be- 


be  a  breach  of  faith  toward  honest 
and  unsuspecting  stockholders  who 
pay  tlie  charter-price  for  their  stock, 
and  expect  to  take  it  clear  of  all 
incumbrance.  The  effect  would  be  the 
same  as  if  commissioners  should 
enter  into  a  private  bargain  with  sub- 
scribers, to  let  them  subscribe  on 
terms  which  the  charter  does  not 
allow.  The  getters- up  of  projects 
to  be  carried  by  such  means  may 
well  be  supposed,  as  is  generally  the 
fact,  to  be  influenced  by  a  view  to 
their  own  special  benefit,  for  certainly 
they  do  not  act  in  behalf  of  the  corpo- 
ration itself.  We  do  not  say  that  the 
present  is  such  a  case,  but  such  is  the 
natural  consequence  of  the  doctrine 
claimed  by  the  defendant's  counsel, 
and  we  cannot  give  it  our  approval 
or  countenance.  It  is  soon  enough 
for  corporate  bodies  to  enter  into  con- 
tracts incumbering  their  property, 
when  they  are  duly  organized  accord- 
ing to  their  charters  and  have  their 
chosen  and  impartial  directors  to  con- 
duct their  business.  If  a  vote  was 
necessary  in  this  case  to  make  these 
charges  a  debt  against  the  company, 
the  grant  for  that  very  reason  cannot 
stand,  for  the  directors  had  no  power 
to  assume  or  to  create  such  a  debt  for 
such  a  service. 

"  But  the  next  objection  is  still  more 
decisive.  As  we  have  said,  the  ser- 
vices of  the  defendant  were  rendered 
between  the  first  of  April  and  last  of 
December,  while  he  was  a  director, 
and  exerting  himself,  together  with 
others,  to  get  the  company  into  being. 
In  what  exactly  his  services  consisted 
beyond  his  advice  and  personal  efforts 
to  induce  gentlemen  to  take  stock  in 
the  company  does  not  appear.  We 
see  nothing  of  time  spent,  money 
expended  or  travel  or  other  labor,  ex- 
cept what  may  be  implied  from  the 
fact  that  Mr.  Ketchum  "  was  a 
banker,  and  particularly  accustomed 
to  financi.il  and  railroad  operations, 
and  had  an  extensive  and  personal  ac- 
quaintance and  much  influence  with 
business  and  moneyed  men,"  and  his 
having  received  from  one  of  his  associ- 
ates, then  acting  as  president  of  the 
association,  a  blank  subscription  list, 


accompanied  with  a  request  that  he 
would  get  subscribers,  which  he 
promised  to  do,  and  accordingly  made 
application  to  per.sons  and  firms,  and 
got  subscribers  to  the  amount  of  nine 
thousand  four  bundled  and  eighty 
shares,  which,  as  the  report  says, 
were  obtained  "  with  difficulty  and 
only  on  personal  application."  Noth- 
ing, however,  was  said  in  the  inter- 
view with  his  associates,  so  far  as  ap- 
pears, as  to  this  service  being  con- 
sidered or  treated  as  extra  labor,  or  as 
entitling  him  to  a  commission  or  re- 
ward ;  not  a  word  appears  to  have 
been  said  about  compensation,  nor 
does  it  appear  that  it  was  so  much  as 
alluded  to  ;  still  it  is  found  that  Mr. 
Ketchum,  himself,  did  not  suppose 
the  services  were  to  be  gratuituous. 
We  suppose  it  may  be  so,  but  even  he 
himself  does  not  state  in  what  man- 
ner he  expected  to  be  compensated. 
Doubtless  a  director  may  perform  ex- 
tra labor,  and  for  it  be  justly  entitled 
to  a  compensation  for  his  time  and 
expenses,  and  this  may  be  made  out 
even  without  an  express  promise,  for  a 
promise  may  be  implied  from  the 
peculiar  and  extraordinary  services 
rendered,  but  then  the  services  must 
appear  to  be  of  an  extraordinary 
character,  and  this  beyond  all  ques- 
tion or  doubt,  for,  as  director,  he 
agrees  to  give  his  services,  and  is 
entitled  to  make  no  charges,  what- 
ever, however  severe  and  protracted 
may  be  his  labors.  A  different  rule 
would  lead  to  great  abuses  and  cor- 
ruption. We  cannot  but  think  it  im- 
portant in  every  case  that  where  a  per- 
son, holding  the  position  of  a  director, 
expects,  or  may  be  fairly  entitled  to 
expect  a  compensation  for  his  services, 
the  services  should  appear  to  have 
been  agreed  for,  or  their  nature  and 
extent  should  appear  to  be  such  as 
clearly  to  imply  that  both  parties  un- 
derstood they  were  to  be  paid  for,  and 
not  rendered  gratuitously  within  the 
scope  of  a  director's  duty. 

"Mr.  Ketchum,  so  long  as  he  re- 
mained a  director,  was  bound,  in  good 
faith,  to  make  a  proper  use  of  his  in- 
fluence to  induce  persons  to  take  stock 
in  the  company,  if  thereby  he  could 


DiEECTOKS. 


265 


cause  the  defendant  had  rendered  no  services  for  wliich  lie  was 
entitled  to  be  paid.  Ellsworth,  J.,  in  passing  npon  this  question, 
gave  expression  to  the  true  rule  in  such  cases,  as  stated  in  his 
opinion  given  in  the  preceding  note. 


fairly  promote  the  interests  of  the 
company.  He  was  chosen  a  director 
because  of  his  ability,  at  the  outset  of 
this  enterprise.  Why  did  his  asso- 
ciates select  a  man  of  his  character 
and  experience,  but  tliat  he  mipfht 
bring  tliese  capabilities  into  the  dis- 
charge of  his  duties  to  the  company. 
If  Mr.  Ketchum  thought  his  aid  and 
co-operation  were  too  chea]ily  pur- 
chased by  the  incidental  advantages 
which  he  expected  to  receive  by  carry- 
ing this  road  through,  he  should  have 
said  so,  and  then  he  might  or  miglit 
not  have  been  chosen  a  director.  Un- 
doubtedly the  other  directors  did 
what  they  could,  and  whether  it  was 
more,  or  less,  than  Mr.  Ketchum  did, 
does  not  appear.  They  did  what  they 
could,  and  we  see  no  evidence  that 
any  of  them  ag-reed  for,  or  was  to  re- 
ceive compensation  from  the  com- 
pany, when  organized.  All  expected 
to  be  benefited  in  some  way,  and  we 
cannot  doubt  that  their  expectations 
were  realized.  One  became  president. 
another  was  contractor  and  built  the 
road,  another  the  financier,  and  an- 
other perhaps  had  real  estate  on  the 
proposed  line  of  the  road,  the  value  of 
which  would  be  enhanced.  They  all 
had  their  several  objects  and  ends, 
and  probably  secured  them,  and  so  far 
as  this  was  properly  done,  the  com 
pany  cannot  complain,  but  then  such 
services,  unaccompanied  with  a  special 
contract,  fall  quite  short  of  creating 
an  indebtedness  against  the  corpora- 
tion 

'■  The  third  objection,  viz.,  that  di- 
rectors have  no  right  to  charge  for 
performing  official  duty  is  a  principle 
universally  admitted  to  be  sound  law. 
We  find  it  so  laid  down  in  the  ele- 
mentary books,  and  in  several  decided 
cases,  and  the  reasons  assigned  most 
forcit)ly  commend  themselves  to  our 
approbation.  In  Collins  v.  Godfrey, 
1  B.  &  Aid.  950,  a  director  of  a  bank 
was  prevented  from  receiving  a  re- 
ward offered  by  the  bank  for  the 
recovery  of  stolen  property,  because 
he  performed  nothing  but  his  duty  in 

34 


endeavoring  to  recover  it.  In  Dunstan 
V.  Imperial  Gas-light  Co.,  3  B. 
&  Aid.  12-'5,  a  resolution  formally 
adopted,  allowing  the  directors  certain 
compensation  for  attendance  on  courts, 
etc.,  was  held  insufficient  to  give  a 
director  a  right  to  recover  for  such 
services.  The  same  doctrine  is  held 
in  the  case  of  Loan  Association  v. 
Stonemetz,  29  Penn.  St.  534.  There 
a  vote  was  passed  by  the  directors  to 
pay  the  chairman  of  a  committee  on 
short  loans  $200  for  his  services  al- 
ready rendered,  but  the  court  held 
that  it  created  no  debt,  it  being  in 
favor  of  a  director  for  services  ren- 
dered by  him  in  his  official  capacity. 
The  court  say :  '  Although  the  di- 
rector performed  the  work  faithfully, 
his  laliors  fell  within  the  limit  of  his 
duty  as  a  director,  and  the  fact  that 
he  performed  them  with  an  exuber- 
ance of  good  faith  imposed  upon  the 
corporation  no  moral  duty  to  pay  for 
them.  The  legal  obligation  was  as 
defective  as  the  moral.  When  the 
resolution  was  passed  the  considera- 
tion had  been  executed,  for  the  ser- 
vices compensated  by  this  verdict  had 
been  previously  rendered,  and  there  is 
no  proof  of  a  precedent  or  contempo- 
raneous request.  It  is  quite  true  that 
they  were  beneficial  to  the  defendant, 
and  a  request  might,  in  the  liberal 
spirit  of  modern  decisions,  be  implied, 
but  in  the  instance  of  gratuitous  ser- 
vices performed  by  a  party  in  the  line 
of  his  legal  duty,  there  is  no  case 
which  authorizes  such  an  inference. 
Our  decision  must  be  placed  on  yet 
higher  ground.  We  regard  it  as  con- 
trary to  all  sound  policy  to  allow  the 
director  of  a  corporation,  elected  to 
serve  without  compensation,  to  re- 
cover payment  for  services  performed 
by  him  in  that  capacity,  or  as  inci- 
dental to  his  office.  It  would  be  a  sad 
spectacle  to  see  the  managers  of 
any  corporation  *  *  assembling  to- 
gether, and  parceling  out,  among 
themselves,  the  obligations,  or  other 
property  of  the  corporation  in  pay- 
ment of  past  services.'  " 


266  Private  Corporations. 

Sec.  161.  Directors'  meetings.—  A  formal  meeting  of  the  direct- 
ors is  not  necessary  to  enable  them  to  transact  any  business 
or  do  any  act  which  is  within  their  coi'porate  powers.^  It  is 
sufficient  if  the  prescribed  quorum  is  present,  whetlier  there 
has  been  any  call  for  the  meeting  or  not,  although  it  is  essen- 
tial that  a  majority  of  the  board  be  present  and  that  they 
act  together  as  a  board."  The  directors  are  not  the  corpora- 
tion, but  simply  the  officers  and  agents  thereof,  consequently  the 
place  of  their  meeting  is  not  material,  and  may  be  held  out  of  the 
state,  as  well  as  in  it/  But,  where  the  action  of  the  directors 
as  a  board  is  required,  notice  of  a  time  and  place  for  the  meeting 
should  be  given,  and  simply  obtaining  the  assent  of  a  majority 
of  the  directors  to  an  act,  separately  and  at  separate  interviews,  as 
to  a  matter  which  calls  for  its  action  as  a  board,  is  insufficient.* 
But  it  seems  that  it  is  sufficient  presumptive  proof  for  a  stranger, 
of  the  concurrence  of  the  board  of  directors,  to  show  that  they 
assented  separately.^ 

^  Waite  V.  Windham  County  Mining  ^  Arms  v.  Conant,  36  Vt.  744  ;  Ohio, 

Co..  86  Vt.  18.  etc.,  R.  R.Co.  v.  McPherson,  3o  Mo.  13; 

•^  D'Arcy  v.  Tamar,  etc.,  Railway  Co.,  Bellows  v.  Todd,  39  Iowa,  209. 

L.  R.,  2   Exch.    158;  Cram  v.  Bangor  *  D'Arcy  v.  Tamar,  etc.,  Railway  Co., 

House  Proprietary,   12  Me.  354;   Buell  ante;  Barcu.s v.  Hannibal,  etc.,  Plank- 

V.  Buckingham,   16  Iowa,  284.     Ami-  road   Co.,  26  Mo.  102;  Wells  v.  Rah- 

nority  of  a  board   cannot  adjourn  the  way  Rubber  Co.,  19  N,  J.  Eq.  402. 

meeting   to   a  place  fifty  miles  away.  »  Tenney   v.   East  Warren   Lumber 

State  V.  Smith,  48  Vt.  266.  Co.,  43  N.  H.  343. 


Officers  and  Agents  Generally.  207 

CHAPTER  YII. 

OFFICERS   AND   AGENTS   GENERAIiLV. 

Sec.  165.  Necessity  for  corporate  agents. 

Sec.  166.  General  limitations  on  the  authority  of  agents. 

Sec.  167.  Directors  as  agents. 

Sec.  168.  Appointment  of  agents,  use  of  seal,  etc. 

Sec.  169.  What  is  within  the  scope  of  the  agent's  authority. 

Sec.  170.  Powers  implied  by  virtue  of  an  office. 

Sec.  171.  Powers  of  president. 

Sec.  172.  Autliority  by  usage. 

Sec.  173.  Apparent  authority. 

Sec.  174.  Distinction  between  executed  and  unexecuted  contracts,  where 

the  agent  exceeds  his  authority. 

Sec.  175.  Limitations  of  power  as  to  time. 

Sec.  176.  Mode  of  executing  contracts  by  agents. 

Sec.  177.  How  contracts  by,  should  be  executed. 

Sec.  178.  Id. 

Sec.  179.  TTltra  vires  contracts  by  agents. 

Sec.  180.  Same  continued. 

Sec.  181.  Parties  dealing  with  an  agent  must  take  notice  of  his  authority. 

Sec.  183.  Same  continued. 

Sec.  183.  Delegation  of  authority  by  agents. 

Sec.  184.  Powers  expressly  conferred. 

Sec.  185.  Ratification  of  acts  of  agents. 

Sec.  186.  The  doctrine  of  ratification  applicable  to  corporations. 

Sec.  187.  Same  continued. 

Sec.  188.  Personal  liability  of  agents. 

Sec.  189.  Forms  of  executing  power  by  agents. 

Sec.  190.  When  agent  personally  bound. 

Sec.  191.  Where  there  is  no  principal. 

Sec.  193.  Liability  of  agent  in  case  of  misrepresentation  of  his  authority. 

Sec.  193.  Matters  of  which  parties  dealing  with  agents  are  bound  to  take 

notice. 

Sec  194.  Same  continued. 

Sec.  195.  Liability  of  agents  for  violation  of  duties. 

Sec.  196.  Compensation  of  officers  and  agents. 

Sec.  197.  Frauds  of  officers  and  agents. 

Sec.  198.  Proof  of  agency. 

Sec.  165.   Necessity  for  corporate  agents The    principal   part   of 

the  general  business  of  a  corporation  must  necessarily  be  per- 
formed by  agents.     All  of  its  officers,  as  respects  such  corpora- 


268  Private  Coeporations. 

tion,  are  agents.  In  fact,  no  act  can  be  directly  done  by  snch 
corporation,  except  throngli  the  voice  or  vote  of  its  members, 
who,  in  this  respect,  by  a  fiction  of  the  law,  are  snpposed  to  rep- 
resent the  ideal  and  fictitious  corporate  body,  of  which  they  are 
members.  They  may  act,  by  a  majority,  as  the  act  of  the  corjDO- 
ration ;  but  all  other  acts,  by  or  on  behalf  of  the  corporation, 
must  be  performed  by  agents.  The  importance  of  the  law  of 
agency  in  connection  with  corporations  will,  therefore,  be  mani- 
fest. The  general  law  of  agency  as  applicable  to  the  relations 
between  the  corporation  and  its  agents  is  of  greater  importance 
than  where  mere  private  or  natural  persons  only  are  concerned. 
For  corporations  must  necessarily  employ  tliein.  They  have  no 
other  alternative.  Each  officer,  including  the  directors,  managers 
or  trustees,  are  agents  of  the  corporation ;  besides,  it  is  usually 
necessary,  in  carrying  on  the  objects  of  private  corporations,  to 
employ  agents  for  special  purposes.  In -all  acts  of  the  corpora- 
tion, by  or  through  agents,  the  general  doctrine  applies  that  what 
one  does  by  the  agency  of  another,  he  does  himself,  the  familiar 
maxim  being,  (pd  facit 2)er  alium,facitper  se. 

Sec.  166.  General  limitations  on  the  authority  of  agents.  —  It  may 
be  further  observed  that  the  authority  of  corporate  agents  can 
never  exceed  the  rights,  powers  and  authority  of  the  principal, 
and  is  usually  less.  It  is  seldom  that  all  the  powers  of  the  corpo- 
ration are  vested  in  the  board  of  directors,  although  they  are 
usually  the  highest  and  most  important  officers  and  agents  of  a 
corporation.  The  powers  and  authority  of  officers  and  agents 
may  be,  and  with  the  more  important  of  them,  usually  are, 
limited  by  either  the  fundamental  law  or  the  by-laws  of  the 
organization.  But  the  authority  of  minor  and  inferior  agents 
is  usually  prescribed  and  limited  by  acts  and  resolutions  of  the 
corporation,  or  the  immediate,  and  for  most  purposes  general 
agents,  the  board  of  directors,  whose  powers  in  this  respect,  as 
well  as  others,  may,  as  we  have  seen,  be  also  Kmited  by  its  organic 
or  constating  laws. 

Sec.  167.  Directors  as  agents.  —  We  have  already  considered  the 
agency  of  directors  in  treating  of  those  officers.'     They  are  the 

'  See  chap.  6,  ante. 


Officers  and  Agents  Generally.  269 

most  important  of  corporate  agents,  sis  on  tliem  usually  devolve 
the  manaivement  of  all  the  affairs  of  the  corporation.  In  view 
of  the  usual  powers  conferred  upon  them,  ihej  may  almost  be 
said  to  be  the  corporation,  the  reserved  powers  of  the  corpo- 
ration in  a  majority  of  cases  being  the  mere  right  to  annually  ex- 
press, through  the  members  at  large,  the  corporate  will  as  to  the 
policy  and  management  of  the  corporate  affairs  by  an  election  of 
such  directors  or  managers  as  will  execute  such  will.  If  the  di- 
rectors do  not  manage  the  affairs  of  the  corporation  intrusted  to 
them  with  prudence  or  discretion  in  the  opinion  of  the  majority 
of  the  members  representing  a  majority  of  the  shares  of  stock, 
such  members  may  replace  them  with  others,  at  any  meeting  of 
the  corporate  body  for  such  an  election,  provision  for  which  is 
usually  made  in  the  fundamental  law  of  the  corporation ;  and 
thereby  the  corporate  will,  in  these  respects,  in  theory  at  least, 
may  be  executed. 

Sec.  168.  Appointment  of  agents,  use  of  seal,  etc.  —  The  USe  of  the 
seal  for  the  appointment  of  many,  if  not  most,  of  corporate 
agents,  as  well  as  in  the  making  of  most  of  the  various  contracts, 
required  in  the  execution  of  the  powers  and  objects  of  coi*pora- 
tions  created  for  various  purposes,  has,  in  modern  times,  been 
practically  abandoned.  It  is  no  longer  regarded  as  the  corporate 
voice,  or  as  an  important  evidence  of  corporate  assent.^  In  fact 
the  practice  of  using  the  seal  has  been  almost  abandoned.     The 

'  The  strict  rule  of  the  ancient  Eng--  ter  Works  Co.  v.  Bailey,  4  Bing'.  283; 

lish  law,  requiring  acts  of  a  corpora-  Edwards  v.  Grand  Junction  Canal  Co., 

tiou  to  be  done  by  a  sealed  instrument,  1    Mylne  &  C.   659,672;     Murray  v. 

was  very   early  relaxed  as  respected  East  India  Co.,  5  B.  &  Aid.  204;  Ar- 

the  appointment  of  corporate  agents,  nold  v.  Mayor  of  Poole,  4  Mann.  &  Q. 

so  far  as  to  permit  an  agent  to  be  ap-  893;    Smith    v.  Cartwright,    6  Exch. 

pointed  without  deed,  in  cases  where  927  ;    6  Eng.  L.  &   Eq.  528.     For  the 

the  service  was  unimportant  or  ordi-  early  rules  relative  to  the  mode  of  ap- 

nary,   where  haste  was  required,  etc.,  pointing    an    agent    to    demand  rent 

though  it  has   been  more  strictly  re-  for  a  corporation,  and  to  distress  for 

tained  where  the  agency  affected  real  non-payment,  see   Knap   v.  Jewelch, 

property  interests  or  matters  of  an  im-  1  Brownl.  138;    case    of  Master,  etc., 

portant  character.      Qn  the  history  of  of  Emanuel  College,  2  id.  175  ;    Year 

the  modern  relaxation  of  this  rule  in  B.  1  Edw.  5    fol.  5,  pi.  10  ;  id. ,  2  Eich. 

England,  consult  Horn  v.  Ivy,  1  Ventr.  3,  fol.  7,  pi  13  ;  7  Hen.  7,  fol.  10,  pi.  2. 
47;  Cary  v.   Matthews,   1  Salk.    191;         Bank  of  England  may  authorize  a 

Wilmot  V.  Mayor,  etc. ,  of  Coventrv,  1  person  to  sisfn  notes,  by  mere   vote. 

Y.  &  C.  518  ;    bumpor   v.  Syms,  Cro.  See  Rex  v.  Bigg,  1  Strange,  18. 
Eliz.  815;    Cooper   v.    Gooderich,  id.  Where  the  act  of  incorporation  em- 

862;  BailifiFs,  etc.,  of  Ipswich  v.  Mar-  powers  the  directors   to   appoint  and 

tin,   Cro.  Jac.  411  ;    Erneley  v.    Wal-  displace    any   of    the    othcers    of    the 

roud,  Dyer,  102  &;  East  London  Wa-  company,  the  appointment  of  an  at- 


270  Private  Corporations. 

record  of  the  corporate  will,  either  as  expressed  by  tlic  majority 
of  its  members  in  attendance  at  a  corporate  meetini^,  or  by  the 
majority  of  tlie  directors  at  a  meetin<^^  duly  called,  is  the  highest 
and  best  evidence,  and  agents  for  any  and  all  purposes  may  be 
thus  a{)pointed  and  constituted,  without  any  other  written  au- 
thority", or  any  authentication  thereof  by  the  corporate  seaL  The 
technical  doctrine  that  a  corporation  could  not  contract  except 
under  its  seal,  or  in  other  words,  could  not  make  a  promise,  if  it 
ever  had  been  fully  settled,  must  have  been  productive  of  great 
mischiefs.  Indeed,  as  soon  as  the  doctrine  was  established  that 
its  regularly  appointed  agents  could  contract  in  their  name  with- 
out seal,  it  was  impossible  to  support  it ;  for,  otherwise,  the  party 
who  trusted  such  contract  would  be  without  remedy  against  the 
corporation.  Accordingly,  it  would  seem  to  be  a  sound  rule  of 
law,  that  wherever  a  coF];>oration  is  acting  within  the  legitimate 
purposes  of  its  institution,  all  parol  contracts  made  by  the  au- 
thorized agents  are  express  promises  of  the  corporation  ;  and  all 
duties  imposed  on  them  by  law,  and  all  benefits  conferred  at  their 
request,  raise  implied  promises  for  the  enforcement  of  which  an 
action  will  lie."  * 

The  doctrine  that  every  thing,  or  that  even  important  acts 
must  be  done  by  deed  under  the  corporate  seal,  cannot  be  now 
supported.  On  the  contrary,  it  is  well  established  that  an  agent 
may  be  appointed  merely  by  a  vote  of  the  corporation,  or  of  the 
boards  of  directors,  and  that  his  acts,  within  the  scope  of  his 
authority  thus  conferred,  and  within  the  powers  of  the  corjDora- 
tion,  will  bind  the  corporation.'^ 

torney   to  the  company   need  not  be  v.    Patterson,     7     Cranch,   299,  but, 

under  seal.     See  Reg  v.  Cumberland,  also,  that  they   may  be  appointed  by 

5  Dowl    &  L.  481.  parol.     City    of  Detroit  v.  Jackson,  1 

In  this  country,  it  is  not  only  well  Mich.  106  ;    Nicholas  v.  Oliver,  86  N. 

established   that  the  corporate  seal  is  H.  218  ;    Randall  v.  Van  Vechten,    19 

not  necessary  to  indicate  the  appoint-  Johns.  60. 
ment  of  an  agent,  Bank  of    Columbia 

'  Bank  of  Columbia  v.  Patterson,  7  Kitchen   v.   Cape  Girardeau,   etc.,  R. 

Cranch,  299  ;  Gray  v.  Portland  Bank,  Co.,  59  Mo.  514.   See,  as  to  admissions 

3  Mass.  3(14  ;  Worcester  T.  Co.  v.  Wil-  of  superintendent  of  a  street  railway, 

lard,  5  id.  80  ;    Gilmore    v.   Pope,   id.  justifying   an    assault  by  one   of    its 

491  ;     Bank   of     Metropolis   v.    Gutt-  drivers,  Malecek  v.  Tower  Grove  R. 

schlick,  14  Pet.  19.  A  corporation  may  Co.,  57  Mo.  17. 

employ  an  agent  to  perform  services  ^  The  Bank  of  United  States  v.  Dan- 
consonant  with  its  general  design,  dridge,  12  Wheat.  64  ;  Green's  Brice's 
without  any  specific  authority  for  that  Ultra  Vires,  356  et  seq.,  and  notes; 
purpose    conferred    by    the    charter,  Chesapeake,   etc.,  Can.  Co.  v.  Knapp, 


Officers  and  Agents  Generally.  271 

Sec.  169.  what  is  within  the  scope  of  the  agent's  authority. — 
Among  the  most  difficult  questions  in  tlie  law  of  agency  is  the 
one  which  involves  the  question,  whether  the  acts  of  an  agent  are 
within  the  scope  of  his  authority.'  The  determination  of  this  ques- 
tion frequently  involves  a  consideration  of  the  objects  and  pur- 
poses of  the  corporation  ;  a  construction  of  the  fundamental  laws 
of  its  being;  a  consideration  of  tlie  customs  in  different  countries 
and  states  in  reference  to  the  general  powers  and  duties  of  various 
officers  and  agents;  the  general  statutory  provisions  relating  to 
it ;  and  tlie  general  customs  of  the  corporation,  and  of  the  com- 
munity where  it  is  established  or  does  business.  Authority  con- 
ferred upon  an  agent  may  be  general  or  special,  and  the  former 
may  be  general,  but  limited  to  a  particular  matter.  But  whether 
general  or  special,  and  whether  conferred  orally  or  by  writing, 
and  authenticated  with  the  corporate  seal,  the  authority  conferred 
is  always  held  to  confer  the  usual  means  of  accomplishing  the 
object.  Thus  if  a  general  authority  is  given  to  collect,  receive, 
and  pay  all  the  debts  due  by,  or  to,  the  principal,  it  will  occur  to 
every  one,  who  reflects  upon  the  nature  of  such  a  trust,  that  num- 
berless arrangements  may  be  required  fully  to  accomplish  the  end 
proposed  ;  such  as  settling  accounts,  adjusting  disputed  claims, 
resisting  unjust  claims,  answering  or  defending  suits ;  and  these 
subordinate  powers  (or  as  they  are  sometimes  called  mediate 
powers)  are,  therefore,  although  not  expressly  given,  understood 
to  be  included  in,  and  a  part  of,  or  incident  to,  the  primary  power.' 
In  accordance  with  this  doetrine  it  has  been  held  that  authority 
to  procure  a  note  to  be  discounted,  implied  an  authority  to  indorse 

9  Pet.  541  ,    Randall    v.  Van  Vecliten,  1  H.  &  G.424;  Lejrrand   v.  Hampden- 

19  Johns.  65  ;  Baptist  Church  v.  Mul-  Siduev   College,    5  Munf.  3'24  ;    Bates 

ford,  8  Halst.  182  ;  Perkins   v.  Wash-  v.    Ba'nk    of     Alabama,    2    Ala.    461  ; 

iugton   Ins.  Co.,  4  Cow.  645  ;    Lathrop  Stamford  Bank   v.  Benedict,   15  Coun. 

V.  Bank  of  Scioto,  8  Dana,  115;  Sav-  445;     City    of    Detroit    v.    Jackson,  1 

ings    Bank    v.    Davis,    8    Conn.    191 ;  Doug.  (Mich.)  106 ;    St.  Andrew's  Bay 

Union  Bank  of  Maryland  v.  Ridgeley,  Land  Co.  v.  Mitchell,  4  Fla.  193. 

'  Blanchard  v.  Blackstone.  102  Mass.  Lead.  Cas.  603  ;  Mott  v.  Hicks,  1  Cow. 

343  ;  Mechanics'  Bank  v.  Bank  of  Col-  513. 

umbia,  5  Wheat.  33i)  ;  Hopkins  v.  Me-  '^  Howard  v.   Baillie,  2   H.    Bl.    618; 

hafly,  11  S.  &  R.  126  ;  Regents,  etc.,  v.  Withington  v.  Herring,  5  Bing.  443  ;  3 

Detroit,  etc.,  13  Mich.  138  ;   Sweetzer  Bell's  Com.  387,  art.  412  (4th  ed.);  Kog- 

V.  Mead,  5  id  107  ;  Bank  of  Metropolis  ers  v.  Kneeland,  10  Wend.  318;  Peck  v. 

V.   Guttschlick,  14   Pet.   19  ;  Story   on  Harriott,   G    S.   &   R.  146  ;    Sprague  v. 

Agency,  §§  154,  260,  266,  277  ;  Bank  of  Giliett,  9  Mete.  91 ;  Fowler  v.  Bledsoe, 

Columbia  v.  Patterson,  7  Cranch,  399 ;  8  Humph,  509. 

yon  V.  Adamson,  7  Iowa,   509;    Am.  , 


272  PltlVATE  CORPOBATIONS. 

it  in  the  name  of  the  princijDal  and  bind  him  Ijj  siicli  indorsement, 
as  sncli  a  course  would  ordinarily  be  necessary  in  order  to  accom- 
plish the  purposes  desired.' 

So  an  authority  to  adjust  a  loss  on  a  policy  has  been  held  to 
confer  the  power  to  submit  the  matter  to  arbitration ; '  an  au- 
thority to  sell  lands  includes  an  authority  to  receive  the  purchase- 
money;"  an  authority  to  purchase  grain  includes  the  right  to 
waive  or  modify  a  contract  made  in  reference  to  grain  ;  *  an  au- 
thority to  sell  a  horse  carries,  by  implication,  the  authority  to  war- 
rant, unless  restricted  in  this  respect.^  And  it  is  also  held  that 
the  authority  includes  all  the  various  means  which,  under  the  cir- 
cumstances of  the  case,  are  allowed  by  the  custom  or  the  usages 
of  trade.  Thus,  if  an  agent  is  authorized  to  sell  goods,  this  will 
be  construed  to  authorize  the  sale  to  be  made  upon  credit,  as  well 
as  for  cash,  if  this  course  is  justified  by  the  usages  of  trade,  and 
the  credit  is  not  beyond  the  usual  period ;  for  it  is  presumed  that 
the  principal  intends  to  clothe  his  agent  with  the  power  of  resort- 
ing to  all  the  customary  means  to  accomplish  the  sale,  unless  he 
expressly  restricts  him.®  And  where  a  municipal  corporation 
clothed  its  agents  with  full  power  and  authority  to  make  a  con- 
tract, wliich  was  made  accordingly,  it  was  held  binding  upon  the 
corporation,  though  there  was  no  formal  acceptance  of  the  same 
by  vote,  and  even  where  it  was  afterward  rejected  by  the  corpora- 
tion,'' 

Sec.  170.  Powers  implied  by  virtue  of  office.  —  An  ofiicer  of  a 
corporation  has  usually,  by  virtue  of  his  ofiice,  the  authority,  in 
the  absence  of  express  provisions  conferring  it  or  limitations  con- 
tained in  the  fundamental  laws  or  other  regulations  by  the  cor- 
poration, to  perform  all  the  duties  usually  belonging  or  appertain- 

'  Andrews  v.  Kneeland,  6  Cow.  354.  Thornton,  6  East,   17;  2  Kent's  Com. 

2  Goodson  V.  Brooke,  5  Camp.  163.  622;  McKinstry  v.    Pearsall,  3  Johns. 

3  Peck  V.  Harriott,  6  S.  &  R.  149.  319  ;  Van  Allen  v.  Vanderpool,  6  id.  69; 
•*  Anderson  v.  Cooulev,  21  Wend.  279.  Goodenow  v.  Tyler,  7  Mass.  36 ;  Clark 
sFenn  v.  Harrison,  3  T.   R.  757;    3  v.  Van  Northwick,  1  Pick.  348;  Laus- 

Chit.  Com.  and   Man.   200 ;   Paley    on  satt  v.  Lippincott,  6  S.  &  R.  386  ;  Ger- 

Agency,  209  ;  1  Bell's  Com.  387,  art.  bier  v.  Emery,  2   Wash.   (C.  C.)  413  ; 

412  (4th  ed.).    But  the  right  to  warrant  Greely  v.  Bartlett,  1  Greenl.  173;  For- 

in  such  cases  has  been  denied.     See  restier  v.  Bordman,  1  Story  43. 

Gibson  v.  Colt.  7  Johns.  390  ;  Nixton  v.  '  Davenport  v.  Hallowell,  10  Me.  317; 

Hyserott,  5  id.  58.  Junkins  v.  School   District,  39  id.  220; 

"Story  on  Agency,  §  60  ;  Paley  on  Willard  v.  Newburyport,  12  Pick.  227; 

Agency,  by  Lloyd  {3d  ed.),  198,  note  ;  1  Kingsbury  v.  School  District,  12  Mete. 

Livermore  on  Agency  103  ;  Newson  v.  99. 


Officers  and  Agents  Generally. 


273 


ing  to  the  office.  The  usual  power  conferred  upon  tlie  president, 
virtute  officii,  where  there  are  no  limitations  upon  his  rights,  is 
the  authority  to  preside  at  meetings  of  the  corporation  or  boards 
of  directors  ;  to  sign  contracts  and  execute  deeds  of  the  corpora- 
tion ;  and,  perhaps,  generally  to  have  charge  of  the  corporate  seal. 
So,  there  is  an  implied  power,  virtute  offi^cii,  conferred  upon  the 
cashiers  of  banks  to  transfer  and  indorse  negotiable  securities  held 
by  banks  ;  as  by  virtue  of  the  office  he  is  intrusted  with  tlie  notes 
and  securities  and  other  funds  of  tlie  banks,  and  is  usually  held 
out  to  the  world  as  the  general  agent  for  the  negotiation,  man- 
agement and  disposal  of  them,  l^o  special  authority  for  this 
purpose  is  necessary  to  be  shown,  as  such  authority  would  be 
presumed.'      And  where  a  cashiei*  of   a  bank  habitually  exer- 


•  Wild  V.  Bank  of  Passamaquoddy, 
3  Mason,  505.  See,  also,  State  v.  Com- 
mercial Bank,  6  S.  &  M.  337. 

In  Massachusetts  it  has  been  held 
that  neither  a  president  nor  a  cashier 
of  a  bank  has,  ex  officio,  authority  to 
transfer  the  property  or  other  securi- 
ties of  the  company,  but  must  have  ex- 
press authority  to  that  effect  from  the 
corporation  at  large,  or  the  directors, 
as  the  case  may  be.  Hallowell  Bank  v. 
Hamlin,  14  Mass.  178  ;  Hartford  Bank 
V.  Barry.  17  id.  97.  Neither,  it  is  said, 
can  the  president  or  cashier  charge  a 
bank  with  any  special  liability  for  a 
deposit  contrary  to  its  usage,  without 
the  previous  authority  or  subsequent 
assent  of  the  corporation .  Foster  v. 
Essex  Bank,  17  Mass.  505.  In  Massa- 
chusetts, however,  it  is  admitted  that 
a  cashier  has  authority,  ex  officio,  to 
indorse  a  note,  the  property  of  the 
bank,  as  a  measure  preliminary  to 
a  suit,  and  to  authorize  a  demand 
upon  the  maker  and  notice  to  the 
indorser  ;  Hartford  Bank  v.  Barry,  17 
Mass.  97  ;  and  to  give  new  certifi- 
cates of  stock  to  a  purchaser  of  shares 
sold  on  a  tax  warrant,  on  its  face  good, 
and  issued  by  lawful  authority,  though 
the  tax  might  have  been  improperly 
assessed.  Smith  v.  Northampton  Bank, 
4Cush.  1. 

These  narrow  limits  on  a  cashier's 
ex-officio  power  are,  however,  by  no 
means  generally  acknowledged.  On 
the  contrary,  it  is  said  that  a  cashier  is 
usually  intrusted  with  all  the  funds 
of  a  bank,  in  cash,  notes,  bills,  etc.,  to 
be  used  from  time  to  time  for  the  ordi- 

35 


nary  and  extraordinary  exigencies  of 
the  bank.  He  receives,  directly  or 
through  the  subordinate  officers,  all 
moneys  and  notes.  He  delivers  up  all 
discounted  notes  and  other  property 
when  payments  have  been  made.  He 
draws  checks,  from  time  to  time,  for 
moneys,  whenever  the  bank  has  de- 
posits. He  acts  as  the  arm  of  the  bank 
in  carrying  out  the  business  arrange- 
ments and  agencies  assumed  by  the 
bank  through  the  directors.  In  short, 
he  is  considered  the  executive  officer, 
through  whom  and  by  whom  the 
whole  moneyed  operations  of  the  bank 
in  paying  or  receiving  debts,  or  dis- 
charging or  transferring  securities, 
are  to  be  conducted.  It  does  not  seem 
too  much  then  to  infer,  in  the  absence 
of  all  positive  restrictions,  that  it  is 
his  duty  as  well  to  apply  the  negotia- 
ble funds,  as  the  moneyed  capital  of 
the  bank,  to  discharge  its  debts  and 
obligations.  Flecknerv.  United  States 
Bank,  8  Wheat.  360  ;  Lafayette  Bank 
V.  State  Bank  of  Illinois,  4  McLean  (C. 
C),  208  ;  Ridgwav  v.  Farmers'  Bank, 
12  S.  &  R.  365  ;  Bank  of  Ky.  v.  Schuvl- 
kill  Bank,  1  Pars.  Sel.  Cas.  243 ;  Ever- 
ett V.  United  States,  6  Port.  (Ala.)  166; 
Stamford  Bank  v.  Benedict,  15  Conn. 
445  ;  Crocket  v.  Young,  1  S.  &  M.  241  ; 
State  V.  Commercial  Bank,  G  id.  237  , 
Carey  v.  Giles,  10  Ga.  9  ;  Ryan  v.  Dun- 
lap.  17  111.40. 

The  inducement  to  the  transfer 
need  not  appear,  but  the  courts  will 
presume  the  transfer  to  have  been 
properly  made  by  the  cashier,  in  the 
absence  of  proof  to  the  contrary.  lb. 


274  Pkivate  Corporations. 

cises  powers  as  such  with  the  knowledge  and  acquiescence  of 
the  directors,  this  entitles  the  public  and  persons  dealing  with  the 
bank  to  the  benefit  of  a  conclusive  presumption  that  the  party  thus 
acting  is  authorized  so  to  act,  provided  it  is  not  in  violation  of 
the  laws  of  its  constitution,  or  contrary  to  the  limitations  of  power 
contained  in  its  organic  laws  or  constating  instruments.'  The 
regular  and  lawful  appointment  of  such  an  officer  would  be  in- 
ferred from  the  circumstances.  And  the  bank,  in  such  a  case, 
would  be  estopped,  where  the  interests  of  third  parties  dealdng 
with  such  bank  required  it,  from  denying  the  authority  of  such 
officer,  and  his  power  to  act  and  perform  the  duties  usually  per- 
formed by  such  an  officer.  "If,"  says  Justice  Story,  "  he  was 
held  out  as  an  authorized  cashier,  that  character  was  equally  ap- 
plicable to  all  who  deal  with  the  bank,  in  transactions  beneficial 
as  well  as  onerous  to  the  bank."  "^  And  this  recognition  and  per- 
mission of  official  acts  is  the  same,  whether  the  officer  receives 
his  appointment  or  election  from  the  corporate  body  at  large,  or 
from  a  duly  constituted  board  of  directors.^ 

Sec.  171.  Powers  of  president.  In  relation  to  the  powers  and  au- 
thority of  a  president  of  a  corporate  body,  it  seems  well  settled 
that  he  may,  as  incidental  to  the  office,  and  the  execution  of  the 
trust  reposed  in  him  virtute  officii,  perform  all  the  duties  usually 
incumbent  upon  such  officer,  or  such  as  custom  or  necessity 
has  imposed  upon  the  officer,  or  such  as  is  imposed  by  the  gen- 
eral course  of  business  of  the  corporation.     In  relation  to  this 

'  Merchants'  Bank  v.  State  Bank,  10  Dunlap,  17  111.  40  ;  State  v.  Commer- 
Wall  604  ;  Fleckner  v.  Bank  of  United  cial  Bank,  14  Miss.  218. 
States,  8  Wheat.  338;  Minor  v.  Me-  ^  gank  of  United  States  v.  Dan- 
chanics'  Bank,l  Pet.  46;  Bank  of  United  dridge,  12  Wheat.  64.  See,  also,  Bar- 
States  V.  Dunn,  6  id.  51  ;  United  States  gess  v.  Pue,  2  Gill,  254  ;  Barrington  v. 
V.  Bank  of  Columbus,  21  How.  256 ;  Bank  of  Washington,  14  S.  &  R.  421  ; 
Baldwin  v.  Bank  of  Newburgh,  1  Wall.  Troy  T.  Co.  v.  McChesney,  21  Wend. 
234;  Badger  V.  Bank  of  Cumberland,  296;  Warren  v.  Ocean  Ins.  Co.,  16 
26  Me.  428  ;  Mussey  v.  Eagle  Bank,  9  Me.  439  ;  Badger  v.  Bank  of  Cumber- 
Mete.  306  :  Farmers'  Bank  v.  Butchers'  land,  26  id.  428  ;  Davidson  v.  Borough 
Bank,  4  Duer,  219  ;  S.  C,  16  N.  Y.  of  Bridgeport,  8  Conn.  472;  Waite  v. 
125  ;  Cooke  v.  State  Bank.  52  id.  96  ;  Mining  Co.,  36  Vt.  18. 
Bank  of  Pennsylvania  v.  Reed,  1  W.  ^^  Conover  v.  Insurance  Co.,  1  N.  Y. 
&  S.  101  ;  Ridgway  v.  Farmers'  Bank,  290  ;  Lohman  v.  New  York  R.  Co., 
12  S.  &  R.  256;  Merchants'  Bank  v.  2  Sandf.  39  ;  Beers  v.  Phoenix  Glass 
Marine  Bank,  3  Gill,  96  ;  Sturges  v.  Co.,  14  Barb.  358  ;  Mead  v.  Keeler,  24 
Bank  of  Circleville,  11  Ohio  St.  153  ;  id.  20. 
Robinson  v.  Bealle,  20  Ga.  275  ;  Ryan  v. 


Officers  and  Agents  Generally.  275 

subject,  in  a  recent  case  in  Illinois,  "Walker,  J.,  observes : 
"  As  we  understand  the  law,  a  corporate  body  may,  unless 
otherwise  provided  by  their  charter,  appoint  any  member  of  the 
body,  or  other  person,  by  their  by-laws  or  by  resohition,  an  agent 
to  transfer  or  dispose  of  their  property  or  negotiable  securities. 
No  officer  of  the  body  has  that  exclusive  power  unless  given  by 
the  charter.  They  may  confer  power  on  the  president,  treasurer, 
secretary,  or  other  officer  or  person.  But  in  the  absence  of  both 
statutory  authority  and  regulations  of  the  body  on  the  subject, 
the  presumption  might  be  indulged  that  the  president,  as  the  head 
of  the  organization,  would  have  authority,  if  incident  to  the  or- 
ganization, or  in  conformity  with  the  usage  and  custom  of  busi- 
ness. The  doctrine  seems  to  be  settled  that  the  president  of  a 
corporate  body  being  its  head,  and  through  whom  the  corporate 
affairs  of  the  corporation  are  constantly  pei-formed,  and  such  acts 
as  are  incident  to  the  execution  of  the  trust  reposed  in  him,  or  such 
as  custom  or  necessity  has  imposed  upon  the  office,  he  may  perform 
without  express  authority.  And  it  is  immaterial  whether  such 
authority  exists  by  virtue  of  his  office,  or  is  imposed  by  the  course 
of  business  of  the  company.'"  But  it  has  been  held  in  Massa- 
chusetts, that  neither  the  president  nor  the  cashier  of  a  bank  has, 
ex  officio,  authority  to  transfer  the  property  or  securities  of  the 
bank,  but  that  for  this  purpose  they  must  have  an  express  author- 
ity from  the  corporation  or  its  directors.''  It  has  been  held,  also, 
that  the  recei%ang  teller  of  a  bank,  where  there  is  one,  is  the  only 
proper  officer  to  receive  deposits,  and  that,  if  he  receives  the  funds 
of  a  stranger  and  promises  to  apply  them  to  the  payment  of  a 
bill  or  note,  he  acts  as  the  agent  of  the  stranger,  and  not  of  the 
bank,  and  that  the  bank  is  not  liable  therefor ; '  and  that  if  he 
exceeds  his  authority  as  a  teller,  and  certifies  a  check  upon  the 
bank  as  "  good,' '  he  cannot  bind  the  bank  in  this  way  to  pay  the 
amount  of  such  check  to  any  person  who  may  afterward  present 

1  Mitchell  V.  Deeds,  49  111.  416  ;  Chi-  Pendleton  v.  Bank,  1  T.  B.  Monr.  179 

cago,  etc.,  R.  Co.  v.    Coleman,   18  id.  where  it  was  held  that  a  cashier  had 

297.      See,  also,  Elwell   v.  Dodge,  33  no  authority  ex  officio  to   accept  bills 

Barb.  336.  of  exchange. 

^  Hallowell  Bank  v.  Hamlin,  14  Mass.        ^  Thatcher  v.  Bank  of  New  York,  5 

178;  Hartford  Bank   v.  Barry,  17  id.  Sandf.  121;  Mussey  v.   Eagle   Bank,  9 

97 ;  Foster    v.    Esses    Bank,   id.  94  ;  Mete.  306. 


276 


Private  Cokpobations. 


it,  even  where  there  is  a  usage  of  that  kind.'  But  this  doctrine 
would  appear  unsound,  and  in  New  York  it  has  been  held  that 
if  a  teller  has  made  it  a  practice  to  certify  checks,  and  of  entering 
the  same  in  a  book,  for  the  benefit  of  the  officers  of  the  bank, 
the  bank  is  liable  for  checks  so  certified,  though  the  teller  fails  to 
make  the  entry,  and  even  though  the  bank  has  no  funds  of  the 
drawer,  provided  the  person  claiming  the  same  is  a  hona  fide 
holder  of  them/ 


'  Mussey  v.  Eagle  Bank,  9   Mete . 
(Mass.)  306. 

■^  Farmers'  Bank  v.  Butchers'  Bank, 
16  N.  Y.  125. 

In  this  case  the  action  was  by  a 
hona  fide  holder  of  a  negotiable  check, 
which  had  been  certified  to  be  good  by 
the  paying  teller  of  the  bank  (the  de- 
fendant) on  which  it  was  drawn,  and 
it  was  held  that  the  bank  under  such 
circumstances  was  liable,  although  the 
drawer  had  no  funds  in  the  bank  with 
which  to  pay  the  check,  and  the  teller 
exceeded  his  authority  in  certifying 
the  check  as  good.  It  appeared  in 
this  case  that  the  teller  was  in  the 
habit  of  certifying  the  checks  of  cus- 
tomers with  the  knowledge  of  the  offi- 
cers of  the  bank,  and  that  he  was  fur- 
nished with  a  book  for  the  express 
purpose  of  keeping  a  memorandum  of 
such  checks.  The  court  in  this  case  ob- 
serve: "  His  authority  to  certify,  there- 
fore, in  a  proper  case,  cannot  be  dis- 
puted. But  it  is  insisted  that  his 
power  extends  only  to  cases  where  the 
bank  had  funds  in  hand,  he  having 
been  expressly  prohibited  from  certi- 
fying in  the  absence  of  funds,  and 
hence  that  the  bank  is  not  bound.  It 
may  be  doubted  whether  such  a  pro- 
hibition adds  any  thing  to  the  restric- 
tions which  would  otherwise  exist  upon 
the  powers  of  the  agent.  A  teller, 
acting  under  a  general  power  to  cer- 
tify checks,  would  be  guilty  of  an  ex- 
cess of  authority  and  a  clear  violation 
of  his  duty  if  he  certified  without 
funds.  *  *  *  The  bank  selects  its 
teller  and  places  him  in  a  position  of 
great  responsibility.  The  trust  and 
confidence  thus  reposed  in  him  by 
the  bank  leads  others  to  confide  in  his 
integrity.  Persons  having  no  voice  in 
his  selection  are  obliged  to  deal  with 
the  bank  through  him.  If,  therefore, 
while  acting  in   the   business  of  the 


bank  and  within  the  scope  of  his  em- 
ployment,  so  far  as  it  is  known  or  can 
be  seen  by  the  party  dealing  with  him, 
he  is  guilty  of  misrepresentation, 
ought  not  the  bank  to  be  held  respon- 
sible ?  *  *  *  It  is  conceded  that 
every  one  taking  the  checks  in  ques- 
tion would  be  presumed  to  know  that 
the  teller  had  no  authority  to  certify 
without  funds.  But  this  knowledge 
alone  would  not  apprise  him  that  the 
certificate  was  defective  and  unauthor- 
ized. To  discover  that  he  must  not 
only  have  notice  of  the  limitations  of 
the  powers  of  the  teller,  but  of  the 
extrinsic  fact  that  the  bank  had  no 
funds  ;  and  as  to  this  extrinsic  fact, 
which  he  cannot  justly  be  presumed 
to  know,  he  may  act  upon  the  repre- 
sentation of  the  agent.  There  is  a 
plain  distinction  between  the  terms  of 
a  power  and  facts  entirely  extraneous, 
upon  which  the  right  to  exercise  the 
authority  conferred  may  depend.  One 
who  deals  with  an  agent  has  no  right 
to  confide  in  the  agent  as  to  the  ex- 
tent of  his  powers.  If ,  therefore,  a 
person,  knowing  a  bank  has  no  funds 
of  the  drawer,  should  take  a  certified 
check  upon  the  representation  of  the 
cashier,  or  other  officer  by  whom  the 
certificate  was  made,  but  he  was  au- 
thorized to  certify  without  funds,  the 
bank  would  not  be  liable.  But  in.  re- 
gard to  the  extrinsic  fact  whether  the 
bank  has  funds  or  not  the  case  is  dif- 
ferent. That  is  a  fact  of  which  a  stranger 
who  takes  a  check  certified  by  the 
teller  cannot  be  supposed  to  have  any 
means  of  knowledge.  Were  he  held 
bound  to  ascertain  it,  the  teller  would 
be  the  most  direct  and  reliable  source 
of  knowledge,  and  he  already  has  his 
written  representation  upon  the  face 
of  the  check.  If,  therefore,  one  who 
deals  with  an  agent  can  be  permitted 
to  rely  upon  the  representation  of  the 


Officers  and  Agents  Generally. 


277 


Sec.  172.  Authority  by  usage. —  The  exercise  of  powers  by  one 
assuming  to  be  an  officer  or  agent,  as  president,  cashier,  or  treas- 
urer, with  a  knowledge  by  the  corporation,  or  its  immediate  rep- 
resentative, the  board  of  directors,  of  such  acts,  witliin  the  scope 
of  the  corporate  powers,  and  such  as  usually  pertaui  to  the  office, 
would  justify  third  persons  and  parties  dealing  with  such  corpo- 
ration, to  treat  such  officer  or  agent  as  lawfully  appointed,  and 
rightfully  exercising  the  duties  of  the  office.'  And  where  officers 
are  acting  generally  within  the  apparent  scope  of  their  authority, 
this  will,  as  to  third  persons,  raise  a  presumption  that  they  have 
been  authorized  by  all  the  required  formalities.' 

Sec.  173.  Apparent  authority.  —  The  doctrine  frequently  an- 
nounced is,  that  where  a  corporation  places  a  person  in  a  position 
which  implies  responsibility,  and  thereby  leads  others  to  confide 


agent  as  to  the  existence  of  a  fact,  and 
to  hold  the  principal  responsible  in 
case  the  representation  is  false,  this 
would  seem  to  be  such  a  case.  It  is, 
I  think,  a  sound  rule,  that  where  the 
party  dealing  with  an  agent  has  ascer- 
tained that  the  act  of  the  agent  cor- 
responds in  every  particular  in  regard 
to  which  such  party  has  or  is  pre- 
sumed to  have  any  knowledge  with 
the  terms  of  the  power,  he  may  take 
the  representations  of  the  agent  as  to 
any  extrinsic  fact  which  rests  pecu- 
liarly within  the  knowledge  of  the 
agent,  and  which  cannot  be  ascer- 
tained by  comparison  of  the  power 
with  the  act  done  under  it.  The  fa- 
miliar caseof  the  giving  of  a  negotiable 
partnership  note  by  one  of  the  partners 
for  his  own  individual  benefit  affords 
an  apt  illustration  of  this  rule.  Each 
of  the  partners  is  the  agent  of  the 
partnership  as  to  all  matters  within 
the  scope  of  the  partnership  business, 
and  can  bind  the  firm  by  making,  in- 
dorsing and  accepting  bills  and  notes 
in  such  business  ;  but  he  has  no  more 
authority  than  a  mere  stranger  to  exe- 
cute such  paper  in  his  own  business, 

'  Merchants'  Bank  v.  State  Bank,  10 
Wall.  604  ;  Fleckner  v.  Bank  of  the  U. 
S.,  8  Wheat.  338 ;  Bank  of  U.  S.  v. 
Dunn,  6  Pet.  51  ;  United  States  v.  Bank 
of  Columbns,  21  How.  356;  Baldwin 
V.  Bank  of   Newburgh,  1  Wall .  384  ; 


or  for  the  accommodation  of  others. 
If  he  gives  the  partnership  note  or  ac- 
ceptance for  his  own  debt,  it  is  void  in 
the  hands  of  any  party  having  knowl- 
edge of  the  consideration  for  which  it 
is  given  ;  but  when  negotiated  to  a 
bona  fide  holder,  the  firm  is  precluded 
from  questioning  the  authority  of  the 
partner,  and  is  effectually  bound. 
Livingston  v.  Hastie,  3  Caines,  346  ; 
Lansing  v.  Gaine,  3  Johns.  300;  Laver- 
ty  V.  Burr,  1  Wend.  539  ;  Williams  v. 
Walbridge,  3  id.  415  ;  Boyd  v.  Plumb, 
7  id.  309  ;  Qansevoort  v.  Williams,  14 
id.  133;  Joice  v.  Williams,  id.  141  ; 
Wilson  V.  Williams,  id.  146  ;  Catskill 
Bank  v.  Stall,  15  id.  466  ;  18  id.  466. 
*  *  *  The  fact  of  the  agency,  and 
the  trust  and  confidence  reposed  by  the 
principal  in  the  agent,  create  a  broad 
line  of  distinction  between  them  ;  and 
it  is  this  trust  and  confidence  which 
constitute  the  foundation  of  the  liabil- 
ity, and  which  justify  the  party  deal- 
ing with  the  agent  in  relying  upon  his 
representation  in  respect  to  facts  es- 
pecially within  the  agent's  knowl- 
edge." 


Badger  v.  Bank  of  Cumberland,  36  Me." 
428  ;  Cooke  v.  State  Bank,  53  N.  T.  96. 
'^Bissell  V.  Michigan,  etc.,  R.  Co., 
23  N.  T.  258  ;  Green's  Brice's  Ultra 
Vires,  437  et  seq.,  and  notes. 


278  Pkivate  CoBPOBA'noNs. 

in  his  integrity,  especially  in  matters  pertaining  to  the  office  or 
ao-ency,  and  peculiarly  within  the  knowledge   of  the  officer  or 
ao-ent,  the  corporation  shall  be  responsible  for  any  misrepresenta- 
tion, negligence  or  fraud  of  such  officer  or  agent,  whereby  a  party 
actino-  in  good  faith  with  such  officer  or  agent  has  sustained  a  loss. 
This  is  sometimes  placed  upon  the  familiar  maxim  in  equity  that 
where  one  of  two  innocent  persons  must  suffer  by  the  acts  of  an- 
other, he  who  has  enabled  such  person  to  occasion  the  loss  must 
sustain  the  damage  caused  thereby.     Or,  in  other  words,  "  he  who 
without  intentional  fraud  has  enabled  any  person  to  do  an  act, 
which  must  be  injurious  to  himself  or  to  another  party,  shall 
himself  suffer  the  injury  rather  than  the  innocent  party  who  has 
placed  confidence  in  him."  ^     But  mere  general  reputation  with- 
out proof  of  acts  of  charge  and  management  in  the  office  is  held 
to  be  inadmissible  to  show  that  the  officer  assuming  to  act  is  the 
officer  he  claims  to  be.-     What  has  been'  said  in  reference  to  cash- 
iers of  banks  would,  of  course,  be  applicable  to  the  treasurer  of 
a  corporation  for  pecuniary  emolument  generally,  and  the  general 
principles  and  doctrine  we  have  stated  would  also  be  equally  ap- 
plicable to  all  other  officers  of  the  corporation. 

Sec.  174.  Distinction  betvreen  executed  and  executory  contracts  in 
case  the  agent  exceeds  his  authority.  —  If  the  agent  or  corporation 
wholly  exceeds  all  authority  conferred  upon  or  existing  in  the  cor- 
poration, in  entering  into  contracts  with  third  parties,  they  are 
ultra  vires  and  usually  void.^ 

But  this  doctrine  is  limited  to  executory  contracts.  For 
where  the  contract  has  been  executed,  and  the  corporation  has 

1  Story  on  Agency,  p  127.     See,  also,  3  Hill,  262  ;  Commercial  Bank  v.  Kort- 

1  Story  on  Eq.  Jur.,  §§  384-394  ;  Fitz-  right,  22  Wend.  348  ;  Locke  v.  Stearns, 

herbert  v.  Mather,  1  T.  R.  12.     Where  1  Mete.  (Mass.)  560. 

one  of  two  innocent  parties  must  suf-  ^  Litchfield   Iron   Co.  v.    Bennett,  7 

fer  a  loss,  he  should  suffer  it  who  by  Cow.  234;  Clark  v.  Benton  Manuf.  Co., 

his  own  acts  has  occasioned  the  confl-  12  Wend.  218;  Waite   v.  Mining  Co., 

dence  and  the  loss.  Neville  v.  Wilkin-  36  Vt.  18.     If,  however,  a  treasurer  is 

son,   1    Bro.  Ch.  543;  3   P.  Wms.  74  ;  in   the   practice   of   accepting   drafts, 

Scott  V.    Scott,  1  Cos,  .378;  Evans  v.  with  the  knowledge  and  assent  of  the 

Bicknell,  6  Ves.  173 ;  Pearson  v.  Mor-  directors,  this  is  proof  of  his  authority, 

gan,  2  Bro.  Ch.  388;  Com.  Dig.,  chap.  Partridge    v.   Badger,    15   Barb.    146; 

4  W.  28;  Paley   on  Agency,  by  Lloyd,  Mead  v.  Keeler,  24  id.  20;  Williams  v. 

194,    200,    201  (3d    ed.);    Whitehead  Cheeney,  3  Gray,  215  ;  Lester  v.  Webb, 

V.    Tuckett,  15    East,  401;   3    Kent's  1  Allen,  34;  Dougherty  v.   Hunter,  54 

Com.  621  ;  Guerreiro  v.  Peile,  3  B.  &  Penn.  St.  380. 

,  Aid.  616  ;  North  River  Bank  v.  Aymar,  ^  See  post,  chap.  9. 


Officers  and  Agents  Generally.  279 

received  the  benefit  of  the  same,  it  cannot  usually  avoid  its  obli- 
gations incurred  thereby,  even  though  the  agent  entirely  exceeded 
the  authority  he  possessed  in  making  the  contract.  Thus,  if  one 
assuming  to  act  for  a  corporation,  but  without  authority,  em- 
ploys another,  and  he  renders  service  to  it,  with  the  knowledge  of 
the  officers,  especially  such  as  would  have  authority  to  employ  such 
party,  this  would  entitle  the  employed  to  recover  of  the  corpora- 
tion. But  if  the  contract  was  merely  entered  into  and  not  exe- 
cuted, and  the  corporation  refuses  to  execute  the  contract  on  its 
part,  it  might  successfully  defend  against  any  claims,  on  the 
ground  of  a  breach  of  contract  on  its  part.^  But  this  question  in- 
volves the  consideration  of  the  doctrine  of  ultra  vires,  which  we 
propose  to  consider  in  a  following  chaptered 

Corporations  can  usually  be  bound  only  by  those  contracts  exe- 
cuted by  its  agents  that  come  within  the  scope  of  the  agent's  au- 
thority, and  do  not  exceed  the  powers  of  the  corporation  in  refer- 
ence to  the  contract.  And  it  seldom  happens  that  the  corporation 
confers  all  its  powers  upon  an  agent.' 

Sec.  175.  Limitations  of  power  as  to  time.— The  authority  of  a 
corporate  agent  as  to  time  may  be  limited  in  various  ways.  First, 
if  an  officer,  it  would  be  limited  to  the  time  for  which  he  was 
appointed  or  elected,  and  his  authority  as  an  agent  would  cease 
with  the  expiration  of  the  term  of  his  office.*  Second,  if  the 
agent  is  appointed  for  a  special  purpose,  the  authority  of  the 
agent  will  cease  when  such  special  object  is  accomplished.^ 
Third,  it  may  be  limited  as  to  time  by  the  very  terms  of  the 
appointment.     Fourth,  it  may  usually  be  terminated  any  time  by 

iPister  V.   La   Rue,  15  Barb.   323;  dridge.  id.  83  ;  Mount  Sterling  v .  Loo 

Parish  v.  Wheeler,  23  N.  Y.  503;  Tracy  nay,  1  Mete.  (Ky)  550  ;  New  Haven  Co. 

V.   Talmage,  14  id.   163;  De  Groff  v.  v.Hayden.lO?  Mass.  525;  Essex  T.Corp. 

American  Linen  Thread  Co.,  31  id.  134  ;  v,  Collins,  8  id.  299;  Washington  Bank 

Bissell  V.  Michigan,  etc.,  R.  Co.,  23  id.  v.  Lewis,  22  Pick.  34  ;  Hayward  v.  Pil- 

258;  White  V.  Franklin  Bank,  33 Pick,  grim  Society,  21  id.  370;  Steward  v. 

181 ;  Gould  V.  Town  of  Oneonta,  3  Hun,  Huntingdon   Bank,   11    S.   &  R.   367; 

401;  Hazelhurst  V.  Savannah,  etc., R.  Stephenson    v.    New   York   R.   Co.,  3 

Co.,  43  Ga.  13  ;  Southern  Life  Ins.  Co.  Duer,  341  ;  Cos  v.  Midland  R.  Co.,  3 

V.  Lanier,  5  Fla.  110.  Exch.  368  ;  Kelly  v.  Troy  Ins.  Co.,  3 

^  See  posf,  chap.   9;  Green's  Brice's  Wis.    354;  Exchange    Bank  v.  Mon- 

TJltra  Vires, 371  et  seq.,  and  notes.  teath,  17  Barb.  171. 

2  Mechanics'  Bank  v.  Bank  of  Colum-  ^  Curling  v.  Chalken,  3  M.  &  S.  510; 

bia,  5  Wlieat.  337  ;  Clark  v.  Washing-  Peppin  v.  Cooper,  3  B.  &  Aid.  431. 

ton,  13  id.  40;  Bank  of  U.  S.  v.  Dan-  ^  Seton  v.  Slade,  7  Ves.  376. 


280  Private  Corpokations. 

the  power  which  constituted  the  agent.'  But  where  the  authority 
might  be  terminated  in  any  of  these  ways,  still  if  the  agent  con- 
tinues to  act,  and  the  corporation  continues  to  recognize  his  acts, 
as  such,  or  if  the  corporation  still  holds  him  out  by  any  acts  of 
theirs  as  its  agent,  it  would  be  estopped  from  denying  the  agency, 
and,  on  general  principles,  would  be  held  liable  for  his  acts  done  in 
the  name  of  the  company  and  within  the  scope  of  the  original 
authority.^  The  doctrine  of  the  law  in  reference  to  agents  of  nat- 
ural persons  is,  that  the  agency  is  terminated  by  the  death  of  the 
principal.  We  have  shown  that  the  doctrine  of  the  immortality  of 
corporations  is  not  literally  correct,  for  although  they  have  the  prop- 
erty of  perpetual  succession,  the  life  of  the  artificial  person  may 
be  terminated  in  various  ways,  and  if  terminated  by  any  means, 
the  same  consequences  would  result  in  respect  to  its  agents  as 
though  it  were  a  natural  person.'  But,  where  an  agent  receives 
his  appointment  from  the  board  of  directors,  or  other  officers,  or 
general  or  special  managers  of  the  corporation,  the  expiration  of 
their  office,  or  their  removal  for  any  cause,  would  not,  jper  se, 
result  in  a  termination  of  the  agency.  For,  "  though  the  power 
of  appointing  a  particular  officer  or  agent  of  a  corporation  be 
vested  in  a  body,  as  the  directors,  managers,  etc.,  existing  within 
it,  it  does  not  follow  that  the  authority  of  the  agent  is  determined 
by  the  removal  of  the  board  which  appointed  him ;  or  that  be- 
cause they  are  appointed  but  for  a  year,  his  agency  expires  with 
that  period."  Thus,  where  a  letter  of  attorney  was  given  by  the 
directors  of  a  bank,  it  was  held  that  the  attorney  might  execute 
his  power  under  it,  after  the  term  for  which  the  directors  were 
appointed  had  expired,  since  the  constituent,  to-wit,  the  corj)ora- 
tion,  still  continued  in  existence.*  And  where  the  charter  of  a 
bank  empowered  the  directors  for  the  time  being  to  appoint  a 
cashier,  and  such  other  officers  and  servants  under  them  as  should 
be  necessary  for  executing  the  business  of  the  corporation,  it  was 
decided  by  the  supreme  court  of  Maryland,  that  the  office  and 

1  Story  on  Agency,  §  463  et  seq.  ■*  Anderson  v.  Longden,  1  Wheat.  85; 

*  Northern  Cent.  R.  Co.  v.  Bastian,  Bown  v.  County  of  Somerset,  11  Mass. 

15  Md.  494.     See,  also,  Clark  v.  Pratt,  221 ;  Northampton  Bank  v.  Pepoon,  3 

47   Me.   55;    Ang.  &   Am.   on   Corp.,  Pick.  288;  Dedham  Bank  v.  Chicker- 

§283.  ing,  id.  385. 

3  Union  Bank  v.  Ridgely,  1  H.  &  Q.  ^  Id. 
333 ;  Ang.  &  Am.  on  Corp.,  §  289. 


Officers  and  Agents  Generally.  281 

power  of  the  cashier  did  not  cease  with  the  office  and  power  of 
the  directors  who  appointed  him,  nor  was  of  annual  duration  only 
because  theirs  was ;  but  that  the  duration  of  the  cashier's  office 
was  limited  only  by  the  duration  of  the  charter  of  the  bank,  sub- 
ject always  to  be  terminated  by  the  directors  as  occasion  might  re- 
quire.^ The  mere  fact  that  an  agent  is,  in  some  respects,  the 
deputy  of  the  annual  officers  by  no  means  proves  that  he  is  an 
annual  officer  himself ;  for  it  may  be  that  his  appointment  was 
made  to  remedy  the  inconvenience  of  annual  officers  and  the 
deficiency  of  service  which  may  result  from  the  casual  interrup- 
tion of  an  annual  election."  " 

Sec.  176.  Mode  of  executing  contracts  by  agents.  —  It  may  be  stated 
as  a  universally  recognized  doctrine,  that  where  the  organic  or 
constating  acts  or  instruments  of  a  corporation  provide  in  what 
manner  contracts  in  its  behalf  shall  be  executed,  such  require- 
ments must  be  pursued,  and  all  persons  dealing  or  contracting 
with  such  corporation  would  be  required  to  take  notice  of  such 
provisions,  otherwise  the  acts  of  agents  or  of  the  corporation 
would  be  ultra  vires  and  void,^  But  in  England  it  has  been  held 
that,  when  the  deed  of  settlement  of  a  joint-stock  company  re- 
quired the  directors  to  use  certain  formalities  in  the  transfer  of 
shares,  but  which  for  the  period  of  ten  years  had  been  disregarded, 
the  corporation,  after  so  long  and  universal  a  disregard  of  their 
deed,  could  not  set  up  a  want  of  such  formality  to  the  prejudice 
of  third  parties.^  This  doctrine  has  also  been  recognized  by  the 
supreme  court  of  the  United  States,  Campbell,  J.,  observing : 
"  This  principle  does  not  impugn  the  doctrine  that  a  corporation 
cannot  vary  from  the  act  of  its  creation,  and  that  persons  dealing 
with  a  company  must  take  "notice  of  whatever  is  contained  in  the 
law  of  its  organization.  *  *  *  But  the  principle  includes 
those  cases  in  which  a  corporation  acts  within  the  range  of  its 
general  authority,  but  fails  to  comply  with  some  formality  or 
regulation  which  it  should  not  have  neglected,  but  which  it  has 

1  Union  Bank  v.  Ridgely,  1  H.  &  Gf.  -  Curling  v.  Chalklen,  3  M.  &  S.  509. 

431  ;  Exeter  Bank  v.  Rogers,  7  N.  H.  MVilliams  v.  Chester  R.  Co.,  5  Eng. 

38  ;  Thompson  v.  Young,  2  Ohio,  334;  L.  &  Eq.  497. 

Dedham  Bank  v.  Chickering,  3  Pick.  ■*  Bargate  v.  Shortridge,  5  H.   L.  C. 

835.  297. 

36 


282  Private  Corporations. 

chosen  to  disregard."  '  But  the  contracts  of  corporations  need 
not  necessarily  be  under  seal ;  *  and  it  is  not  essential  that  the  ap- 
pointment of  the  agent  be  under  the  common  seal,  or  even  evi- 
denced by  a  recorded  vote,  but  may  be  inferred  from  circumstan- 
ces, such  as  the  adoption  and  recognition  of  the  agent' s  acts.^ 

Sec.  177.  How  contracts  by,  should  be  executed.  —  In  the  execu- 
tion of  a  contract  of  the  corporation  by  an  agent,  the  proper 
way  is  to  sign  the  corporate  name  to  the  instrument  and  the 
name  of  the  agent  acting  for  it,  and  to  seal  it  with  the  cor- 
porate seal.  It  should  appear  on  the  face  of  the  instrument 
that  the  contract  is  the  contract  of  the  corporation  and  not 
the  personal  act  and  contract  of  the  agent.  He  should  execute 
the  instrument,  so  as  in  form  to  bind  the  principal;  and  it 
should  show  that  the  principal  is  intendjed  to  be  bound  by  its 
provisions  and  not  the  party  who  acts  for  him.  For  it  has  been 
said,  "  that  no  person  in  making  a  contract  is  considered  the  agent 
of  another,  unless  he  stipulates  for  his  principal  by  name,  stat- 
ing his  agency  in  the  instrument  which  he  signs.  This  principle 
has  been  long  settled,  and  has  been  frequently  recognized,  nor  do 
I  know  of  an  instance  in  the  books  of  an  attempt  to  charge  a  per- 
son as  the  maker  of  any  written  contract,  appearing  to  be  signed 
by  another,  unless  the  signer  professed  to  act  by  procuration  or 
authority,  and  stated  the  name  of  the  principal  on  whose  behalf 
he  gave  his  signature.  It  is  also  held  that  whatever  authority  the 
signer  may  have  to  bind  another,  if  he  does  not  sign  as  agent  or 
attorney  he  binds  himself  and  no  other  person."*  But  this 
doctrine  has  undoubtedly  been  much  relaxed  in  modern  times, 
and  even  less  formalities  in  the  execution  of  instruments  by  agents 
would  undoubtedly  serve  to  bind  the  principal,  especially  in  the 
various  common  contracts  into  which  corporations  may  enter  by 

'  Zabriskie  v.  Cleveland,  etc.,  R.  Co.,  phia,  31  Penn.  St.  175  ;  Clark  v.  Wasb- 

23  How.  (U.  S.)  381.     See,  also,  Amey  ington,  12  Wbeat.  40. 

V.  Allegheny  City,  24  id.  864;  Connec-  "*  Parker,  J.,  in  Stackpole  v.  Arnold, 

ticut  Ins.  Co.  V.  Cleveland,  41  Barb.  9.  11  Mass.  27.     See,  also,  Bradlee  v.  Bos- 

2  See  post,  chap.  10.  ton  Glass  Man.,  16  Pick.  347  ;  Alfrid- 

3  Dill,  on  Corp.,  §  374;  Story  on  sou  v.  Ladd.  12  Mass.  173;  Savage  v. 
Agency,  §  52  ;  Fanning  v.  Gregorie,  16  Rice,  9  N.  H.  263  ;  Rice  v.  Gove,  22  id. 
How.  (U.  S.)524;  Abby  v.  Billups,  35  158;  Minard  v.  Mead.  7  Wend.  68; 
Miss.  618  ;  Allton  v.  Mulledy,  21  HI.  Pentz  v.  Stanton,  10  id.  271 ;  Spencer 
76  ;  Western,  etc.,  Society  v.Philadel-  v.  Field,  id.  87. 


Officers  and  Agents  Generally. 


283 


its  agents.*  But  whatever  modification  of  the  former  rule  there 
may  have  been,  it  is  evident  that  in  the  execution  of  a  written 
instrument  the  name  of  the  party  intended  to  be  bound  should 
appear,  and  that  when  an  agent  executes  an  instrument  he  should 
do  it  in  the  name  of  the  party  for  whom  he  acts.  But  if  from 
the  whole  instrument  it  appears  that  the  true  object  and  intent  is 
to  bind  the  principal  and  not  the  agent,  or  where  the  purpose  to 
act  for  the  corporation  is  manifest  from  the  whole  paper,  and 
where  it  does  not  appear  from  it  that  there  is  an  intention  to 
assume  a  personal  responsibility  on  the  part  of  the  agent,  the 
corporation  and  not  the  agent  will  be  bound  thereby,  even  though 
the  agent  only  signs  his  own  name  and  affixes    his  own  seal." 


'  See  Higgins  v .  Senior,  8  M .  &  W . 
834  ;  Taintor  v.  Pendergrast,  3  Hill, 
72  ;  New  England  Ins.  Co.  v.  De  Wolf, 
8  Pick.  56  ;  2  Kent's  Com.  631. 

'^Regents,  etc.,  v.  Detroit,  12  Mich. 
138;  Sweetzer  v.  Mead,  5  id.  107; 
Bank  of  Metropolis  v.  Guttschlick,  14 
Pet.  19  ;  Story  on  Agency,  §  154. 

In  such  cases,  in  furtherance  of 
the  public  policy  of  encouraging 
trade,  if  it  can  upon  the  whole  in- 
strument be  collected,  that  the  true 
object  and  intent  of  it  are  to  bind 
the  principal  and  not  to  bind  the 
agent,  courts  of  justice  will  adopt  that 
construction  of  it,  however  informally 
it  may  be  expressed.  Thus,  where  an 
agent,  duly  authorized,  made  a  prom- 
issory note  thus:  '  I  promise  J.  S.  or 
order,'  etc.,  and  signed  the  note  'Pro. 
C.  D.  A.  B.,'  it  was  held  to  be  the  note 
of  the  principal  and  not  of  the  agent, 
although  the  words  were,  '  I  promise,' 
So  wliere  A.  and  B.  wrote  a  note  in 
these  words, '  VVe  jointly  and  severally 
promise,'  and  signed  it  A.  and  B.  forC, 
it  was  held  to  be  the  note  of  C,  and 
not  of  A.  and  B.  the  agents.  Rice  v. 
Gove,  22  Pick.  158  ;  Long  v.  Colburu, 
11  Mass.  97.  So,  where  the  note  was 
'  I  promise,'  etc.,  and  it  was  signed  by 
the  agent  '  For  the  Providence  Hat 
Manufacturing  Company,'  A.  B..  the 
agent ;  it  was  held  to  be  the  note  of  the 
company  and  not  of  the  agent.  Emer- 
son V.  Prov.  Hat  Manuf.  Co.,  12  Mass. 
237.  So,  a  promissory  note  of  the  like 
tenor,  signed  by  the  agent  in  this  man- 
ner, '  A.  B.,  agent  for  C.  D.,'  has  been 
held  to  be  the  note  of  the  principal 


and  not  of  the  agent.  Ballou  v.  Tal- 
bot, 16  Mass.  461  ;  Dispatch  Line  of 
Packets  v.  Bellamy  Manuf.  Co.,  12  N. 
H.  229.  So,  where  a  promissory  note 
was  in  these  words,  '  I,  the  subscriber, 
treasurer  of  the  Dorchester  Turnpike 
Corporation,  for  value  received,  prom- 
ise,' etc. ,  and  it  was  signed  '  A.  B.,  treas- 
urer of  the  Dorchester  Turnpike  Cor- 
poration,' it  was  held  to  be  the  note  of 
the  corporation  and  not  of  the  treas- 
urer. Mann  v.  Chandler, 9  Mass.  835. 
See  Hills  v.  Bannister,  8  Cow.  32; 
Barker  v.  Mechanics'  Fire  Ins.  Co., 
3  Wend.  94;  Mott  v.  Hicks,  1  Cow. 
513  ;  Brock  way  v.  Allen,  17  Wend. 
40.  So,  where  a  note  purported 
to  be  a  promise  by  '  the  president 
and  directors'  of  a  particular  cor- 
poration and  was  signed  'A.  B.,  presi- 
dent,' it  was  held  to  be  the  note  not  of 
A.  B.,  but  of  the  corporation.  Mott 
V.  Hicks,  1  Cow.  513.  See,  also. 
Bo  wen  v.  Morris,  2  Taunt.  374  ;  Slielton 
V.  Darling,  2  Conn.  435  ;  Brockway  v. 
Allen,  17  Wend.  40.  But  if  the  note  had 
been  '  I,  A.  B.,  president  of  the  corpora- 
tion (naming  it),  promise  to  pay,'  etc., 
it  would  (it  seems)  have  been  deemed  to 
be  the  personal  note  of  A.  B.,  and  not  of 
the  corporation.  Barker  v.  Mechanics' 
Fire  Ins.  Co. ,  3  Wend.  94.  So,  where 
the  agent  of  a  corporation  drew  a  bill 
of  exchange  upon  the  president  of  tlie 
corporation,  styling  him  such,  and  the 
latter  accepted  the  bill,  it  was  held 
that  he  was  not  personally  liable  if  he 
had  authority  to  accept  the  bill,  but 
the  corporation  was  alone  liable.  Laza- 
rus V.  Shearer,  2  Ala.  (N.  S.)  718.    So, 


284 


Private  Coeporations. 


Thus  where  a  contract  was  entered  into  "  between  a  committee 
appointed  by  the  corporation  of  the  city  of  Albany  for  that 
purpose,  of  the*  first  part,  and  John  R.,  Jr.,  of  the  second 
part ; "  and  the  parties  of  the  first  part  agreed  to  pay  for  the 
work  to  be  done,  and  signed  their  individual  names  and  affixed 
their  individual  seals  to  the  agreement,  the  authority  of  the  com- 
mittee to  act  for  the  corporation  in  the  premises  being  conceded, 
it  was  held  that  the  members  of  such  committee  were  not  per- 
sonally liable,  and  that  the  remedy  for  a  breach  of  the  contract 
should  be  against  the  corporation.'  So,  where  a  bill  of  exchange 
directed  to  "  A.  B.,  cashier  of  F.  &  M.  Bank,"  was  accepted  by 
the  cashier  as  follows :  "Accepted,  A.  B.,  cashier,"  by  writing 
across  the  face  of  the  bill ;  this  was  held  to  be  the  bill  drawn 


where  the  agents  of  a  corporation, 
being  duly  authorized,  made  a  written 
contract,  as  follows :  '  We  hereoy 
agree  to  sell,'  etc.,  and  signed  it  as 
agents  of  the  corporation,  it  was  held 
that  they  were  not  personally  bound 
thereby,  but  the  corporation  was. 
Mary  v.  Beekman  Iron  Co.,  9  Paige, 
188;  Evans  v.  Wells,  23  Wend.  325. 
*  *  *  So,  where,  on  a  sale  of  real 
property  by  a  corporation,  a  memoran- 
dum of  the  sale  was  signed  by  the  par- 
ties, on  which  it  was  stated  that  the 
sale  was  made  to  A.B.,the  purchaser, 
and  that  he  and  C.  D., '  mayor  of  the  cor- 
poration on  behalf  of  himself  and  the 
rest  of  the  burgesses  and  commonalty 
of  the  borough  of  Ceermathen,  do 
mutually  agree  to  perform  and  fulfill, 
on  each  of  their  parts  respectively,  the 
conditions  of  sale,'  and  then  came  the 
signature  of  the  purchaser,  and  of  '  C. 
D.,  mayor,'  it  was  held  that  the  agree- 
ment was  that  of  the  corporation  and 
not  that  of  the  mayor,  personally  ;  and 
that  consequently  the  mayor  could  not 
sue  them.  So,  where  in  articles  of 
agreement  the  covenants  were  in  the 
name  of  a  corporation  without  men- 
tion of  any  agent,  but  the  instrument 
was  signed  by  the  president  of  the  cor- 
poration, by  his  private  name,  on  be- 
half   of    the   corporation,  and   sealed 


with  his  private  seal,  it  was  held  that 
he  was  not  personally  liable  thereon. 
Hopkins  v.  Mehaffey,  11  S.  &  R.  126. 
On  the  other  hand,  unless  some  agency 
is  apparent  on  the  face  of  the  instru- 
ment, it  has  been  not  unfrequently  held 
that  the  principal  is  not  bound,  al- 
though the  agent  had  full  authority  to 
make  the  contract.  Story  on  Agency,  >5 
147,  note.  Thus,  where  a  wife  had  full 
authority  to  sign  notes  for  her  husband, 
and  she  made  a  note  in  her  own  name, 
not  referring  to  her  husband,  either  in 
the  body  of  the  note  or  in  the  signature, 
it  was  held  that  the  husband  was  not 
bound.  Minard  v.  Mead,  7  Wend.  68. 
So,  where  A.,  B.  and  C.  made  a  note  as 
follows :  '  We,  the  subscribers,  jointly 
and  severally  promise  to  pay  D. ,  or 
order,  for  the  Boston  Glass  Manufac- 
tory, the  sum  of  — ,'  and  signed  the 
note  in  their  own  names,  without  say- 
ing '  as  agents,'  it  was  held  that  they 
were  personally  bound  and  not  the 
corporation.  Bradley  v.  The  Boston 
Glass  Manufactory,  16  Pick.  347. 
And  where  an  agent  drew  a  bill  for 
the  purchase  of  goods  on  account  of 
his  principal,  and  signed  the  bill  A. 
B.,  agent,  but  did  not  disclose  the 
name  of  his  principal,  he  was  held 
personally  bound  by  the  bill  as  drawer. 
Pentz  v.  Stanton,  10  Wend    271. 


'  Randall  v.  Van  Vechten,  19  Johns. 
60.  See,  also,  Dubois  v.  Canal  Com- 
pany, 4  Wend.  285  ;  Worrall  v.  Munn, 
5  N.  Y.  229  ;  Ford  v.  Williams,  13 id. 
577;  Richardson  v.  Scott,  etc.,  Co.,  22 


Cal.  150.  But  this  doctrine  seems  to 
have  been  denied  in  Bank  of  Columbia 
v.  Patterson,  7  Cranch,  299.  See,  also, 
Damon  v.  Granby,  2  Pick.  345. 


Officers  and  Agents  Generally. 


285 


upon  and  accepted  by  the  bank,  and  tlic  bank  liable  thereon  and 
not  the  cashier  personally.^  And  where  a  note  payable  to  an 
insurance  company  was  indorsed,  "  Without  recourse,  J.  S., 
secretary,"  it  was  held  to  pass  the  legal  title  to  the  indorsee.' 


'  Farmers'  Bank  v.  Troy  City  Bank, 
1  Doug.  (Mich.)  457.  See,  also,  Water- 
vliet  Bank  v.  White,  1  Den.  608  ;  Jen- 
kins V.  Morris,  16  M.  &  W.  880;  Thomp- 
son V.  Tioga  R.  Co.,  36  Barb.  79;  Bird 
V.  Daggett,  97  Mass.  495. 

-El well  V.  Dodge,  33  Barb.  336; 
Scott  V.  Johnson,  5  Bosw.  213;  Mer- 
chants' Bank  v.  McColl,  6  id.  473; 
Nicholas  v.  Oliver,  36  N.  H.  218;  Davis 
V.  Bank  of  Mobile,  12  Ala.  463;  Alex- 
ander V.  Sizer,  L.  R.,  Ex.  102;  Sharpe 
V.  Bellis,  61  Penn.  St.  69;  Mclntire  v. 
Preston.  10  111.  48.  See,  also,  Nichols 
V.  Frothingham,  45  Me.  220;  Bruce 
V.  Lord,  1  Hilt.  247;  Wright  v.  Boyd, 
3  Barb.  523;  Atlantic  Mut.  Fire  Ins. 
Co.  V.  Young,  38  N.  H.  451  ;  Dispatch 
Line,  etc.,  v.  Bellamy  Manuf.  Co.,  12 
id.  205. 

A  note  signed  with  the  addition  of 
"  agent "  of  a  certain  corporation,  al- 
though its  terms  may  be  that  of  an 
individual  promise,  may  nevertheless 
be  treated  as  a  note  of  the  corporation, 
if  the  agent  had  authority  in  fact  to 
execute  it,  or  if  its  execution  by  him 
was  subsequently  ratified.  Bank  v. 
Biningsville  Cotton  Co.,  11  Rich.(S.C.), 
L.  95 ;  Dispatch  Line  of  Packets  v. 
Bellamy  Manuf.  Co.,  12  N.  H.  205. 
Thus  where  an  agent  gave  a  note  in 
the  body  of  which  were  the  words  "  I 
promise  to  pay,"  the  signature  being 
"A.,  agent  for  the  M.  M.  Company," 
and  it  appeared  in  evidence  that  it  was 
in  the  constant  habit  of  signing  notes 
in  this  manner,  which  the  company 
regularly  paid,  it  was  held  that  he  was 
not  personally  liable.  When  an  agent 
duly  authorized  subscribes  an  agree- 
ment in  such  a  maimer  as  to  manifest 
an  intent  not  to  bind  himself,  but  the 
principal,  and  when  by  his  subscrip- 
tion he  has  actually  bound  the  princi- 
pal, then  the  contract  cannot  be  bind- 
ing on  him  personally.  No  precise 
form  of  words  is  required  to  be  used 
in  the  signature ;  every  word  must 
have  an  effect,  if  possible  ;  and  the  in- 
tention must  be  collected  from  the 
whole  instrument  taken  together. 
Hovey  v.  Magill,  2  Conn.  680. 

A  bill  dated  at  the  office  of  the  cor- 


poration, signed  with  the  name  of  the 
president,  with  the  addition  of  his  title 
of  office,  abbreviated,  and  directing  the 
contents  to  be  charged  "to  motive 
power  and  account," — held,  to  be  on 
its  face  the  bill  of  the  corporation,  and 
not  that  of  the  signer  individually. 
Olcott  V.  Tioga  R.  R.  Co.,  27  N.  Y.  546. 
So  where  bills  were  drawn  by  an  agent 
of  the  corporation  and  accepted  by  the 
president,  in  the  name  of  H.  G.  &  Co. 
that  being  the  style  of  the  copartner- 
ship, merely  as  a  convenient  mode 
adopted  by  the  corporation  for  raising 
funds.  Held,  that  the  company  was 
liable  upon  them.  Evidence  that  such 
was  the  object  of  the  mode  of  accept- 
ance is  admissible  in  such  case.  A 
corporation  is  bound  by  the  acts  of  its 
authorized  agent,  although  the  agent 
contracts  in  his  own  name,  and  does 
not  disclose  his  principal,  if  the  credit 
be  not  given  exclusively  to  the  agent. 
Conro  V.  Port  Henry  Iron  Co. ,  12  Barb. 
27. 

A  note  in  the  terms  "The  O.  M. 
Co.  promise  to  pay,  etc.,"  signed  "  J. 
H.,  trustee,"  imports  an  intention  to 
bind  the  company  only  ;  and  cannot  be 
enforced  against  the  agent  personally. 
Shaver  v.  Ocean  Mining  Co.,  21  Cal. 
45. 

Where  the  words  of  the  note  were, 
"  I  promise,"  and  it  was  signed  with 
the  words /or  the  company  prefixed  to 
the  name  of  the  agent, —  held,  that  it 
was  the  note  of  the  company,  and  not 
of  the  agent.  Emerson  v.  Providence 
Hat  Co.,  12  Mass.  237.  But  a  note  in 
the  words  "  I  promise  to  pay,  etc., 
signed  by  an  individual  with  his  own 
name,  may  be  treated  as  a  contract 
binding  him  personally,  notwithstand- 
ing he  adds  to  his  signature  a  desig- 
nation of  a  corporate  office  held  by  him, 
— e.   g.    "trustee,"  or  "  president "  of 

the company.      Such  description 

is  treated  as  merely  a  description  of 
the  person.  Fiske  v.  Eldridge,  12 
Gray,  474  ;  Haverhill  Mut.  Fire  Ins. 
Co.  V.  Newhall,  1  Allen,  129  ;  Walker 
V.  Bank  of  N.  Y.,  9  N.  Y.  582;  Morell 
V.   Codding,  4  Allen,  403. 


286  Private  Corporations. 

Seo,  178.  It  has  even  been  held  that  in  cases  of  doubt,  as  to  the 
intention  of  the  parties  to  a  written  instrument,  that  it  was  per- 
missible to  admit  parol  evidence  to  show  the  facts  and  the  inten- 
tion of  the  parties ;  as  that  the  principal  and  not  the  agent  should 
be  bound.  Thus,  where  a  check  was  signed  by  the  cashier  of  a 
bank  without  the  addition  of  the  word  "  cashier  "  to  his  name, 
but  dated  at  the  bank  and  made  payable  to  its  teller,  as  it  was 
doubtful  whether  it  was  the  private  or  the  official  act  of  the 
cashier,  it  was  lield  proper  to  show  this  by  parol  evidence.^ 

The  general  principles  applicable  in  case  of  the  agents  of  a  cor- 
poration are  the  same  as  in  case  of  the  agents  of  natural  persons  ; 
and  reference  may  be  had  to  special  treatises  on  agency  for  a 
fuller  illustration  of  the  law  relating  to  the  sufficiency  of  the 
execution  of  contracts  by  agents  to  bind  the  principal. 

Sec.  179.  ultra  vires  contracts  by  agents., —  We  have  already  al- 
luded to  the  familiar  principle  of  law  that  a  corporation  cannot 
engage  in  any  business,  do  any  act,  or  enter  into  any  contract  not 
embraced  within  the  scope  of  the  powers  conferred  upon  it.  And 
it  cannot,  of  course,  confer  upon  its  agents  any  authority  or  power 
which  it  does  not  itself  possess.  This  doctrine  rests  upon  the 
soundest  principles ;  as  otherwise  acts  might  be  done  and  obliga- 
tions incurred,  not  only  prejudicial  to  private  rights,  but  inimical 
to  the  interests  of  the  public.  It  follows,  therefore,  that  con- 
tracts made  by  the  agents  of  a  corporation,  that  are  beyond  the 
powers  of  the  corporation,  and  unauthorized  by  law,  are  usually 
null  and  void,  in  whosesoever  hands  they  may  be.'' 

*  Mechanics'   Bank   v.   Bank  of  Co-  ^BuflFett  v.  Railroad  Company,  40  N. 

lumbia,  5  Wheat.  326  ;  Olcott  v.  Tioga  Y.  168  ;  Griggs  v.  Foote,  14  Allen,  195  ; 

R.  Co.,  27  N.  Y.  559;  Bank  of  Utica  v.  Pearce  v.  Railroad  Company,  21  How. 

Magher,  18  Johns.  341  ;  Northampton  441  ;  Miners'  Ditch  Company  v.  Zeller- 

Bank  v.  Pepoon,  11   Mass.  288;  Far-  bach,  37  CaL   543;    Marsh  v.   Fulton 

mers'  Bank  v.  Height,  3  Hill.  494 ;  Mc-  County,  10  Wall.  676;  Thomas  v.  Rich- 

Whorter  v.  Lewis,  4  Ala.  198;  Cahill  mond,  12  id.  349;  Bridgeport  v.  Hous- 

V.  Kalamazoo  Ins.  Co.,  2  Doug.  (Mich.)  atonic  Railroad  Company,  15  Conn.  475; 

124 ;  Merchants'  Bank  v.  Central  Bank,  Martin  v.  Mayor,  etc.,  1  Hill,  545;  Over- 

1   Ga.    418  ;    Ghent  v.    Adams,  2   id.  seers   v.   Mayor,  etc.,   18   Johns.   382 ; 

214  ;  Mare  v.  Charles,  9  E.  &  B.  978;  Donovan  v.  New  York,  33  N.  Y.  291  ; 

34  Eng.  L.  &  Eq.  138  ;  DeWitt  v.  Wal-  Seibrecht  v.  New  Orleans,  12  La.  Ann. 

ton,  9  N.  Y.  571  ;  Hicks  v.  Hinde,  9  496  ;  Clark  v.  Des Moines,  19  Iowa.  199  ; 

Barb.  528 ;  Babcock  v.  Beman,  11  N.  Y.  Loker  v.  Brookline,  13  Pick.  343;  Phil- 

200.  adelphia  v.  Flanigen,  47  Penn.  St.  21  ; 

For  a  further  consideration  of  per-  Trustees  v.    Cherry,  8   Ohio   St.    564 ; 

eonal   liability  of  the   agent  in    such  Hague  v.  Philadelphia,  48  Penn.  St.  527; 

cases,  see  post,  %  210  et  seq.  Albany  v.  Cunliff,  2  Comst.  165  ;  Cuyler 


Officers  and  Agents  Generally.  287 

But  we  shall  hereafter  consider  the  doctrine  of  idi/ra  vires 
more  fully  in  a  chapter  on  contracts.^ 

Sec.  180.  If,  under  the  English  corporation  acts,  the  law  of  its 
constitution  or  the  constating  instruments  confer  upon  boards  of 
directors  the  authority  of  acting  for  the  corporation,  or  of  man- 
aging its  affairs,  they  still  have  no  authority  beyond  that  confer- 
red upon  the  corporation,  nor  can  they  bind  the  corporation  by 
any  contract  beyond  the  powers  conferred  on  the  corporate  body 
which  they  represent  as  agents.^  And  where  the  powers  of  mak- 
ing by-laws  is  in  the  corporate  body,  they  may  thereby  limit 
the  power  of  the  directors ;  and  the  exercise  of  powers  by 
them  beyond  the  power  thus  conferred  would  also  be  ultra  vires? 

Sec.  ISl.  Parties  dealing  with  an  agent  must  take  notice  of  his  real  or 
apparent  authority.  —  It  is  a  fundamental  principle  of  the  law  of 
agency,  that  the  principal  is  bound  only  by  the  authorized  acts  of 
his  agent.  But  this  authority  may  be  shown  not  only  by  a  written 
instrument  conferring  the  authority,  or  by  a  verbal  authority 
where  that  is  sufficient,  but  by  the  acts  of  the  principal  in  holding 
the  agent  out  to  the  world  as  having  authority  to  act  in  the  par- 
ticular matter.*  Strangers,  dealing  with  the  agent  of  a  corpora- 
tion, are  not  bound  to  inquire  what  the  corporation  has  in  fact  au- 
thorized him  to  do,  but  may  deal  with  him  in  reference  to  those 
powers  which  it  has  held  him  out  to  the  world  as  being  possessed 
of.     In  other  words,  in  reference  to  his  apparent  authority.'^     The 

V    Rochester,  12  Wend.  165  ;  Hodges  Smead  v.  Railroad  Company,  11  id.  104; 

V,   BuflFalo,  2  Denio,  110;  Vincent   v.  Brady  v.  Mayor, 20  N.  Y.  312  ;  Appleby 

Nantucket,  12  Cush.  103;  Stetson  v.  v.  Mayor,  etc.,  15  How.  Pr.  428;  Estep 

Kempton,  13  Mass.  272  ;  Parsons  v.  In-  v.  Keokuk  County,  18  Iowa,  199  ;  Clark 

habitants   of    Goshen,    11   Pick.    396;  v.  Polk  County,  19  id.  248.     And  the  de- 

Spaulding  v.  Lowell,  23  id.  71;  Mitchell  fense  ultra  vires  may  be  made  though 

V.  Rockland,  45  Me.  496;  S.  C,  41  id.  the  corporate  seal  is  attached.     Leav- 

363  ;  Commissioners  v.  Cox,  6  Ind.  403;  enworth  v.  Rankin,  2  Kans.  358. 

'Seeposi,  chap.  9.  *CoMSTOCK,  J.,  in  Mechanics'  Bank 

2  Fleckner  v.  United  States  Bank,  8  v.  New   York,  etc.,  R.  Co.,  13   N.  Y. 

Wheat.    356;    Ridgway   v.    Farmers'  632;  Farmers   &  Mechanics' Bank   v. 

Bank,  12  S.  &  R.  265  ;  Salem  Bank  v.  Butchers  &  Drovers'  Bank,  16  id.  125. 

Gloucester  Bank,  17  Mass.  29  ;  Bank  of  »  galem  Bank  v.  Gloucester  Bank,  17 

Kentucky  v.   Schuylkill  Bank,  1  Par-  Mass.  1  ;  Magill  v.  Kauffman,4  S.  &  R. 

sons'  Sel.  Cas.  227.  318  ;  City  of  Covington  v.  Covington, 

^  Id.     See,  also,  Green's Brice's  Ultra  etc..  Bridge  Co.,  10  Bush.  69. 

Vires,  607  et  seq. 


288  Private  Corpokations. 

same  rules  in  this  respect  apply  to  corporations,  as  apply  in  the 
case  of  individuals,  and  a  person  who  is  clothed  with  authority  to 
do  an  act  for  them  at  all  is  treated  as  being  clothed  with  authority 
to  bind  them  in  respect  to  all  matters  within  the  scope  of  his  real 
or  apparent  authority.^  Thus  where  an  agent  had  authority  to 
sign  contracts  of  shipment,  and  his  name  was  signed  to  a  particu- 
lar contract  as  such  agent  of  the  clerk  in  his  office,  the  execution 
of  such  contracts  being  a  part  of  his  duties,  it  was  held  that  the 
defendants  were  bound  thereby.''  The  maxim  facit  per  alium, 
facitjpei'  se,  applies  with  equal  force  to  corporations,  as  to  indi- 
viduals, and  the  rule  is  not  a  doubtful  one,  either  in  policy  or 
principle,  that  in  transactions  where  one  of  two  persons  must 
sustain  a  loss,  the  loss  must  fall  upon  him  who  has  made  it  possi- 
ble for  the  other,  innocently,  to  be  placed  in  a  position  where  loss 
might  result  to  him  except  for  the  application  of  tliis  rule.  It 
would  be  disastrous  to  commercial,  as  well  as  other  interests,  if  a 
person,  by  acting  through  the  agency  of  another,  could  shield 
himself  from  liability  for  such  person's  acts,  ad  libitum.  Fortu- 
nately, no  such  rule  exists,  and  he  who  intrusts  authority  to 
another,  in  whatever  department  of  business,  is  bound  by  all 
that  is  done  by  his  agent  within  the  scope  of  his  apparent 
power,  and  cannot  screen  himself  from  the  consequences  thereof 
upon  the  ground  that  no  authority  in  fact  was  given  him  to  do 
the  particular  act,  unless  the  act  was  clearly  in  excess  of  his 
apparent  authority,  or  was  done  under  such  circumstances  as  put 
the  person  dealing  with  him,  upon  inquiry,  as  to  the  agent's  real 
authority ;  and  no  exception  to  this  rule  exists  in  the  law  relating 
to  corporations.  It  is  always  a  question  of  fact  whether  the  act 
was  done  under  such  circumstances  that  the  person  dealing  with 
the  agent  had  a  right  to  believe  that  he  was  clothed  with  authority 
to  do  the  particular  act  in  question. 

The  rule  may  be  said  to  be  that,  unless  notice  is  given  to  third 
persons,  or  circumstances  exist  which  should  put  them  on  inquiry, 
that  in  respect  of  certain  matters  within  the  scope  of  his  apparent 
authorit}'-,  certain  limitations  are  imposed  upon  the  agent,  his  acts 
within  the  scope  of  such  authority  shall  be  treated  as  the  acts  of 

■*Bodmev.  Exchange  F.  Ins.  Co.,  51  N.     Rowley  v.  Empire  Ins    Co.,  36  N.  Y 
Y.  117  ;  Newell  v.  Smith,  49  Vt.  255  ;     550. 

^  Newell  V.  Smith,  ante. 


Oeticers  and  Agents  Generally.  289 

his  principal,  and  not  the  acts  of  the  person  with  whom  he  deals 
as  the  representative  of  the  principal,  even  though  the  policy 
declares  him  the  agent  of  the  assured.'  The  question  is  not  what 
the  powers  of  the  agent  in  fact  were,  but  what  power  did  the 
company  hold  him  out  as  possessing."  From  the  business  with 
which  the  agent  was  intrusted,  had  the  person  dealing  with  him 
a  right  to  understand  that  he  had  authority  to  do  the  particular 
act,  in  reference  to  which  the  principal  denies  his  authority  ?^ 

But  the  general  doctrine  in  reference  to  corporate  agents,  whether 
general  or  special,  has  been  held  to  be  that  parties  dealing  with 
them  must  take  notice  of  such  authority  as  is  conferred  upon  them 
by  the  charter,  organic  act,  articles  of  association  or  other  constat- 
ing instruments,  and  perhaps  the  by-laws  adopted  by  the  corporate 
body,  in  accordance  with  the  organic  or  fundamental  laws  of  its  con- 
stitution, for  such  laws  are  supposed  to  be  public ;  and  all  parties 
dealing  with  corporate  agents  are  presumed  to  have  notice  of  the 
same."  In  a  recent  case  where  this  question  was  involved,  Daniels, 
J.,  said :  "  The  president  is,  at  most,  the  agent  of  the  company, 
created  under  a  special  legislative  act  defining  tlie  rights  and  privi- 
leges of  the  body,  and  the  manner  in  which  they  should  be  enjoyed. 
Tliis  the  plaintiff  is  to  be  regarded  as  knowing.  For  all  persons 
deahng  with  the  officers  or  agents  of  corporations  are  bound  to 
know  that  they  act  either  under  its  charter  or  by-laws,  or  the  usages 
which  may  be  shown  to  exist  defining  the  extent  of  their  author- 
ity. They  must,  in  doubtful  cases,  acquaint  themselves  with  the 
extent  of  that  authority,  or  otherwise  submit  to  the  consequences 
resulting  from  their  omission  to  do  that."^  In  support  of  this 
doctrine  it  is  claimed  that  all  persons  may  acquaint  themselves 
with  the  general  status  of  incorporation,  and  with  the  articles  of 

'  Wood's  Law  of  Fire  Insurance,  644  ;  *  Adriance  v.  Roome,  52  Barb.  399; 

Commercial  Insurance  Co.  v.   Ives,  56  Wild    v.  Bank  of    Passamaquoddy,  3 

111.  403  ;  Columbia  Ins.  Co.  v.  Cooper,  Mas.  (U.  S.  C.  C.)  505  ;  State  v.  Com- 

50  Penn.  St.  331  ;  Union  Mut.  Ins.  Co.  mercial  Bank,  6  S.  &  M.  218. 

V.  Wilkinson,  13  Wall.  222.  »Ilisley  v.  Ind.,  etc.,R.  Co.,  1  Hun, 

-Eclectic  Life  Ins.   Co.    v.  Fahren-  202.  See,  also,  North  River   Bank  v. 

krug,  68  111.  463.  Aymar,  3  Hill,  263;  Mechanics'  Bank 

»^tna  Ins.  Co.   v.  Maguire,  51  111.  v.   New  York,  etc.,  R.  Co.,  13  N.  Y. 

342  ;  Washington  F.  Ins.  Co.  v.  David-  599  ;   McCullough   v.    Moss,  5   Denio, 

son,  30  Md.  91  ;  Home  Life  Ins.  Co.  v.  567  ;  Adriance  v.  Roome,  52  Barb.  399; 

Pierce,  5  Ins.  L.  J.  290(111.;  ;  Farmers',  Dabney  v.   Stevens,  40  How.  Pr.  341  ; 

etc.,  Ins.  Co.  v.  Cheshunt,  50  111.  Ill  ;  Salem  Bank  v.  Gloucester,  17  Mass.  1 ; 

Franklin  F.  Ins.    Co.   v.    Murray,  73  Lowell  Savings  Bank  v.  Winchester, 

Penn.  St.  13.  8  Allen,  109. 

37 


290  Private  Corporations. 

association,  or  other  instruments  by  which  parties  may  associate 
and  become  incorporated  under  general  statutes ;  that  if  they  fail 
to  acquaint  themselves  with  them,  and  the  authority  of  the  cor- 
porate agents  provided  for  by  such  acts,  articles  or  constating 
instruments,  it  is  their  own  fault ;  and  if  they  give  credit  to  any 
person  not  thereby  authorized  to  act  in  reference  to  the  particular 
matter,  they  must  be  content  to  look  to  the  agent  only,  and  can- 
not look  to  the  company  whom  they  represent.'  Even  a  stranger 
who  deals  with  a  corporate  agent  is  bound  to  take  notice  of  such 
limitations  of  this  authority  as  are  contained  in  the  organic  or 
constating  laws  or  instruments  of  the  body  corporate. 

Sec.  182.  Delegation  of  authority  by  agents.  — In  the  extended 
and  frequently  complicated  character  of  the  business  of  many  of 
our  various  modern  corporations  for  pecuniary  gain,  it  must  almost 
necessarily  follow  that  authority  is  conferred  upon  various  officers 
and  agents,  expressly  or  impliedly,  to  employ  other  agents  and 
sub-agents.  The  objects  of  corporations  would  seldom  be  attained 
unless  this  power  existed  ;  and  in  a  majority  of  cases  it  rests  upon 
impKcation  from  the  powers  conferred  on  a  class  of  agents,  or  a 
particular  agent  of  large  powers  and  authority.  We  have  already 
briefly  alluded  to  this  subject  in  treating  of  directors.^  But  a 
furtlier  consideration  of  it  seems  to  be  proper  in  this  connection. 
It  may  be  said  that  the  'power  to  delegate  authority  may  be 
expressly  provided  for  in  the  original  appointment  of  the  agent ; ' 
but  in  the  various  and  complicated  affairs  of  moneyed  corpora- 
tions this  seldom  occurs,  and  the  right  is  usually,  perhaps,  left  to 
be  inferred  from  the  nature  and  character  of  the  agency. 

Mr.  Story,  after  affirming  the  general  doctrine  alluded  to, 
observes  :  "  But  there  are  cases  in  which  the  authority  may  be 
implied,  as  when  it  is  indispensable  by  the  laws,  in  order  to  accom- 
plish the  end ;  or  it  is  the  ordinary  custom  of  trade ;  or  it  is  under- 
stood by  the  parties  to  be  the  mode  in  which  the  particular  busi- 
ness would  or  might  be  done.*     Thus,  if  a  person  should  order 

'  Earnest   v.   Nicholls,  6  H.  L.  419  ;  seg.;  1  Bell's  Com.  387  et  seq.;  Shipley 

Smith  V.  Hull  Glass  Co.,  11  C.  B.  936.  v.  Kymer,  1  M.  &  S.  484  ;  Cockran  v. 

*  See  ante,  chap.  6.  Irlam,  2  M.  &  S.  301  ;  Laussatt  v.  Lip- 

3  1  Liv.  on  Agency,  54  et  seq.;  Com-  pincott,  6  S.  &  R.  386 ;  Johnson  v.  Cun- 
mercial  Bank  v.  Norton,  1  Hill,  505.  ningham,  1  Ala.  (N.  S.)  249. 

4  Coles  V,  Trecoothick,  9  Ves    234  et 


Officers  and  Agents  Generally.  291 

his  goods  to  be  sold  by  an  agent  at  public  auction,  and  the  sale  could 
only  be  made  by  a  licensed  auctioneer,  the  authority  to  substitute 
him  in  the  agency,  so  far  as  the  sale  is  concerned,  would  be 
implied.'  So  where,  by  the  custom  of  trade,  a  ship  broker,  or 
other  agent,  is  usually  employed  to  procure  a  freight  or  charter- 
party  for  ships,  seeking  a  freight,  the  master  of  such  a  ship,  who  is 
authorized  to  let  the  ship  on  freight,  will  incidentally  have  the 
authority  to  employ  a  broker,  or  agent  for  the  owner,  for  this  pur- 
pose. And  the  same  principle  will  apply  to  a  factor,  where  he  is, 
by  the  usage  of  trade,  authorized  to  delegate  to  another  the  author- 
ity to  substitute  another  person  to  dispose  of  the  property.''  In 
short,  the  true  doctrine,  which  is  to  be  deduced  from  the  decisions, 
is  (and  it  is  entirely  coincident  with  the  dictates  of  natural  justice), 
that  the  authority  is  exclusively  personal,  unless  from  the  lan- 
guage used,  or  from  the  fair  presumptions  growing  out  of  the 
particular  transaction,  or  of  the  usage  of  trade,  a  broader  power 
was  intended  to  be  conferred  on  the  agent."  " 

'      Sec.  183.     Same  continued This  doctrine  of  implied  authority, 

from  the  nature  and  character  of  the  agency,  is  peculiarly  ap- 
plicable to  corporate  agents.  For,  as  corporations  can  only  act 
by  and  through  agents,  it  frequently  occurs  that  some  one  must 
be  appointed  a  general  agent,  by  the  corporate  body  or  by  the 
directors,  to  superintend  a  variety  of  matters,  such  as  the  superin- 
tendents of  various  mattei's  connected  with  the  operations  of  rail- 
roads and  other  corporations.  And  such  appointment  necessarily 
contemplates  the  appointment  of  sub-agents.  It  necessarily  fol- 
lows in  such  cases,  t^at  they  have  implied  authority  to  appoint 
sub-agents  for  various  purposes,  and  to  remove  the  same  at  their 
will,  and  these  sub-agents  may  in  turn  be  authorized  by  express 
authority,  or  the  requirements  of  the  employment  or  business,  to 
employ  other  agents.  The  appointment  in  all  these  cases,  if  not 
directly  authorized  by  the  corporate  body  or  board  of  directors, 

'  Laussatt  v.   Lippincott,  6  S.  &  R.         '  Story  on  Agency,  g  14.     See,  also, 

386.  1  Bell's  Com.  388,  482;  Ersk.  Inst.,  B. 

2  Cockran  v.  Irlam,  2  M.  &  S.  301  ;  3,  tit.  3,  §  34 ;  2  Kent's  Com.  633  (4th 

Goswill  V.  Dankley,  1  Str.  680 ;  Brom-  ed.) ;  1  Domat,  B.  1,  tit.  16,  ii  3  of  art. 

ley  V.  Coxwell,  2  B.  &  P.  438  ;  Gray  v.  2.  3  ;  Cockran  v.  Irlam,  2  M.'&  S.  301  ; 

Murray,  3  Johns.  Ch.    167;   Story  on  Catlin  v.  Bell,  4  Camp.  183. 
Agency,  i^  110. 


292  Private  Corpoeations. 

nor  clearly  to  be  inferred  from  the  nature  and  character  of  the 
duties,  business,  or  objects  of  the  corporation,  is  at  least  generally 
ratified  by  the  acts  and  conduct  of  the  principal,  in  some  manner, 
so  as  to  make  the  appointment  equally  as  valid  for  all  purposes 
as  though  the  authority  originally  emanated  from  the  principal. 
We  have  already  considered  the  implied  authority  of  an  agent, 
and  the  subject  of  ratification  by  the  principal,  in  discussing  the 
subject  of  directors. 

Sec.  184.  Powers  expressly  conferred  by  law.— We  have  already 
alluded  to  the  powers  expressly  conferred  upon  ofiicers  and  agents 
by  statute  or  by  the  fundamental  law.  In  such  cases  they  may 
exercise  these  powers  unrestrained  by  the  will  of  even  the  corpo- 
rate body.  The  doctrine  of  authority  to  act  within  the  scope  of 
the  authority  is  here  as  applicable  as  ,where  the  appointment 
comes  from  the  corporate  body  or  other  appointing  power.  But 
we  have  noticed  the  general  principles  applicable  in  such  cases, 
as  well  as  the  doctrine  of  implied  powers,  and  a  further  considera- 
tion of  them  in  this  connection  is  thereby  rendered  unnecessary. 

But  no  authority  can  be  conferred  in  excess  of  that  possessed 
by  the  corporate  body,  as  such  authority  would  be  ultra  vires, 
and  any  contract  made  by  them  in  excess  of  such  powers  would  be 
ultra  vires  and  void. 

Sec  .  185.  Ratification  of  acts  of  agents The  doctrine  of  ratifica- 
tion as  applied  to  agency  is  that  whereby  the  principal  with  full 
knowledge  of  the  agent's  acts,  doings  or  omissions,  approves  and 
indorses  the  same,  whereby  he  becomes  bound  by  them,  as  though 
express  authority  had  been  originally  conferred  upon  such  agent 
in  relation  to  the  matters.'  The  general  maxim  is :  Omnis 
ratihabitio  retrotrahitur,  et  Tnandato,  priori,  equiparatur.  Thus, 
if  a  contract  is  made  by  an  agent  acting  for  his  principal,  but  with- 
out authority,  but  is  subsequently  ratified  by  the  principal,  this 
renders  it  valid  so  as  to  confer  upon  the  other  contracting  party 
the  same  rights  and  remedies  as  if  the  authority  therefor  had  orig- 
inally been  conferred  upon  the  agent.''     This  ratification  may  be 

'  Story  on  Agency,  S§  239,  445.  Cain,  7  Ala.  806  ;  Taylor  v.  Robinson, 

2  Smith's  Merc.  L.  60;    id.  108  (2d  14  Cal.  396;  McCracken  v.   San  Fran- 

ed.);  Story  on  Agency, §  445  ;  Cook  v.  cisco,  16  id.  591. 

Tullis,  18  Wall.   332;  Wood  v.   Mc- 


Officers  and  Agents  Generally.  293 

made  in  various  ways.  It  is  not  essential  tliat  there  be  a  posi- 
tive and  direct  adoption  of  the  acts,  but  such  ratification  may  be 
inferred  from  the  acts  of  tlie  principal,  and  from  the  facts  and 
circumstances  of  the  case.  If  there  is  an  express  ratification  or 
assent  to  an  unauthorized  act  of  an  agent,  there  is  no  question  of 
the  application  of  the  doctrine,  and  a  contract  made  by  such  un- 
authorized agent  thus  ratified  becomes  obligatory  on  the  part  of 
the  corporation  as  well  as  the  other  j^arty."  But  in  most  cases  of 
this  character  the  ratification  becomes  a  matter  of  inference  or  im- 
plication from  the  acts  and  conduct  of  the  principal.'  And  slight 
circumstances  will  sometimes  be  sufiicient  to  warrant  the  conclu- 
sion of  a  ratification  by  the  principal.^  Thus,  if  the  principal, 
when  informed  of  a  purchase  by  his  agent  in  the  name  of 
the  principal,  merely  complains  of  the  manner  in  which  the 
authority  has  been  exercised,  but  does  not  deny  the  authority  ;  * 
or  if  an  agent  exceeds  his  authority  in  the  purchase  of  goods,  but 
the  principal,  with  knowledge  of  the  facts,  receives  the  goods  as 
his  own  Avithout  objection  ;  ^  or  if  an  agent  sells  goods  contrary  to 
his  instructions,  but  the  principal  afterward  receives  the  proceeds 
witn  knowledge  of  the  facts ;  and  generally,  where  the  principal 
receives  the  fruits  of  what  has  been  acquired  by  the  wrongful  act 
of  an  agent,  and  does  not  restore  it  on  being  informed  of  the  facts," 

»  Wilson  V.  Tumman,  6  M.  &  G.  336;  11  Mass.  98.     The  rule  is  that,  when 

Blood  V.  Goodrich,  9  Wend.  68;  S.  C,  an  a^ent  does  an  act  for  the  use  of  his 

13  id.  565;  Harford  v.  M'Nair,  9  id.  57;  principal  and  the  principal  enjoys  the 

Chitty  on  Com.  and  Man.  179;  1  Liv.  benefits  and  fruit  of  the  act,  he  is  es- 

on    Agency,    45 ;     Story   on    Agency,  topped    from    afterward   saying    that 

§353.  the  act  is  illegal.     Law   v.   Conn.    R. 

2  Terril  V.  Flower,  6  Mart.  (La.)  584;  R.    Co.,   46    N.    H.    384;    Ruggles   v. 

Loraine  v.  Cartwright,  3  Wash.  (C.  C.)  Washington  County,  3  Mo.  496  ;  Raid 

151;  Story  on  Agency,  §  353.  v.  Hibbard,  6  Wis.  175  ;  Farmers',  etc., 

^Paley  on  Agency,  by  Lloyd,  171  ;  Bank  v.  Sherman,  G  Bosw.   181  ;  Nar- 

Conn.  V.  Penn.,  1  Peters  (C.  C.),  496  ;  ragansett  Bank  v.  Atlantic  Co.,  3  Mete. 

Richmond  Man. Co.  v.  Starks,  4  Mason,  (Mass.)  383,  as  where  a  person  brings 

396;  Bank  of  Columbia  v.  Patterson,  a  suit  based  on    the    acts    of  a   party 

7  Cranch,  399  ;  Rogers   v.    Kneeland,  claiming  to  have  acted  as   his   agent, 

13  Wend.  114.  the  bringing  of  such  action  is  a  rati- 

*  Johnson  v.  Jones,  4  Barb.  369.  fication  of  the  authority  of  the  agent. 

^Odiorne    v.    Maxcy,  13  Mass.  178;  Dodge  v.  Lambert,  3  Bosw.  570  ;  S.  P., 

Clark   V.    Van   Reimsdyk,  9   Cranch,  Hamp.shire  v.  Franklin,  16  Mass.  76  ; 

153.  Sutton   V.  Cole,  3   Pick.    (Mass.)   333; 

« Willinks      v.     Hollingsworth,     6  Folger  v.   Mitchell,  id.  396 ;  Bank  of 

Wheat.  341 ;  Forrestier  v.  Bordman,  1  Augusta  v.  Conrey,  38  Miss.  667  ;  Wal- 

Story,  43;    Palmerton   v.  Huxford,   4  ker   v    Mobile,  etc,  R.    R.  Co.,  34   id. 

Denio,  166.      See,  also,  Fenn  v.   Har-  345;  Ham   v.  Boody,    30   N.    H.  411  ; 

rison,  4  T.  R.  177  ;  Long  v,  Colburn,  Corser  v.  Paul,  41  id.  34 ;  Bank  of  Be- 


294:  Private  Corpokations. 

in  these  and  similar  cases  the  conduct  of  the  principal  would  be 
considered  as  an  indorsement  and  ratification  of  the  agent's  acts. 
It  would  be  the  duty  of  the  principal  in  such  cases  to  restore  the 
fruit  of  the  unauthorized  contract,  as  soon  at  least  as  the  facts 
came  to  his  knowledge,  and  as  far  as  possible  place  the  other  party 
in  staifd  quo,  otherwise  he  would  be  held  liable  on  the  contract. 

Sec.  186.  The  doctrine  of  ratification  applicable  to  corporations. — 
This  doctrine  is  peculiarly  applicable  to  corporations  for  pecuni- 
ary profit,  and  serves  a  valuable  purpose  in  securing  the  ends  of 
justice.  We  have  already  seen  that  the  authority  of  agents  of 
corporations  may  exist  by  the  fundamental  law  of  the  institution, 
by  the  action  of  the  corporate  body  or  board  of  directors,  by  im- 
plication from  the  acts  of  the  corporation,  or  be  inferred  from  the 
otfice  of  the  agent  who  assumes  to  act.  In  the  case  of  private 
joint-stock  corporations  for  pecuniary  pro'fit  they  usually  require 
many  agents  and  sub-agents.  The  appointment  of  these  agents 
may  be  inferred,  not  only  where  there  is  no  appointment  under 
the  corporate  seal,  but  even  where  there  is  no  actual  record  of 
their  appointment.  These,  in  their  turn,  may  be  authorized  to 
appoint  sub-agents,  to  make  contracts  in  the  name  of  the  corpora- 
tion. Proof  of  the  authority  to  act  may  be  diflicult  or  impossible, 
except  as  it  may  be  inferred  from  the  acts  of  the  body.  If  a  sub- 
agent  is  employed,  and  his  acts  are  recognized  by  the  company,  or 
if  they  receive  the  benefit  of  his  contracts,  knowing  the  facts, 
this,  as  we  have  seen,  would  be  a  ratification  of  the  agency ;  and 
if  it  takes  the  benefit  of  a  contract  made  by  such  an  agent,  it 
must  take  the  same  as  made,  with  its  disadvantages  as  well  as  ben- 

loit  V.  Beale,  34  N.  Y.  473;  Franklin  12  Ga.  205;  Mapp  v.  Phillips,  32  id. 

V.  Ezell.  1  Sneed  (Tenn.),  497.     Where  72  ;  Mathews  v.  Hamilton,  23  111.  470  ; 

a  sale  ia  made  of  land,  no  one  will  be  Tidrick  v.  Rice,  13  Iowa,  214;  Dodge 

permitted  to  receive  both  the  money  v.  McDonnell,  14  Wis.  553  ;  Fletcher 

and  the  land  ;  and  hence  where  one  re-  v.  Dysart,  9  B.  Monr.  (Ky.)  413  ;  Dick- 

ceives  the  proceeds  of  the  sale  of  land,  inson  v.  Conway,  12  Allen  (Mass.),  487  ; 

this  is  an  affirmation  that  his  title  has  Coombs  v.  Scott,   id.   493  ;    Woodbury 

passed  to  the  purchaser,  by  virtue  of  v.    Larned,  5   Minn.  339;  Humphreys 

the   sale.       Warden   v.    Eichbaum,   3  v.    Havens,    12  id.   298 ;    Seymour   v. 

Grant's  Cas.  42.     But  the  ratification  of  Wyckoif,  10  N.  Y.  (6  Seld.)  213  ;  Brass 

the  acts  of  an  unauthorized  agent  will  v.    Worth,    40    Barb.   648;   Roach    v. 

not  bind  the  principal,  unless  at  the  Coe,  1    E.  D.  Smith,   175  ;  Pittsburgh, 

time  of  ratification  he  was  fully  aware  etc.,  R.  B    C'o.   v.   Gazzam,  32   Penn. 

of  all  the  circumstances.     O wings  v.  St.  340. 
Hall,  9  Pet.  607;  Hardeman  v.  Ford, 


Officers  and  Agents  Generally. 


295 


efits  to  them,  and  they  could  not,  under  such  circumstances,  claim 
any  benefit  from  portions  of  it  in  their  favor,  and  reject  it  as  to 
those  matters  imposing  obligations  upon  it.  It  must  accept  the 
contract  in  toto,  or  not  at  all.^ 

Sec.  187.  Same  continued.  —  The  general  doctrine  we  have  re- 
ferred to  is  illustrated  by  a  recent  case,  where  the  directors  of  a 
railroad  company  allowed  its  president  to  purchase  locomotives 
and  to  operate  the  road  with  them,  and  generally  to  manage  the 
affairs  of  the  corporation  in  his  discretion  and  without  interfer- 
ence, but  afterward  resumed  the  management  of  the  road  them- 
selves. This  was  held  a  sufficient  ratification  of  the  president's 
acts  as  to  fiu-nish  evidence  of  the  president's  original  authority  to 
bind  the  corporation  for  the  payment  of  bills  issued  by  the  pres- 
ident in  payment  of  the  locomotives.^  And  it  is  a  generally 
recognized  principle  of  the  law  of  agency  that  where  the  principal 
neglects  promptly  to  disavow  the  act  of  agency  in  case  the  agent 


>  See  Moss  v.  Averell,  10  N.  T.  449  ; 
Church  V.  Sterling,  16  Conn.  388  ;  Chi- 
cago Building  Soc.  v.  Crowell,  Go  111. 
453.  In  Mayor  v.  Ray,  19  Wall.  468, 
Hunt,  J.,  said  :  "  Itis  a  general  rule  ap- 
plicable to  all  persons  and  corporations, 
and  is  a  dictate  of  plain  honesty,  that 
whoever,  knowing  the  facts  of  the  case, 
retains  and  uses  money  received  by  an 
agent  for  his  account,  cannot  repudi- 
ate the  contract  on  which  it  is  re- 
ceived." See,  also.  Story  on  Agency, 
§  239  et  seq.;  1  Lind.  on  Part.  (;3d  ed.) 
278,  805  ;  Downing  v.  Mt.  Washington 
R.  Co.,  40  N.  H.  230.  In  Al- 
legheny City  v.  McClurkan,  14  Penn. 
St.  81,  Coulter,  J.,  observes:  "I 
take  it  for  granted  that  it  (the  char- 
ter of  the  corporation)  contains  no 
express  authority  to  the  corporation 
to  issue  such  notes  as  those  embraced 
in  this  action.  But  it  does  not  follow 
that  the  corporators  are  therefore  not 
answerable  for  them  in  their  corporate 
capacity.  They  have  received  value 
for  them  in  their  various  public  works 
and  improvements  erected  and  made 
in  the  city  through  their  instrumen- 
tality, and  it  hardly  comports  well 
with  fair  dealing  that  they  should  seek 
to  exonerate  themselves  from  a  debt 
on  this   account,    contracted    bv   and 


through  their  accredited  agents  and 
with  their  silent  acquiescence." 

^Olcott  V.  Tioga  R.  Co.,  27  N.  Y. 
546.  See,  also,  Cushman  v.  Loker,  3 
Mass.  106;  Episcopal  Charity  Soc.  v. 
Episcopal  Church,  1  Pick.  372.  And 
long  acquiescence  will  amount  to  a  pre- 
sumption where  it  cannot  otherwise 
be  accounted  for.  Courcier  v.  Ritter, 
4  Wash.  (C.  C.)  549  ;  Erick  v.  Johnson, 
6  Mass.  193  ;  Amory  v.  Hamilton,  17 
id.  103  ;  Towle  v.  Stevenson,  1  Johns. 
Cas.  110  ;  Pitts  v.  Shubert,  11  La. 
288  ;  Kingston  v.  Kincaid,  1  Wash. 
(C.  C.)  455. 

If  the  agency  actually  exists  the  ac- 
quiescence may  well  raise  the  pre- 
sumption of  a  ratification.  Courcier 
V.  Ritter,  4  Wash.  (C.  C.)  549;  Amory 
v.  Hamilton,  17  Mass.  103  ;  Erick  v. 
Johnson,  6  id.  193  ;  Fitzsimmons  v. 
Joslin,  21  Vt.  129  ;  Johnson  v.  Jones, 
4  Barb.  369  ;  Pickett  v.  Pearsons,  17 
Vt.  470  ;  Salem  Bank  v.  Gloucester,  17 
Mass.  1  ;  Payson  v.  Stoever,  2  Dill.  427. 

But  where  a  director  sells  land  to 
himself,  a  majority  of  a  corporation 
cannot  ratify  the  transaction  so  as  to 
bind  a  minority.  Cumberland  Coal 
Co.  v.  Sherman,  30  Barb.  553.  See, 
also,  Martin  v.  Zellerbach.  38  Cal. 
300. 


296  Private  Coepoeations. 

has  transcended  his  authority,  he  makes  it  his  own  act,  and  this 
doctrine  is  as  applicable  to  corporations  as  to  natural  persons.' 

So  it  has  been  held  that  where  the  president  of  a  railroad 
openly  establishes  and  advertises  tariffs  for  fare  and  freight  on 
the  road,  and  the  company  receives  and  appropriates  the  tolls  thus 
received  without  objection,  this  amounts  to  a  ratification.^ 

Sec.  188.  Personal  liability  of  agents, —  It  maybe  affirmed  as  a 
well-settled  proposition  of  law,  that  persons,  acting  on  behalf  of 
others,  must  act,  and  give  the  parties  with  whom  they  are  deal- 
ing to  understand  that  they  are  acting  as  agents  for  another,  or 
they  will  be  liable  as  principals.^  This  rule  is  also  as  applicable 
to  corporations  as  to  private  persons.*  In  regard  to  all  written 
contracts  made  by  agents  of  corporations,  unless  the  contract  in 
form  binds  the  corporation,  there  is  a  personal  liability  of  the 
agent. ^  "  The  difficulty  is  not  in  ascertaining  the  general  princi- 
ples which  must  govern  cases  of  this  nature,  but  in  applying  them 
to  the  different  forms  and  shades  of  expression  in  particular 
instruments.  In  order  to  exempt  an  agent  from  liability  upon 
an  instrument  executed  by  him  within  the  scope  of  the  agency, 
he  must  not  only  name  his  principal,  but  he  must  express  by 
some  form  of  words  that  the  writing  is  the  act  of  the  principal, 
though  done  by  the  hand  of  the  agent.  If  he  does  this  the 
principal  is  bound  and  the  agent  is  not."  ° 

'  Kelsey  V.  National  Bank,  69   Penn.  Pumpelly  v.  Plielps,  40  N.  Y.  59  ;  Lee 

St.  426;  Bredin  v.  Dubarry,  14  S.  &  R.  v.  M.  E.  Churcli,  53  Barb.   116  ;  Dean 

30;  Gordon  v.  Preston,  1  Watts,  387.  v.  Roesler,  1  Hilt.  420. 

^Hilliard   v.Goold,  34   N.  H.   230;         «  See  Gray,  J.,  in  Tucker  Manuf.  Co. 

Pennsylvania,  etc.,  R.  Co.  v.  Daudridge,  v.  Fairbanks,  98  Mass.  101.     See,  also, 

8  G.  &  J.  248.  Dutton  v.  Marsh,  L.  R.,  6  Q.  B.  361  ; 

But   a  principal  cannot   ratify  acts  Lindus  v.  Melrose,  3   H.  &  N.  177;  27 

which  do  not  come  within  the  powers  L.  J.  Ex.    336 ;  Alexander  v.  Sizer,  L. 

possessed  by  the  corporation.  R.,4  Ex.  102;  Carpenter  v.  Farusworth, 

2  Thompson  V.  Davenport,  2  Smith's  106  Mass.  561  ;    Nichols   v.  Frothing- 

Leading  Cases (7th  Am.  ed.),358;  Story  ham,  45  Me.  220;  Nicholas  v.  Oliver, 

on   Agency,  §    266;    Green's   Brice's  36   N.  H.  218;  Slawson   v.   Loring,  5 

Ultra  Vires,  630.  Allen,  340  ;  Draper  v.  Massachusetts, 

4  Paice  V.  Walker,  L.  R.,  5  Ex.  173;  etc.,  Co. ,  id.  338  ;  Sharpe  v.  Bellis,  61 
Kay  v.  Johnson,  2  H.  &  M.  118  ;  Bar-  Penn.  St.  69;  Means  v.  Swormstedt,  32 
ker  V.  Allen,5H.&N.  61;  29  L.  J.  Ex.  Ind.  87.  But  in  Sherman  v.  N.  Y. 
100  ;  Haddon  V.  Ayers,  1  E.  &  E.  118  ;  Cent.  R.  Co.,  22  Barb.  239,  the  contract 
Hallett  V.  Dowdall,  18  Q.  B.  2  ;  21  L.  was  so  drawn  as  to  bind  neither  the 
J.  Q.  B.  98  ;  Story  on  Agency,  §  147.  principal  nor  agent. 

5  Seaver   v.  Coburn,  10  Cush.  324; 


Officers  and  Agents  Generally.  297 

Sec.  180.  Forms  of  executing  power  by  agents. —  It  is  difficult  to 
furnish  any  general  rule  as  to  what  is  requisite  in  the  form  of  an 
instrument  to  bind  the  principal  and  when  for  the  want  of  suffi- 
cient form  and  substance  in  the  contract  to  bind  the  principal  the 
agent  is  personally  liable.  But  in  such  cases  the  general  rule  i.s, 
that  if  the  principal  is  bound,  the  agent  is  not,  and  if  the  agent  is 
bound,  the  principal  is  not.^  Where  the  name  of  the  principal 
appears  in  the  body  of  the  instrument,  and  to  the  signature  of  the 
party  acting  there  is  annexed  the  word  "  agent,"  this  would  be 
clearly  the  instrument  of  the  principal,  and  bind  him,  and  not 
the  agent.  And  it  has  been  held  that  even  the  name  of  the  cor- 
poration printed  upon  the  margin  of  the  instrument,  though  it 
did  not  appear  in  the  body  of  the  same,  was  sufficient.*  So,  it 
was  held  where  a  note  was  made  payable  to  one  as  an  officer,  as 
for  instance,  to  "  A.  B.,  treasurer,"  and  he  indorsed  it  in  the  same 
way,  this  created  no  personal  liability.'  So,  it  is  held  that  a 
bill  drawn  to  "A.  B.,  cashier,"  is  a  bill  payable  to  the  bank  of 
which  he  is  cashier,  and  that  an  indorsement  in  the  same  form  is 
an  official  indorsement,  and  does  not  make  him  personally  liable. 
In  such  a  case  in  New  York,  Wright,  J.,  observes :  "  Had  there 
been  nothing  in  the  case  to  connect  the  bill  with  the  defendant's 
bank,  the  cashier  would  have  been  regarded  as  the  payee  and  in- 
dorser  individually,  and  the  abbreviation  ■  affixed  to  his  name 
would  have  been  regarded  as  descripUo  2>&fsorue  j  but  when  his 
official  position  is  shown,  connected  with  the  fact  that  the  bill 
was  the  property  of  the  bank,  and  in  the  regular  course  of  busi- 
ness was  transmitted  to  its  agent  for  collection,  it  is  then  shown 
that  the  indorsement  is  an  official  one."  * 

'  Abbey  v.  Chase,  6  Cusli.  54  ;  Ellis  liability  of  the  banlv  in  such  cases,  01- 

V.  Pulsifer,  4  Alien,  165.  cott  v.  Tioga,  etc..  R.  Co.,  27  N.  Y.  546; 

"  Fuller  V.  Hooper,3  Gray,  334;  Slaw-  Conro  v.  Port  Henry  Iron  Co. .  12  Barb, 

son  V.  Loring,  5   Allen,  340  ;  Mott   v.  27;    Elwell   v.    Dodge,   33     id.    330; 

Hicks,  1  Cow.  514;  Carpenter  v.Farns-  Thompson  v.  Tioga,  etc.,  R.  Co.,  36  id. 

worth,  106  Mass.  561.  79  ;    Merchants'    Bank    v.   McCall,   6 

3  Babcock  v.  Beman,  1  E.  D.  Smith,  Bosw.  473  ;  Mott  v.  Hicks,  1  Cow.  514  ; 

597;  S.  C,  11    N.  Y.  200.     See,  also,  Brockway   v.    Allen,    17    Wend.    40; 

as  to  the  distinction  made  between  an  Bruce  v.  Lord, 1  Hilt,  247.  But  see, also, 

agent  as  indorser  and  acceptor,  Bab-  Bank  of  New  York  v.  Farmers'  Bank, 

cock  V.  Beman,  supra  ;  Bruce  v.  Lord,  36  Barb.   332,  where  it  was  held  that 

1  Hilt.  247.  an  indorsement  of  a  note  by  the  cash- 

*  Bank  of  New  York  v.  Bank  of  Ohio,  ier  did  not  render  the  bank  liable  as 

29  N.  Y.  619.     See  as  to  the  admissi-  indorsee, 
bility  of  parol   evidence  to  show  the 

38 


298  Pkivate  C0KPOBATION8. 

Sec.  190.  When  agent  personally  bound.  —  But  on  the  other  hand, 
where  the  name  of  the  principal  is  not  named  in  the  body  of  the 
instniment,  but  it  runs  in  the  name  of  the  agent,  and  is  merely 
sio'ned  by  him,  with  the  addition  "  agent,"  or  "  agent  for  The 
Churchman,"  or  the  like  addition,  this  addition  will  usually  be 
treated  as  merely  descriptio  personoB,  and  surplusage,  and  the 
agent  held  as  personally  liable.^  So,  a  bill  of  exchange  drawn  on 
an  insurance  company  by  their  agents,  in  which  they  say,  "  charge 
the  same  to  account  of  David  Fairbanks  &  Co.,  Ag'ts,  Piscataqua 
F.  &  M.  Ins.,"  binds  F.  &  Co.  personally  as  drawers,  although 
delivered  by  the  agents  of  the  Piscataqua  Fire  and  Marine  Insur- 
ance Company,  in  payment  of  a  loss  on  one  of  its  policies.'  So, 
in  England  it  was  held  that  where  four  directors  of  a  joint-stock 
company  signed  their  names  to  a  promissory  note,  as  follows : 
"We,  the  directors  of  the  Isle  of  Man  Slate  Company,  do  prom- 
ise to  pay,"  etc.,  and  on  one  corner  of  the  note  was  the  company's 
seal ;  still  it  was  held  that  the  directors  were  personally  liable 
as  makers  of  the  note.^ 

Sec.  191.  When  there  is  no  principal.  —  In  case  a  person  assumes 
to  act  as  agent  for  a  person  as  principal,  when  there  is  in  fact  no 
such  person  in  existence,  the  person  thus  assuming  to  be  principal 
would  clearly  be  personally  liable,  as  he  would  be  held  to  have 
acted  on  his  own  behalf,  although  by  the  form  of  the  instrument 
he  professes  to  act  as  agent."  Mr.  Story  observes,  that  "  persons 
contracting  as  agents  are  nevertheless  ordinarily,  although,  as  we 
shall  presently  see,  not  universally  held  personally  responsible, 
where  there  is  no  other  responsible  principal  to  whom  resort  can 
be  had."  "  And  in  England  it  is  held  that  if  the  '  promoters '  of 
a  corporation  make  on  behalf  of  the  future  corporation  an  abso- 
lute contract,  and  not  merely  one  that  is  conditional  on  the  future 
completion  of  the  organization,  they  will  not  be  relieved  from 

1  Stackpole  v.  Arnold,  11  Mass.  27;  sputton  v.  Marsh,  L.  R.,  6  Q  B.  361. 
SlawsoQ  V.  Loring,  5  Allen,  340  ;  Moss  *  Kelner  v.  Baxter,  L.  R..  2  C.  P.  174; 
V.  Livingston,  4  N.  Y.  208  ;  De  Witt  v.  Story  on  Agency,  §§  287,  290,  274  ;  Pa- 
Waltou.'O  id.  571 ;  McClure  v.  Bennett,  ley  on  Agency,  by  Lloyd,  374 ;  2  Kent's 
1  Blackf.  189  ;  Titus  v.  Kyle,  10  Ohio  Com.  630. 

St.  444.  ^  Story  on  Agency,  §  280. 

2  Tucker  Man.  Co.  v.  Fairbanks,  98 
Mass.  101. 


Officers  and  Agents  Generally.  299 

personal  liability,  even  though  the  corporation  when  organized 
adopts  the  contract.^ 

But  this  doctrine  does  not  apply  where  the  agent  had  authority 
to  act  for  his  principal,  and  where  the  agent  acts  in  entire  good 
faith,  but  without  the  knowledge  of  either  party,  wlio  have  equal 
means  of  ascertaining  the  fact,  the  principal  has  died."  In  such  a 
case,  as  either  party  has  equal  means  of  ascertaining  the  fact,  they 
are  supposed  to  contract  with  reference  to  that  contingency,  and 
the  agent  does  not  thereby  become  personally  liable. 

Sec.  192.  Liability  of  the  agent  in  case  of  misrepresentation  of  his  au- 
thority. —  In  case  of  the  misrepresentation  by  the  agent  of  his  au- 
thority, which  he  assumes  to  exercise,  by  which  he  secures  the 
execution  of  a  contract  between  the  corporation  which  he  assumes 
to  represent  and  another  party,  and  said  contract  is  ultra  vires,  or 
for  any  cause  not  enforceable  against  said  corporation,  and  the 
party  with  whom  it  is  made  is  not  aware  of  the  limitations  of  the 
agent's  authority,  such  agent  will  be  individually  liable  on  such 
contract.  And  this  doctrine  has,  in  England,  been  held  to  apply, 
however  innocent  the  agent,  provided  the  principal  fails  to  ratify 
it.'  He  may  also  be  held  personally  liable  on  the  ground  of  fraud 
and  misrepresentation,  or  of  implied  warranty.  The  doctrine  of 
the  supreme  court  of  !N  e w  York  on  this  question  is  thus  stated : 
"  Whenever  a  person  enters  into  a  contract  as  the  agent  of  an- 
other, he  warrants  liis  own  authority,  unless  very  special  circum- 
stances or  express  agreement  relieve  him  from  that  responsibility. 
An  action  upon  such  warranty  must  always  be  appropriate  where 
personal  liability  attaches  to  an  agent,  in  consequence  of  his  con- 
tracting without  authority.  *  *  *  If  the  act  of  the  agent 
were  fraudulent,  an  action  for  the  deceit  would  lie,  but  it  would 
be  a  concurrent  remedy  with  the  action  on  the  contract  itself,  if 
the  cases  which  sustain  such  action  can  be  regarded  as  correctly 
decided."* 

iRelner  v.  Baxter,  L.   R.,  2  C.  P.  10  C.  B.  (N.  S.)348;  Slim  v.  C'roucher, 

174.     See,  also,  Doubleday  v.Muskett,  1  DeG.  F.  &  J.  518;  Edmunds  v.  Bush- 

7  Bing.  110.  nell,  L.  R.,  1  Q.  B.  97. 

^  Story  on  Agency,  §  265a.  and  note;  •'White  v.  Madison,  26  N.  Y.  117. 

Smout  V.  Ilbery,  10 M.  &  W.  1.  See,  also.  Dung  v.  Parker,  52  id.  49-4  ; 

^Collea  V.  Wright,  8  E.  &  B.  647  ;  Baltzen  v.  Nicolay,  53  id.  467 
27  L.  J  .  Q.  B.   215  ;  Wilson  v.  Miers, 


300  Private  Corpoeations. 

Where  one  acts  as  agent  for  another,  through  his  culpable 
ignorance,  though  in  fact  supposing  that  he  has  author- 
ity, he  is  still  liable,  as  for  a  deceit.^  Mr,  Justice  Suaw,  on  this 
subject,  thus  expresses  his  views  :  "  If  one  falsely  represents  that 
he  has  authority,  by  which  another  relying  on  the  representation 
is  misled,  he  is  liable  ;  and  by  acting  as  agent  for  another,  when 
he  is  not,  though  he  thinks  he  is,  he  tacitly  and  impliedly  repre- 
sents himself  authorized,  without  knowing  the  fact  to  be  trae,  it 
is  in  the  nature  of  a  false  warranty  and  he  is  liable.  But  in  both 
cases  the  liability  is  founded  on  the  ground  of  deceit,  and  the 
remedy  is  by  the  action  of  tort,"^  If  the  agent  believes  he  has  au- 
thority, when  he  has  none,  but  affirms  that  he  has,  when  m  fact 
he  has  not  such  authority,  and  thereby  induces  another  to  enter 
into  a  contract  with  the  agent,  on  behalf  of  the  principal,  it  is 
perhaps  entirely  just  that  he  should  be  responsible  to  the  party 
with  whom  he  deals,  for  the  consequences  of  his  mistake,  and 
that  he  should  rather  suffer  than  the  other  party,  on  the  principle 
that  where  two  innocent  parties  must  suffer  a  loss,  the  party 
ought  to  bear  it  who  was  the  immediate  and  active  cause  of  it.^ 
"  There  is  no  doubt,"  observes  Baron  Aldeeson,  "  that  in  the 
case  of  a  fraudulent  misrepresentation  of  his  authority,  with  an 
intent  to  deceive,  the  agent  would  be  personally  responsible.  But 

'  Noyes  v.  Loring,  55  Me.  408;  Mc-        On  the  other  hand  it  has  been  held 

Curdy  v.  Rogers,  21  Wis.  197;  Bartlett  in  New  York,  that  an  action  may  be 

V.   Tucker,   104  Mass.   3C6;  Ogden  v.  maintained  upon  the  instrument  thus 

Raymond,  22  Conn.   379  ;    Taylor  v.  executed  by  -the  agent,  as  though  it 

iShelton,  30  id.  123;  Duncan  v.  Niles,  were  his   personal   contract.     Dusen- 

32  111.  532;  Walker  v.    Bank  of  New  bury  v.  Ellis,  3  Johns.  Cas  70;  White 

York,  9  N.   Y.  582;  Ballou  v.  Talbot,  v.  Skinner,  13  Johns.  307 ;  Meech  v. 

16  Mass.  461,  Abbey  v.  Chase,  6  Cush.  Smith,  7  Wend.  315;  Cunningham  v. 

54;   Draper  v.    Massachusetts  Steam  Soules  id.  106 ;    Stetson  v.   Patten,  3 

Heating  Co.,  5  Allen,  338.  Ga.  358  ;  2  Kent's  Com.  631;  Clay  v. 

2  Jefts  V.  York,  10  Cush.  392;  Hege-  Oakley,  5  Mart.  (La.)  138;  Perkins  v. 

man  V.  Johnson,  35   Barb.  200.     See,  Washington   Ins.    Co.,  4   Cow.    469; 

also,  M.  &  W.  1;  Jenkins  v.  Hutchin-  Feeter  v.  Heath,  11  Wend.  477;  White 

son,  13  Ad.  &  EI.  (N.  S.)  744.  v.  Skinner,  13  Johns.  307 ;  Lazarus  v. 

In  reference  to  the  form  of  the  action  Shearer,  2  Ala.  (N.   S-)  718;  Hampton 

in  such  cases,  there  seems  to  be  some  v.  Speckenagle,  9  S.  &  R.  212.  Where 

diversity  of  opinion.     In  England  it  it  was  held  that  an  agent  in  purchas- 

has  been  held  that  it  should  be  by  ing  goods  exceeded  his  authority,  he 

special  action  on  the  case.     This  doc-  might  be  treated  as  the  purchaser, 
trine   has   also    been    maintained    in         ^  Smout  v.  Ilbery,    10  M.  &  W.  1; 

Massachusetts.     Long  v.  Colburn,  11  Baring  v.  Corrie,  2  B.  &  A.  143;  Paley 

Mass.  97;  Ballou  v.  Talbot,  16  id  461.  on  Agency,  by  Lloyd,   201;  Story  on 

See,  also,   in  Pennsylvania,   in  Hop-  Agency,  §§  56,  264,  and  notes, 
kins  V.  Mehaffy,  11  S.  &  R.  129. 


Officees  and  Agents  Genp:eally.  301 

independently  of  this,  which  is  perfectly  free  from  doubt,  there 
seems  to  be  still  two  other  classes  of  cases  in  which  an  agent,  who, 
without  authority,  makes  a  contract  in  the  name  of  his  principal 
is  personally  hable,  even  where  no  proof  of  such  fraudulent  inten- 
tion can  be  given.  First,  where  he  has  no  authority,  and  knows 
it,  but  nevertheless  makes  the  contract,  as  having  such  authority. 
In  that  case  on  the  plainest  principles  of  justice  he  is  liable,  for 
he  induces  the  other  party  to  enter  into  the  contract  on  what 
amounts  to  a  misrepresentation  of  a  fact  peculiarly  within  his  own 
knowledge ;  and  it  is  but  just  that  he  who  does  so  should  be  con- 
sidered as  holding  himself  out  as  one  having  competent  authority 
to  contract  and  as  guaranteeing  the  consequences  arising  from  any 
want  of  such  authority.  But  there  is  a  third  class  in  which  the 
courts  have  held  that,  where  a  party  making  the  contract  as  agent, 
honafide  believes  that  such  authority  is  vested  in  him,  but  he  has 
in  fact  no  such  authority,  he  is  still  personally  liable."  ^  But  an 
agent,  it  is  held,  cannot  be  liable,  either  in  contract  or  tort,  for 
falsely  misrepresenting  his  authority,  to  make  contracts  on  be- 
half of  another,  where  the  principal  would  not  be  bound  by  the 
contract  entered  into,  on  the  ground  that  it  is  void  by  the  statute 
of  frauds.^ 

Sec.  193.  Matters  of  which  parties  dealing  vnth.  agents  are  bound  to 
take  notice.— An  agent  will  not  be  personally  liable,  where  he 
exceeds  his  authority,  if  the  person  knew  or  had  equal  means  of 
knowing  that  he  was  exceeding  his  authority.  Where  the  author- 
ity of  the  oflBcers  or  agents  who  assume  to  act  for  a  corporation 
is  provided  for  by  statute,  or  the  acts  under  which  it  is  organized, 
or  by  the  fundamental  law,  or  by  the  constating  instruments  of  the 
corporation,  all  persons  dealing  with  such  officers  or  agents,  as  we 
have  before  observed,  are  bound  to  take  notice  of  such  provisions. 

'  Smout  V.   Ilbery,   10  M.  &  W.  1.  the  wife  and  the  plaintiflF.     Suit  was 

In  this  case  the  decision  turned  upon  brought  against  the  wife  for  the  meal 

another  question.  A  man,  who  was  in  thus  furnished.     It  was  held  that  the 

the  habit  of  purchasing  meal  of  the  wife  was  not  liable.     See,  also.  Blades 

plaintiff    for  his  house,  went  abroad  v.  Free,9  B.  &  C.  1G7;  Story  on  Agencv. 

leaving  his  wife  and  family  resident  i;^  265,  265a;  Hege man  v.' Johnson,  35 

in  England,  and  died  abroad.     Meal  Barb.  200. 

was  supplied  after  the  death  of  the  '^  Dung   v.    Parker,    52  N.    T.   494; 

husband,  which  was  unknown  to  both  Baltzen  v.  Nicolay,  53  id.  467. 


302  Private  Corporations. 

They  have  the  means  of  knowing,  and  are  supposed  to  know  the 
extent  of  the  power  of  such  agents,  and  having  at  least  construct- 
ive notice  of  the  same,  cannot  consistently  claim  that  they  were 
deceived  by  any  implied  representations,  or  even  by  the  express 
warranty  of  the  agent  with  whom  they  deal,  of  the  power  of  the 
corjDoration  as  it  would  be  shown  by  such  provisions  ;  and  hence 
he  could  not  hold  the  agent  personally  liable  in  such  cases.* 

Sec.  194.  All  parties  dealing  with  corporate  agents  are  bound 
to  take  notice  of  acts  of  the  agent  that  are  ultra  m7'es  ;  for  the 
powers  of  the  agent  cannot  exceed  those  of  the  principal ;  and  the 
powers  of  the  corporation,  as  we  have  seen,  are  matters  of  public 
knowledge,  or  capable  of  ascertainment.^  So  an  undertaking  on 
the  part  of  an  agent  for  a  corporation,  that  some  act  shall  be  done 
which  is  contrary  to  the  public  law,  or  against  public  policy, 
would  be  void,  and  of  this  the  contracting  parties  would  be 
required  to  take  notice;  and  in  such  cases  there  could  be  no 
recovery  against  the  agent.^  For,  as  no  contract  prohibited  by 
the  charter  or  the  general  laws  of  the  State,  can  be  made  by  a 
corporation,  it  is  evident  that  the  agent  could  not  make  such  a 
contract.  And  of  this  prohibition  parties  dealing  with  agents 
would  be  required  to  take  notice.* 

Sec.  195.  Liability  of  agents  for  violation  of  duties.  —  It  is  a  general 
doctrine  of  the  common  law  that  agents  are  personally  liable  to 
their  principal  for  all  violation  of  their  duty  and  obligations  to 
their  principals.     These  violations  may  consist  either  of  positive 

'  Ellis   V.    Coleman,  25  Beav.   662  ;  ^  Green's  Brice's  Ultra  Vires,  639  et 

27  L.  J.  Ch.  611  ;  Macgregor  v.  Dover,  seq. 

etc.,  R.  Co.,  18  Q.   B.  618 ;  22  L.  J.  Q.  =*  Macgregor  v.  Deal  R.  Co.,  18  Q.  B. 

B.  69  ;  Kerr  on  Frauds  (Am.  ed.),  90  ;  618  ;  22  L.  J.  Q.  B.  69  ;  Mayor,  etc.,  v. 

Pitcher  v.   Hennessy,  48  N    T.   415;  Norfolk     R.     Co.,    4    E.     &   B.    397; 

Benj.  on  Sales  (Am.  ed.),  §  414  et  seq.  Green's  Brice's  Ultra  Vires,  231. 

And   if    the    agent  may  be    excused  *  Thomas  v.  Richmond,  12  Wall.  349  ; 

from  liability  in  certain  cases  where  Marsh  v.  Fulton,  10  id.  676 ;  Leaven- 

the  facts  relating  to  the   agency  are  worth  v.  Rankin,  2  Kans.  357;  Horn 

known   or  may   be    presumed   to  be  v.  Baltimore,  30Md.  318;  Bridgeport 

known  by  both  parties,  it  is  evident  v.  Railroad  Co.,  15  Conn.  475;  Haynes 

that  the  rule  would  apply  with  even  v.  Covington,  13  S.  &  M.  408  ;  Taft  v. 

greater   force   where    the   agent    has  Pittsford,  28  Vt.  286 ;  Branham  v.  San 

been  induced  to  act  on  his  supposed  Jose,  24Cal.  602;  Wallace  v.  San  Jose, 

agency,  on  the  representations  of  the  29  id.  180  ;  State  v.  Kirkley,  29  Md. 

party     with    whom    he     is     dealing.  85  ;  State  v.  Haskell,  20  Iowa,  276. 
Aspinwall  v.  Torrance,  1  Lans.  381. 


Officers  and  Agents  Generally.  303 

misconduct  or  of  acts  of  negligence  or  omissions  of  their  duty. 
And  in  such  cases  the  suit  must  generally  be  brought  in  the 
name  of  the  corporation  and  not  in  the  name  of  a  stockholder ; 
as  he  is  the  agent  of  the  corporation  and  not  of  the  individual 
corporators,  and  the  injury  thereby  sustained  must  be  considered 
an  injury  to  the  corporate  body,  of  which  he  is  agent.' 

Sec.  196.  Compensation  of  ofl&cers  and  agents.  —  The  compensation 
of  officers  is  usually  fixed  by  the  provisions  of  the  by-laws  ;  but 
in  the  absence  of  such  provisions  or  any  express  contract,  they 
may  generally  recover  so  much  as  their  services  are  reasonably 
worth.'  Or  compensation  may  depend  upon  usage  or  custom.' 
"Where,  however,  there  is  not  only  no  compensation  provided  for 
officers,  but  all  allowance  for  compensation  of  them  is  prohibited 
by  the  organic  or  by-laws  of  the  corporation,  no  compensation 
can  be  allowed.  It  is  common,  perhaps,  to  make  no  provision  for 
the  compensation  of  directors  as  such,  and  it  has  been  held  that 
they,  in  such  cases,  could  not  recover  for  such  services.*  The 
right  of  directors  and  perhaps  some  other  officers  of  private  cor- 
porations, to  recover  on  a  quantum  meruit,  has  been  questioned ; 
and  in  Pennsylvania  and  some  other  states  it  has  been  held  that 
there  must  be  an  express  contract  for  compensation  of  its  officers, 
or  they  cannot  recover ;  *  and  this  is  the  universal  rule  in  relation 
to  officers  of  municipal  corporations.' 

•  Smith  V.  Poor,  40  Me.  415  ;  Hersey  Mete.  (Mass.)  64  ;   Waller  v.    Bank   of 

V    Veazie,  24  id.   12;  Hodges  v.  New  Kentucky,  3  J.  J.  Marsh.  206;  Elwes 

Eng.  Screw  Co.,  1  R.  I.  312 ;  Smith  v.  v.  Ogle,  2  Eng.  L.  &  Eq.  379  ;  Bill  v. 

Hurd,  12  Mete.  (Mass.)  371 ;  Abbott  v.  Darenth,  etc.,  R.  Co.,  1  H.   &  N.  305  ; 

Merriam,  8  Cush.  (Mass.)  588  ;  Bay  less  37  Eng.  L.  &  Eq.  539  ;  East  Anglican 

V.    Orne,  1    Freem.    (Miss.)  Ch.   175;  R.  Co.  v.  Lythgoe,  IOC  B.  726. 

Austin  V.  Daniels,  4  Den.  301  ;  Brown  *  Fraylor  v.  Sonora  Mining  Co.,  17 

V.  Vandyke,  8  N.  J.  Eq.  795  ;  Denny  v.  Cal.  594. 

Manhattan  Co. ,  2  Den.  115  ;  S.  C,  5  id .  ••  New  York,  etc.,  R.  Co .  v.  Ketchum, 

639;  Franklin   Ins.  Co.  v.  Jenkins,  3  27   Conn.    170;   Loan   Association   v. 

Wend.  130;  Lexington  R.  Co.  v.Bidges,  Stonemetz,  29  Penn.  St.  534;  Hodges 

7  B.  Monr.  (Ky.)  559  ;  Salem  v.  Richard-  v.  Rutland  R.  Co.,  29  Vt.  220  ;  Chand- 

son,  30  Conn.  360  ;  Calhoun  v.  Richard-  ler  v.  Monmouth,  8  N.  J.  Eq.  101,  255. 

son,  id.  229;  Richardson  v.    William-  ^  Kilpatrick  v.  Penrose  Ferry,  etc., 

son,  L.    R.,  6   Q.   B.   276;   Weeks  v.  Co.,    49    Penn.    St.     118.     See,    also, 

Propert,  L.  R.,  8  C.  P.  427;  Mabey  v.  Scbackelford  v.  New  Orleans  R.  Co., 

Austin,  L.   R.,  3  Q.  B.  299;  Peck  v.  37  Miss.  202;   Henry   v.    Rutland  R. 

Gurney.L.  R.,  H.  L.  377.  But  see  chap-  Co.,  27  Vt.  485. 

ters  6  and  14  where  cases  will  be  found  ®  Sikes  v.  Hatfield,  13  Gray  (Mass.), 

showing  personal   liability  of  agents  347  ;  Barton  v.   New  Orleans,  16  La. 

and  the  right  of  stockholders  to  sue  Ann.  317  ;  Garnier  v.  St.  Louis,  37  Mo. 

them  in  certain  cases.  554  ;  Philadelphia  v.  Given,  60  Penn. 

'  Commonwealth  Ins.  Co.  v.  Crane,  6  St.  136  ;  Meagher  v.  County,  5  Nev.  244 ; 


304 


Private  Corpokations. 


But  the  right  of  agents,  aside  from  the  officers  of  the  corpora- 
tion, to  recover  for  services  on  a  qua/ntum  meruit,  in  the  absence 
of  a  stipulated  salary  or  some  express  contract,  has  never  been 
questioned.  Where  services  were  rendered  for  the  benefit  of  a 
corporation  before  the  completion  of  its  organization,  in  obtain- 
ing subscriptions  and  removing  obstacles  to  its  organization,  which 
were  valuable,  and  at  the  request  of  parties  who  afterward  be- 
came members  of  it,  and  the  corporation,  after  its  organization, 
accepted  of  such  services  and  received  the  benefit  and  advantages 
of  the  same,  it  was  held  that  the  person  rendering  them  was  en- 
titled to  recover  of  the  company  therefor  in  an  action  of  assump- 
sit upon  an  implied  promise.^ 


Baker  v.  City  of  Utica,  19  N.  Y.  326  ; 
United  States  v.  Brown,  9  How.  487  ; 
McClung  V.  St.  Paul,  14  Minn.  420  ; 
Smith  V.  Commonwealth,  41  Penn.  St. 
335 ;  Boyden  v.  Brookline,  8  Vt.  284, 
where  Redfield,  J.,  observes;  "It  is 
very  plain  to  us  that  a  town  officer,  as 
such,  has  no  legal  claim  against  the 
town  to  recover  pay  for  services  ren- 
dered, unless  by  an  express  vote  of 
the  town,  or  a  uniform  usage  to  pay 
thai  particular  officer,    from   year   to 


year,  for  his  services.  And  in  the 
latter  case,  it  would  be  very  question- 
able whether  a  recovery  at  law  could 
be  had,  if  it  had  all  along  been  left  to 
the  town  to  make  such  compensation 
as  they  should  deem  reasonable,  after 
the  services  had  been  rendered.  *  * 
*  The  same  principle  has  always 
been  recognized  in  this  state,  in  re- 
gard to  all  officers.  If  no  law  of  the 
state  fixed  their  fees  or  pay,  their  ser- 
vices must  be  gratuitous." 


'  Low  V.  Connecticut,  etc.,  R.  Co.,  45 
N.  H.  375.  In  this  case  Bellows,  J., 
observes  : 

"The  great  question  is  whether  the 
plaintiff  is  entitled  to  recover  of  the 
corporation  in  any  form  fo"  services 
rendered  by  him  antecedent  to  its  or- 
ganization, but  which  were  necessary 
to  enable  it  to  complete  that  organiza- 
tion ;  and  if  so,  whether  the  action  of 
assumpsit  can  be  maintained. 

"  In  considering  the  first  question, 
it  will  be  assumed,  for  the  present, 
that  the  services  were  necessary  ;  that 
they  were  rendered  at  the  request  of 
one  or  more  of  the  original  corporators, 
or  of  those  who  were  associated  with 
them  ;  and  that  the  corporation  ac- 
cepted those  services  after  its  organi- 
zation, and  enjoyed  the  benefit  of 
them.  Under  such  circumstances,  we 
are  inclined  to  the  opinion  that  it 
would  become  the  duty  of  the  corpo- 
ration to  pay  for  such  services ;  and 
that,  in  some  form,  tliis  duty  could  be 
enforced. 

"  Questions  of  a  similar  character 
have  repeatedly  arisen    in    England, 


where  the  projectors  or  promoters  of 
railway  enterprises,  who  were  about 
to  solicit  acts  of  incorporation,  had 
agreed  with  the  proprietors  of  land 
over  which  such  railways  were  des- 
tined to  pass,  and  who  were  prepared 
to  oppose  such  acts  of  incorporation, 
to  pay  certain  sums  of  money  for  the 
land  to  be  taken,  and  for  residential 
damages,  in  consideration  that  they 
should  withdraw  their  opposition.  In 
such  cases  where  opposition  was  so 
withdrawn,  and  the  charters  obtained, 
and  the  companies  organized,  it  has 
been  repeatedly  held  that  a  duty  was 
imposed  upon  the  corporation  to  per- 
form the  contract  of  the  projectors, 
upon  the  principle,  it  would  seem,  that 
a  corporation  is  in  equity  bound  by 
the  contracts  of  its  projectors  prelimi 
nary  to  its  incorporation,  when  it 
afterward  takes  the  benefit  of  such 
contract.  In  Preston  v.  Liverpool, 
Manchester  &  Newcastle-upon-Tyne 
Railw.  Co.,  7  Eng.  L.  &  Eq.  124,  the 
vice-chancellor  lays  down  the  doc- 
trine thus  :  '  Where  the  projectors  of 
a  company  enter  into  contracts  in  be- 


Officers  and  xVgents  Generally. 


30i 


But  an  agreement  in  respect  to  services  of  a.  lobby-agent,  or  for 
the  personal  influence  of  an  individual  to  procure  the  passage  of 


half  of  a  body  not  existing  at  the  time, 
but  to  be  called  into  existence  after- 
ward, then  if  tlie  body,  for  whom  the 
projectors  assumed  to  act,  does  come 
into  existence,  it  cannot  take  the  bene- 
fit of  the  contract  without  performing 
that  part  of  it  which  the  projectors 
undertook  that  it  should  perform.' 

"  This  was  a  case  where  the  project- 
ors agreed  to  pay  the  complainant 
£5,000  for  the  land  to  be  taken  for  the 
railway,  and  residential  damages,  and 
the  plaintiff  therefore  assented  that 
his  land  should  so  be  taken.  This 
agreement  was  in  writing  between  the 
plaintiff  and  the  executive  directors  of 
the  Lancashire  &  North  Yorkshire 
Railway  Company,  which  was  after- 
ward united  with  another  and  rival 
enterprise,  under  the  name  of  the  de- 
fendant corporation,  and  the  two  com- 
panies agreed  to  adopt  the  contract 
with  the  plaintiff.  Upon  a  bill  in 
equity,  the  court  held  that  the  plaint- 
iflF  was  entitled  to  relief  against  the 
defendants,  although  the  construction 
of  the  contract  was  referred  to  a  court 
of  law  for  an  opinion. 

"  The  same  general  doctrine  is  rec- 
ognized in  Qooday  v.  Colchester  & 
Stour  Valley  Kailw.  Co.,  15  Eng.  L.  & 
Eq.  596 ;  Edwards  v.  Grand  Junc- 
tion Railway,  1  My.  &  Cr.  650 ;  and 
Stanley  v.  Chester  &  Birkenhead  Rail  w. 
Co.,  9  Sim.  204;  affirmed  by  the  chan- 
cellor in  3  My.  &  Cr.  793.  These  cases 
are  all  suits  in  equity,  and  the  doc- 
trine of  these  is  recognized  in  Red- 
field  on  Railways,  638,  §  5  ;  and  some 
of  them  quoted  and  considered  in  §  7, 
p.  641,  ct  seq. 

"In  the  application  of  this  doctrine 
to  cases  of  agreements  to  pay  money 
in  consideration  of  withdrawing  oppo- 
sition to  a  charter,  there  might  be  seri- 
ous objections,  as  suggested  by  Judge 
Redpield,  in  section  15  of  his  work 
on  Railways,  as  being  contrary  to  pub- 
lic policy  ;  but  in  respect  to  agree- 
ments not  open  to  such  objections  — 
that  is,  agreements  that  would  bind 
parties  in  existence,  and  capable  of 
contracting, —  we  think  the  principle 
is  sound  and  well  sustained  by  author- 
ity. If,  then,  this  be  a  sound  ])rinciple 
in  respect  to  agreements  made  before 
the  corporate  existence  commenced,  it 

39 


must  surely  apply  with  increased  force 
to  agreements  made  after  the  charter, 
and  before  the  organization,  of  the 
corporation. 

"  Indeed,  in  the  American  courts, 
agreements  made  with  corporations 
after  their  charter,  but  before  organi- 
zation, such  as  agreements  to  take  and 
pay  for  shares  in  the  capital  stock, 
have  been  repeatedly  enforced,  and 
even  by  suits  at  law.  Such  are  the 
cases  of  Chester  Glass  Co.  v.  Dewey, 
16  Mass.  94,  and  Salem  Milldam  Co.  v. 
Ropes,  6  Pick.  23,  where  subscribers 
for  stock  before  organization  were 
held  liable  for  assessments  to  pay  pre- 
liminary expenses  incurred  in  obtain- 
ing the  act  of  incorporation,  and  ascer- 
taining the  practicability  of  the  enter- 
prise, but  not  for  the  general  objects 
of  the  corporation  until  all  the  shares 
were  subscribed  for.  So  in  Kennebec 
&  Portland  Railw.  Co.  v.  Palmer,  34 
Me.  365;  and  Penobscott  Railw.  Co. 
V.  Dummer,  40  id.  172.  The  same 
principle  is  recognized  in  Phillips  Lim- 
erick Academy  v.  D^ivis,  11  Mass.  116, 
and  VVallingford  Manufacturing  Co. 
V.  Fox,  12  Vt  304;  Gleaves  v.  Turn- 
pike Co.,  1  Sneed,  491  ;  Lake  Ontario 
Railw.  Co.  V.  Mason,  16  N.  Y.  451  ; 
Tonica,  etc.,  Railw.  Co.  v.  McXeeley, 
21  111.  71 ;  Vermont  Central  Railw.  Co. 
V.  Clares,  21  Vt.  30. 

"These  cases  go  upon  the  ground 
that  where  such  subscriber  is  received 
and  acts  as  a  member  of  the  corpora- 
tion, after  the  organization,  and  as  the 
owner  of  the  shares  agreed  to  be  taken, 
he  is  liable  on  his  subscription,  though 
made  before  the  organization  was  ef- 
fected ;  for,  having  taken  the  benefit 
of  his  subscription,  he  must  also 
take  the  burden  along  with  it.  This, 
as  it  will  be  seen,  is  simply  the  con- 
verse of  the  doctrine  which  binds  the 
corporation  by  a  contract  made  by  the 
projectors,  and  of  which  the  corpora- 
tion afterward  takes  the  benefit.  In 
a  large  proportion  of  cases,  the  sub- 
scriptions for  stock  neces.^arily  p'recede 
the  organization  of  the  corporation  and 
the  choice  of  officers,  but,  upon  the 
subscribers  being  received  and  acting 
as  members,  they  would  be  bound  by 
such  subscriptions. 

"  The  question  then  arises,  whether 


306 


Pkivate  Corporations. 


a  public  or  private  law  by  tlic  legislaturo,  is  void,  as  prejudicial 
to  sound  legislation  and  against  public  policy.' 


a  suit,  at  law  can  be  maintained  to  re- 
cover of  tlie  corporation  the  value  of 
these  services.  As  before  observed, 
the  English  cases  referred  to  are  bills 
in  equity,  and  tlie  reasoning  of  the 
courts  tend  to  exclude  the  idea  of 
suits  at  law.  See,  especially,  Edwards 
V.  Grand  Junction  Railway,!  Mylne  & 
Cr.  650.  Where,  however,  the  charter 
provided  that  the  cost  of  obtaining  it 
should  be  paid  out  of  the  first  sums 
subscribed,  it  was  held  that  debt 
would  lie  against  the  corporation  by 
an  attorney,  who  had  solicited  and  ob- 
tained the  charter,  to  recover  for  the 
costs,  charges,  and  expenses.  Tilson 
et  al.  v.  Warwick  Gas-light  Co.,  4  B. 
&  C.  962.  See  Chitty  on  Cont.  250,  and 
cases  cited. 

"  In  the  case  above  cited,  one  count 
of  the  declaration  was  special,  setting 
out  the  statute,  and  there  were  other 
counts  for  work  and  labor,  and  the 
court  were  inclined  to  hold  that  a  re- 
cove  rv  might  be  had  on  either  count. 
In  Mall  v.  Vt.  &  Mass  Ry.  Co.,  28 
Vt.  401,  it  was  decided  that  a  suit  at 
law  against  a  corporation  would  lie  to 
recover  for  the  services  of  the  plaintitf 
in  attending  various  meetings  of  the 
corporation  after  the  charter,  and  be- 
fore the  organization,  he  having  been 
one  of  the  original  corporators  under 
the  charter,  by  which  subscriptions 
for  five  thousand  shares  were  neces- 
sary bt-fore  an  organization  could  be 
perfected.  The  court  held  that  the 
duty  rested  upon  the  corporators  to  do 
whatever  was  required  by  the  charter 
,to  effect  that  result  ;  that,  although 
the  corporation  might  not  be  vested 
with  full  corporate  powers,  yet  it  was 
in  esse,  and  had  an  inchoate  existence, 
and  the  corporators  had  the  power, 
and  were  so  far  the  agent  of  the  cor- 
poration as  to  bind  them  by  any  act 
which  they  were  required  to  do,  or 
which  was  necessary  to  perfect  their 
organization   under  the  charter ;   and 


the  court  held,  that,  under  the  circum- 
stances, a  promise  to  pay  was  implied. 
That  was  an  action  of  book  debt,  and 
is  an  express  authority,  that,  in  Ver- 
mont, a  suit  at  law  may  be  maintained  ; 
and  it  will  be  observed  that  in  the  case 
before  us  the  corporation  was  char- 
tered by  the  legislature  of  that  state, 
and  the  road  there  located  and  built. 

"  Under  these  circumstances,  we 
think  that  the  contract  must  be  re- 
garded as  made  m  Vermont,  and  there 
to  be  executed  ;  and,  therefore,  in  its 
nature,  validity,  and  interpretation,  to 
be  governed  by  the  laws  of  Vermont ; 
while  in  respect  to  the  form  of  the 
remedy,  it  is  to  be  governed  by  our 
own  laws.  Dyer  v.  Hunt  et  al.,  5  N. 
H.  401  ;  Stevens  v.  Norris,  30  id.  466  ; 
2  Kent's  Com.  462. 

"  It  may  then  safely  be  assumed, 
that,  under  the  laws  of  Vermont,  the 
corporation  is  liable  in  some  form  for 
services  necessary  to  perfect  its  organ- 
ization, and  which,  when  such  organ- 
ization was  perfected,  it  accepted  and 
enjoyed  the  benefits  arising  therefrom. 
Such  would  be  the  case  in  respect  to 
services  in  obtaining  subscriptions  to 
the  capital  stock,  rendered  by  a  corpo- 
rator or  associate,  and  which  subscrip- 
tions were  after  the  organization  ac- 
cepted by  the  corporation.  Of  course 
to  entitle  the  plaintiff  to  recover,  such 
services  must  have  been  necessary  and 
reasonable,  and  rendered  not  gratui- 
tously, but  with  the  understanding 
and  expectation  that  they  were  to  be 
paid  for. 

"  The  question,  then,  is  whether  an 
action  at  law  can  be  sustained  in  New 
Hamjishire  to  enforce  such  claim;  or 
whether  resort  can  be  had  to  equity 
alone,  The  objection  to  a  recovery  in 
a  suit  at  law  is  purely  technical,  but 
it  must,  nevertheless,  prevail  if  it  be 
well  founded.  We  are  inclined  to 
think,  however,  that  it  is  no  violation 
of  settled  principle  to  hold  that  a  suit 


1  Powers  V.  Skinner,  34  Vt.  274.  In 
this  case  Kellogg,  J.,  observes  : 

"Courts  of  justice  have,  with  jeal- 
ous care,  endeavored  to  protect  the 
legislation  of  the  government  from  all 
illegitimate  and  sinister  influences  and 
agencies  ;  and  it  has  been  settled  by  a 


series  of  decisions,  uniform  in  their 
reason,  spirit,  and  tendency,  that  an 
agreement  in  respect  to  services  as  a 
lobby-agent,  or  for  the  sale  by  an  indi- 
vidual of  his  personal  influence  and 
solicitations,  to  procure  the  passage 
of  a  public  or  private  law  by  the  legis- 


Officers  and  Agents  Generally. 


307 


If   the  amount  of   salary  of  officers  is   fixed  by  the   charter 
or   other   fundamental   law,  allowance  in   excess   of    such   salary 


at  law  may  be  maintained  to  enforce 
tlie  obligation  to  pay  for  services  ren- 
dered in  tlie  manner  described,  and  of 
which  the  corporation,  after  its  full 
organization,  has  taken  the  l)enefit. 
It  it  were  true,  that,  at  the  time  the 
services  were  rendered,  the  corporation 
had  no  cai)acity  to  make  a  contract, — 
•which  is  by  no  means  clear  after  the 
charter  has  been  accepted, —  still,  if 
tlie  services  were  rendered  for  the  cor- 
poration upon  the  promise  of  the  cor- 
porators that  they  should  be  paid  for 
by  it  when  its  organization  was  per- 
fected, and  after  tiiat  the  corporation 
had  adopted  the  contract  and  received 
its  benefits,  we  think,  that,  upon  the 
maxim  that  a  subsequent  ratification 
is  equivalent  to  a  prior  request,  it 
may  well  be  held  that  a  promise  to 
pay  will  be  implied.  Upon  this  prin- 
ciple, a  person  may  sue  on  a  contract 

lature,  is  void  as  being  prejudicial  to 
sound  legislation,  manifestly  injurious 
to  the  interests  of  the  state,  and  in 
express  and  unquestionable  contra- 
vention of  public  policy.  Clippin- 
ger  v.  Hepbaugh,  5  W.  &  S.  815 ; 
Wood  V.  McCann,  6  Dana  (Ky.), 
366 ;  Marshall  v.  Bait.  &  Ohio  Ry. 
Co.,  16  Howard  (U.  S.  Sup.  Ct.),  314; 
Harris  v.  Eoof's  Ex'rs,  10  Barb.  (Sup. 
Ct.)  489  ;  Rose  et  al.  v.  Truax,  21  id. 
361  ;  Bryan  v.  Reynolds,  5  Wis.  200. 
The  principle  of  these  decisions  has 
no  respect  to  the  equities  between  the 
parties,  but  is  controlled  solely  by  the 
tendency  of  the  contract ;  and  it  mat- 
ters not  that  nothing  improper  was 
done,  or  was  expected  to  be  done,  under 
it.  The  law  will  not  concede  to  any  man, 
however  honest  he  may  be, the  privilege 
of  making  a  contract  which  it  would 
not  recognize  when  made  by  designing 
and  corrupt  men.  A  person  may,  with- 
out doubt,  be  employed  to  conduct  an 
application  to  the  legislature  as  well 
as  to  conduct  a  suit  at  law,  and 
may  contract  for,  and  receive  pay  for 
his  services  in  preparing  and  present- 
ing a  petition  or  other  documents,  in 
collecting  evidence,  in  making  a  state- 
ment or  exposition  of  facts,  or  in  pre- 
paring and  making  an  oral  or  written 
argument,  provided  all  these  are  used, 
or  designed  to  be  used,  either  before 
the   legislature   itself,  or   some   com- 


made  in  his  name  by  one  assuming  to 
have  authority,  but  having  none  in 
fact.  feo  the  title  of  an  adminis- 
trator will  relate  back  to  the  death  of 
the  intestate,  so  as  to  entitle  him  to 
sue  for  the  price  of  goods  sold  by  one 
assuming  to  act  for  the  administrator, 
whoever  might  be  afterward  ap- 
pointed,— Broom's  Legal  Maxinis(0T6), 
and  cases  cited, —  and  still  at  the  time 
of  such  sale  there  was  no  one  in 
existence  having  capacity  to  make  a 
contract  as  administrator.  See,  also, 
Foster  v.  Bates,  12  M.  &  W.  226.  So 
if  one  without  authority  buys  goods  for 
another,  but  afterward  the  other  re- 
ceives them,  this  is  equivalent  to  a 
previous  request.  1  Wms.  Saund. 
264,  n.  1  ;  Broom's  Legal  Maxims  (596); 
Story  on  Agency,  ^§  244,  250  ;  Keyeer 
v.  School  District,  35  N.  H.  481,  482." 


mittee  thereof,  as  a  body  ;  but  he  can- 
not with  propriety  be  employed  to 
exert  his  personal  influence,  whether 
it  be  great  or  little,  with  individual 
members,  or  to  labor  privatel}'  in  any 
form  with  them,  out  of  the  legislative 
halls,  in  favor  of  or  against  any  act  or 
subject  of  legislation.  The  jiersonal 
and  private  nature  of  the  services  to 
be  rendered  is  the  point  of  illegality 
in  this  class  of  cases.  Sedgwick 
V.  Stanton,  14  N.  Y.  289.  Our 
government,  in  theory,  is  founded  on 
the  most  exalted  public  virtue,  and 
the  principle  which  forbids  the  legal 
recognition  of  any  contract  for  such 
services  is  so  essential  to  the  purity  of 
the  government,  and  is  so  firmly  estab- 
lished as  a  rule  of  public  policy,  that 
it  requires  no  vindication.  It  has  not 
been  questioned  by  counsel  in  argu- 
ment, and  no  member  of  the  court  has 
liad  any  doubt  in  respect  to  its  pro- 
priety, or  any  hesitation  in  recogniz- 
ing its  authority.  It  is  equally  well 
settled  that  where  a  contract  is  an  en- 
tire one,  and  contains  an  element 
which  is  legal,  and  one  which  is  void 
as  being  against  ]iublic  policy,  it  can- 
not be  sifted,  so  that  the  legal  service 
rendered  under  it,  or  in  its  pursuit, 
can  be  separated  from  the  illegal  ser- 
vice, and  a  recovery  had  for  so  much 
of  the  service  as  would,  if  considered 
by  itself,  be  adjudged  to  be  legal.    If 


308  Private  Coepoeations. 

cainiot  be  made  by  the  corporation  nor  can  it  be  made  by  the 
board  of  directors.^ 

Sec.  197.  Frauds  of  officers  and  agents.  —  We  shall  hereafter  con- 
sider the  liability  of  corporations  for  the  frauds  and  other  torts  of 
their  officers  and  agents,  merely  premising  here  that  in  such  cases 
tke  liability  of  the  corporation  is  the  same,  in  the  absence  of  ex- 
press provision  of  the  law  on  the  subject  to  the  contrary,  as  would 
be  the  liability  of  a  natural  person  under  similar  circumstances,  the 
general  principle  being  that  they  are  liable  in  damages  for  frauds 
and  misrepresentations  of  their  agents  perpetrated  and  made  in 
the  due  course  of  their  employment,  and  for  such  torts  as  occur 
by  their  permission  or  express  direction.* 

Sec.  198.  Proof  of  agency.  —  From  what  has  been  said  in  ref- 
erence to  corporate  acts,  either  by  the, corporate  body,  or  by  the 
directors,  it  will  be  apparent  that  the  best  evidence  of  appoint- 
ment of  an  agent  and  his  authority  to  act  is  the  books  of  the 
company  containing  the  entry  of  the  resolution  or  act  of  appoint- 
ment.^ As  the  secretary  of  the  corporation  would  ordinarily  be 
the  proper  custodian  of  the  books  and  records  of  the  corporation, 
he  would  be  the  proper  person  to  prove  the  records  to  be  those  of 

any  part  of  an  indivisible  promise,  or  cannot  relieve  itself  from  its  responsi- 

any  part   of  an  indivisible  considera-  bility  by  voting  the  dissolution  of  the 

tion  for  a  promise,  is  illegal,  the  whole  corporation,  transferring  its    properly 

is  void,  and    no   action   can    be  main-  to  trustees  for  the   purpose  of  closing 

tained    on    it.     Chitty   on     Contracts,  up  its   concerns,  and  giving  notice  to 

586,  c.  ;  Filson's  Trustee  v.  Himes,  5  the   executive    authority  of   the  state 

Penn.  452  ;  Rose  et  al.  v.   Truax,   ttbi  that  it  claims  no  further  interest  in  its 

sripra."  act  of  incorporation. 

In  the  case  of  Revere  v.  The  Boston  If  this  is  attempted  the  plaintiff  is 

Copper  Co.,  15  Pick.  351,  it  was  held,  thereby  released  from   his  obligation 

that  a  corporation  having  made  a  con-  to  serve  the  corporation,  and  is  entitled 

tract  with  the  plaintiff  to  serve  its  in-  to  an  indemnity  for  the  .loss  which  he 

terests  during  his   life,  and  promised  has  sustained  in  consequence  of   the 

in  consideration  thereof  the  payment  refusal  of  the  company  to  employ  him 

of  a  fixed  salary,  so  long  as  the  service  and  pay  the  stipulated  salary, 
continued  to  be  faithfully  performed, 


1  Carr  v.  City  of  St.  Louis,  9  Mo.  191.  Pick.  (Mass.)  326  ;  Narragansett  Bank 

See,  also,  Utica  Ins.  Co.  v.  Bloodgood,  v.  Atlantic  Silk  Co.,  3  Mete.  (Mass.)  283; 

4  Wend.  652 ;  Godbold  v.  Bank  of  Mo-  Clark  v.  Benton  Manuf.  Co.,  15  Wend, 

bile,  11  Ala.    191;  Carr  v.    Chartier's  256;  Haven  v.  New  Hampshire   Asy- 

Coal  Co.,  25  Penn.  St.  337  ;  St.  Luke's  lum,  13  N.  H.  532  ;  Owiugs  v.  Speed, 

Church  V.  Mathews,  4  Dev.  Ch.  578.  5  Wheat.  420;  Methodist  Chappel  Co. 

'^  See  post,  chap.  13.  v.  Herrick,  35  Me.  354. 

^  Thayer  v.  Middlesex    Ins.   Co.,  10 


Officers  and  Aoknts  Gknerally.  SOS 

the  corporation,  which  would  be  necessary  in  onler  to  use  the 
same  as  evidence  of  the  matters  therein  contained.'  But  we  have 
ah'eady  considered  the  effect  of  the  reco<^nition  of  tiie  agent's  acts 
by  the  directors  or  the  corporate  body,  as  by  accepting  of  the  re- 
sults or  fruits  of  his  agency,  and  as  furnishing  evidence  of  his 
agency. 

The  principles  of  evidence  applicable  to  the  proof  of  agency, 
generally,  would  be  equally  applicable  where  it  is  claimed  that  a 
corporation  is  the  principal. 

'  Smitli  V.  Natchez  Steamboat  Co.,  1  of  appointment  of  tlie  agent  may  be 
How.  (Miss.)  478.  inferred  from  corporate  acts.  See  ante. 

But  as  we  have  already  noticed,  proof    §  163. 


310         ■  Private  Cokpokations. 


CHAPTER  VIII. 

CORPORATE  MEETINGS. 

Sec.  199.  How  the  will  of  the  corporate  body  is  expressed. 

Sec.  200.  Notice  of  corporate  meetings. 

Sec.  201.  Common-law  doctrine  relating  to  notices. 

Sec.  202.  Waiver  of  notice  —presumptions. 

Sec.  203.  Adjourned  meetings. 

Sec.  204.  General  and  special  meetings. 

Sec.  205.  Tlie  majority  at  corporate  meetings  may  express  the  corporate 
will. 

Sec.  206.  Doctrine  in  case  of  a  pledge  of  stock  —  right  of  pledgee  or  trus- 
tee to  vote. 

Sec.  207.  Meetings  of  directors . 

Sec.  208.  Acts  of  an  irregular  meeting  may  be  valid. 

Sec.  209.  Can  the  directors  only  act  as  a  board  ? 

Sec.  210.  Same  continued. 

Sec.  211.  What  constitutes  a  qvorum. 

Sec.  212.  Same  continued. 

Sec.  213.  Majority  may  act. 

Sec.  214.  The  powers  of  directors. 

Sec.  215.  The  mode  of  expressing  assent  by  directors. 

Sec.  216.  Corporate  meetings  cannot  be  held  outside  the  state. 

Sec.  217.  Directors  may  hold  meetings  outside  tlie  state . 

Sec.  218.  Jurisdiction  of  equity  to  restrain  by  injunction. 

Sec.  199.  How  the  will  of  the  corporate  body  is  expressed,  —  The 
will  of  the  corporation,  it  being  only  an  artificial  and  ideal  body, 
can  only  be  expressed  by  the  corporators  or  other  persons  compos- 
ing it.  In  order  to  secure  an  expression  of  this  will,  when  neces- 
sary, a  meeting  of  the  corporators  would  ordinarily  be  the  most 
convenient.  At  all  such  meetings  the  members  should  have  an  op- 
portunity to  be  present,  and  a  right  to  a  voice  or  vote  on  any  ques- 
tion of  corporate  policy  or  action,  in  the  absence  of  any  limitation 
of  this  right  in  the  constitution  of  the  corporate  body  ;  the  general 
rule  being,  that  the  will  of  the  majority  is  the  will  of  the  cor- 
porate body. '     This  doctrine  applies,  not  only  in  reference  to  the 

'  McBride  v.  Porter,  17  Iowa,  203;  2  etc.,  7  S.  &  R.  517  ;  Keyser  v.  Stansi- 
Kent's  Com.  293  ;  St.  Mary's  Church,     fer,  6  Ohio,  363. 


Corporate  Meetings.  311 

adoption  of  by-laws,  for  the  general  management  of  its  concerns, 
including  the  mode  of  a2)pointmeiit  or  election  of  officers  and 
agents,  and  the  granting  of  special  or  general  powers  to  them, 
but  the  right  to  direct  the  management,  in  general,  of  the  affairs 
of  the  corporation.  They  may,  in  case  there  is  no  limitation  of 
power  in  the  organic  law,  determine,  by  the  vote  of  the  majority, 
all  questions  of  policy  that  come  within  the  general  scope  of  the 
power  conferred  upon  the  corporation.  They  may  prescribe  the 
times  of  meetings,  general  or  special,  the  manner  of  giving  and 
the  time  of  notice  required  to  be  given  to  the  members,  provide 
for  the  election  of  officers,  agents  and  managers,  and  prescribe 
the  authority  they  possess,  the  duties  imposed  upon  them,  and  the 
mode  of  performing  them.  If  a  person  signs  articles  of  associa- 
tion, which  is  required  under  the  general  incorporating  statutes  of 
most  of  the  states  to  effect  an  incorporation,  or  constitutes  him- 
self a  member  subsequently,  by  a  purchase  of  its  stock,  it  is  with 
the  understanding  that,  in  case  no  other  provision  is  made,  he 
will,  in  the  management  of  its  affairs,  submit  to  the  will  of  the 
majority ;  the  fundamental  principle  being,  "  that  no  one  shall  be 
bound  without  his  own  consent,  expressed  by  himself  or  his  rep- 
resentative ;  but  actual  assent  is  immaterial,  the  assent  of  the 
majority  being  the  assent  of  all:  this  is  not  only  constructively 
but  actually  true  ;  for  that  the  will  of  the  majority  shall  in  all 
cases  be  taken  for  the  will  of  the  whole  is  an  implied  but  essen- 
tial stipulation  in  every  compact  of  the  sort ;  so  that  every  indi- 
vidual who  becomes  a  member  assents,  beforehand,  to  all  measures 
that  shall  be  sanctioned  by  a  majority  of  the  voices."  * 

Sec.  200.  Notice  of  corporate  meetings.  —  In  order  to  secure  an 
expression  of  the  will  of  the  members  of  a  corporation,  in  relation 
to  various  matters  of  concern  to  it,  it  is  usually  necessary  to  have 
meetings  of  the  members.  And  at  all  meetings  the  members 
have  a  right  to  be  present,  and  give  'an  expression  to  their  views 

'Gibson,  J.,  in  Re  St.  Mary's  Church  Barb.  581  ;  Horton  v.  Baptist  Church, 

in  Philadelphia,  7  S.  &  R.517;  Con-  34   Vt.  316;    Luuman    v.   Lebanon    K 

gregation  v.  Johnston,  1  id.  9;   1  Kyd  Co.,  30  Penn.  St.  46  ;    East    Tenn    R. 

on  Corp.  422;  2  Kent's  Com.  236;  Dud-  Co.  v.  Gammon,  5  Sneed,  ."iOT  ;  Gifford 

ley  V.  Kentucky  High  S.,  9  Bush,  576;  v.  N.  J.  R.  Co.,  10  N.  J.  Eq.  172  ;  Black 

Mowrev  v.  Ind.  C.  R.  Co.,  4   Biss.  78;  v.  Delaware,  etc.,  R.  Co.,  22  id.  130. 
Troy   &    Rutland   R.  Co.    v.  Kerr,  17 


312  Private  Corporations. 

and  judgment  <as  to  corporate  action  and  policy,  and  to  enforce 
them  by  their  vote,  unless  restrained  by  the  provisions  of  the 
articles  of  association,  express  or  implied.  In  order,  therefore,  to 
secure  such  an  expression  of  views,  some  notice  is  usually  re- 
quired by  the  organic  law  or  the  by-laws  of  tlie  association,  to  be 
given  to  the  members  composing  it ;  and  in  tlie  absence  of  any 
provisions  in  reference  to  notice,  the  general  principles  of  the 
common  law  would  probably  require  reasonable  personal  notice 
to  be  given.'  And  even  by-laws,  relating  to  notice,  which  are  re- 
pugnant to  the  fundamental  laws  of  its  constitution,  will  be  con- 
sidered as  void."  The  faihire  to  give  the  notice  required  will 
generally  invalidate  a  corporate  meeting.^  And  it  is  held  to  be  a 
plain  dictate  of  reason,  that  no  function  intrusted  to,  or  existing 
in  a  number  of  persons,  can  be  rightfully  or  lawfully  exercised 
without  a  reasonable  notice  to  all  the  members  composing  the 
body." 

If  the  articles  of  association  or  by-laws  provide  for  the  times 
and  places  of  holding  meetings,  it  would,  undoubtedly,  be  the 
duty  of  members  to  take  notice  of  the  same ;  and  if  they  prescribe 
the  notice  to  be  given,  such  notice  as  required  as  to  the  time  and 
mode  of  service  may  undoubtedly  be  given,  and  this  would  be 
all  that  could  be  required.^ 

'  Rex  V.  Langhorn,  4  Ad.  &  El.  538 ;  not  render  the  proceedings  of  a  cor- 

People  V.  Batchelor,   23   N.   Y.   128  ;  porate  meeting  invalid  on  account  of 

People's  Ins.  Co.  v.  Westcott,  14  Gray,  a  want  of  notice  to  him.     Stebhins  v. 

440  ;  State  v.   Ferguson,  31    N.   J.  L.  Merritt,    10  Cush.    27.      The   pledgee 

107.  of  stock  is  not  generally  entitled   to 

"^Tucker  v.  Rex,  3  Bro.  P.  C.  304;  notice,     McDaniels  v.   Flower    Brook 

Hoblyn  v.   Rex,  id.   329.      See,   also,  Manuf.  Co.,  22  Vt.  274.     Where,   by 

Rex  V.  Attwood,  4  B.  &  Ad.  481 ;  N.  M.  the  records  of  a  meeting,  it  appeared 

286  ;  Rex   v.    Westwood,  7  Bing.  1  ;  4  that  a  majority  of  the  directors  were 

B.  &  C.  781  ;  Rex  v.  Bird,  13  East,  367;  present,  it  was  held  that  it  would  be 

Green  v.  Durham,  1  Burr.  127.  presumed  that  all   had   requisite  no- 

3  Rex  V.  Chetwynd,  7  B.  &  C.  695;  tice.  Sargent  v.  Webster,  13  Mete. 
Moore  v.  Hammond,  6  id.  455.  497  ;  Lane  v.   Brainerd,  30  Conn.  565. 

As  to  notice  of  adjourned  meetings  Nor  can  the  validity  of  the  acts  of  di- 

required  to  be  given  to  those  who  at-  rectors  be    collaterally  questioned  on 

tend   the   original  one,  see   Willis  v.  the  ground  of  a  want  of  notice.    Cham- 

Murry,  4  Ex.  843 ;  Warner  v.  Mower,  berlain   v.   Painesville,  etc.,    R.   Co., 

11  Vt.  385.  15  Ohio  St.  225. 

4  People  V.  Batchelor,  22  N.  T.  128  ;  ^  People  v.  Batchelor,  23  N.  Y.  128. 
People's  ins.  Co.  v.  Westcott,  14  Gray,  The  time  and  place  of  meeting,  it  is 
440  ;  1  Redf.  on  Rail.,  §  20.  And  the  claimed,  may  be  fixed  by  usage,  a  tacit 
absence  of  a  member  from  home  will  understanding  of  the  members,  or  in 
not,  ordinarily,  excuse  a  want  of  no-  other  ways,  of  which  members  may  be 
tice.  Jackson  v.  Hampden,  20  Me.  required  to  take  notice.  Atlantic  Ins. 
37.  But  it  has  been  held  that  the  Co.  v.  Sanders,  36  N.  H.  252. 
mental    imbecility  of   a  member  will 


Corporate  Meetings. 


313 


Seo.  201.  Common-law  doctrine  relating  to  notices.  —  The  Coiniaou 
law,  in  the  absence  of  statutory  or  other  regulations  on  the  sub- 
ject, would  require  such  notice  to  be  personally  given ; '  that  it 
be  in  writing  and  signed  by  the  proper  officer  of  the  corporation  ;' 
that  it  contain  the  time  and  place  of  meeting,  unless  there  be 
some  standing  rule  or  general  custom,  known  to  the  members, 
fixing  these  things ;  ^  and  state  the  business  to  be  transacted,  unless 
it  is  a  general  meetmg  for  the  transaction  of  business,  or  for  a 
particular  object  provided  for  by  the  articles  or  by-laws  of  the 
corporation." 

In  the  absence  of  any  provision  for  the  length  of  notice  a  rea- 
sonable time  is  required,  or  the  usual  time,  if  a  custom  prevails.* 


'  Stevens  v.  Eden  Meeting  House 
Soc,  12  Vt.  688  ;  Wiggins  v.  Freewill 
Baptist  Church,  8  Mete  (Mass.)  301  ; 
Stowev.  Myse,  7  Conn.  214;  Savings 
Bank  v.  Davis,  8  id.  191,  Taylor  v. 
Griswold,  2  Green,  222  ;  Rex  v.  Lang- 
horne,  6  N.  &  M.  (N.  C.)  203  ;  Stow  v. 
Myse,  7  Conn.  219  ;  Bethany  v.  Sperry, 

10  id.  200. 

*  The  summons  must  be  from  one 
having  authority  to  issue  the  same. 
Evans  v.  O.sgood,  18  Me.  213  ;  Stevens 
V.  Eden  Meeting  House  Soc,  12  Vt. 
688  ;  Bethany  v.  Sperry,  10  Conn.  200. 
See,  also,  in  case  of  no  officer  author- 
ized to  give  notice,  Goulding  v.  Clark, 
34  N.  H.  148 ;  Citizens'  Mut.  Fire  Ins. 
Co.  v.  Sortwell,  8  Allen,  217  ;  Cham- 
berlain v.  Painesville,  etc.,  R.  Co.,  15 
Ohio  St.  225.  But  it  has  been  held 
that  the  notice  need  not  be  in  writing, 
and  that  if  the  members  are  fully  in- 
formed of  meetings  by  parol,  it  is  suf- 
ficient. Wile,  on  Corp.  46;  Rex  v. 
Hill,  4  B.  &  C.  442. 

^  Re  British  Sugar  Refining  Co.,  3  K. 
&  J.  408 ;  26  L.  J.  Ch.  369;  Graham  v. 
Van  Diemen's  Land  Company,  1  H.  & 
N.  541;  26  L.  J.  Ex.  73  ;  Re  Irrigation 
Company  of  France  ;  Fox  Case,  L.  R., 
6  Ch.  176  ;  Jones  v.  Milton  &  Rush  T. 
Co.,  7  lud.  547;  Warner  v.  Mower,  11 
Vt.  385. 

■*  Sampson  v.  Bowdoinham  Steam 
Mill  Corp., 36  Me.  78;  Warner  v.  Mower, 

11  Vt.  385;  Merritt  v.  Ferris,  22   111. 
303  ;  Brice's  Ultra  Vires,  354. 

°  Wiggin  v  Freewill  Baptist  Soc, 
8  Mete.  (Mass.)  301;  Long  Island  R. 
Co.,  in  rem,  19  Wend.  37;  Rex  v. 
Hill,  4  B.  &  C.  442. 

40 


In  reference  to  notice,  Redfield,  .T., 
in  Warner  v.  Mower,  11  Vt.  385,  ob- 
served; "It  is  to  be  borne  in  mind, 
too,  that  a  manifest  distinction  obtains 
between  general  stated  meetings  of  a 
corporation,  and  special  meetings.  I 
know  that  stated  meetings  may  never- 
theless be  special  ;  i.  e., limited  to  par- 
ticular business.  But  stated  meetings 
of  a  corporation  are  usually  general  ; 
i.  e.,  for  the  transaction  of  all  business 
within  the  corporate  powers.  Unle.^s 
the  object  of  such  meeting  is  restricted 
by  express  provision  of  the  by-laws,  it 
would  ordinarily  be  understood  to  be 
general;  and  so  every  corporator  would 
be  bound  to  understand  it.  But  if  the 
object  of  the  meeting  be  limited  by  the 
by-laws,  it  is  then  a  special  meeting, 
and  no  other  business  could  lawfully 
be  transacted  at  such  meeting,  unless 
special  notice  was  given.  Where  the 
meeting  is  stated  and  general, no  notice 
is  required,  either  of  the  time  or  place 
of  holding  the  meeting,  or  of  the  busi- 
ness to  be  transacted.  Such  is  the 
general  law  of  private  corporations. 
But  as  all  corporations  are  entities 
of  the  law  merely,  and  exist  and  act 
solely  in  conformity  to  their  charter 
and  by-laws,  it  is  obvious  that  the 
force  and  effect  of  every  act  of  any 
particular  corporation  must  depend 
mainl_y  upon  the  charter  and  by-laws 
of  that  corporation.  These  are  de- 
nominated the  constitution  and  laws 
of  the  corporation,  and,  like  every 
other  constitution  and  all  other  laws, 
should  receive  such  construction,  as  to 
effect  the  probable  intention  of  the 
framers.      That     intention    must   be 


314  Private  Corporations. 

In  reference  to  this,  Mr,  Dillon  observes  :  "  Dae  notice  of  the  time 
and  place  of  a  corporate  meeting  is  by  the  English  law  essential 
to  its  validity,  or  its  power  to  do  any  act  wliicli  shall  bind  the  cor- 
poration. Eespecting  notice,  the  courts  in  England  adopted  cer- 
tain rules  which,  since  they  form  the  basis  of  much  of  the  statute 
law  in  this  country  upon  the  subject,  and  have  in  the  main  been 
followed  by  our  courts,  and  as  they  are  founded  on  reason, 
may  advantageously  be  here  mentioned.  All  corporations  are 
presumed  to  know  of  the  days  appointed  by  the  charter,  statute, 
usage,  or  by-laws,  for  the  transaction  of  particular  business,  and 
hence  no  notice  of  such  meeting  for  the  transaction  of  such  busi- 
ness is  necessary,  or  for  the  transactions  of  mere  ordinary  affairs  of 
the  corporation  on  such  days,  yet,  if  it  is  intended  to  proceed  to  any 
other  act  of  importance,  a  notice  is  necessary  the  same  as  at  any 
other  time.  A  notice,  when  necessary,  must,  if  practicable,  be 
given  to  every  member  who  has  a  rigiit'to  vote;  where  the  act  is 
given  to  one  to  be  done  by  a  body  consisting  of  a  definite  class  or 
classes,  it  must  be  given  by  or  issued  by  order  of  some  one  who 
has  the  authority  to  convene  a  corporate  meeting.  But  notice 
may  be  altogether  dispensed  with,  or  its  necessity  waived,  by 
the  presence  and  consent  of  every  one  of  those  entitled  to  it.  It 
must  be  served  personally  upon  every  resident  member,  or  left 
at  his  house.  If  temporarily  absent,  it  may  be  left  with  his 
family,  or  at  his  home  or  last  place  of  abode."  ^ 

jude^ed  of,  as  in  other  cases,  by  the  "  Those  by-laws  provide  for  an  an- 
words  used  in  reference  to  the  sub-  nual  meeting  of  the  corporation,  to  be 
ject-matter  and  circumstances  of  each  liolden  at  their  counting  room,  on  the 
particahir  corporation.  first  Wednesday  in  April  of  each  year. 
"The  charter  of  this  corporation  Tlius  far  the  time  and  place  of  the 
provides  for  the  first  meeting  of  the  meeting  is  fixed,  and  there  being  no 
corporation  specially,  and  that  at  that  restriction  in  regard  to  business,  any 
meeting,  and  at  all  other  meetings  and  all  business  pertaining  to  the  in- 
legally  notified  they  may  make  and  terest  and  powers  of  the  corporation 
alter  such  by-laws  as  may  be  thought  may  be  transacted.  The  annual  meet- 
necessary.  There  being  thus  no  re-  ing  of  all  others  is  the  one  when,  not 
striction  in  the  charter  in  relation  to  only  usually  but  always,  all  business 
meetings  of  the  corporation  or  the  busi-  is  expected  to  be  transacted.  And  the 
ness  to  be  transacted,  that  subject  will  custom  of  a  country  is  of  great  force 
be  governed  exclusively  by  the  by-  in  the  construction  of  statutes  as  well 
laws.  as  contracts." 

'  Dill,  on  Man.  Corp  ,  §§  200,  201.  necessary  to  state  what  business  is  to 

He  further  states,  "  The  notice  must  be  done  when  tlie  meeting  relates  only 

state  the  time  of  meeting.and  the  place  to  the  ordinary  affairs  of  the  cnrpora- 

if  it  be  not  the  usual  place.     It  is  not  tion  ;  but  when  it  is  for  the  purpose  of 


CoRPOuATE  Meetings. 


315 


What  is  thus  stated  relates  to  municipal  coii^orations,  and  the 
notice  required  to  be  given  to  the  members  of  the  select  or  repre- 
sentative body,  denominated  a  council  ;  but  it  is  equally  applica 
bletothe  select  body,  in  private  corporations  known  as  the  execu- 
tive committee  or  the  board  of  directors. 

Sec.  202.  Waiver  of  notice  —  presumptions.— We  have  already 
alluded  to  the  fact  that  the  right  to  notice  of  a  corporate  meeting 
may  be  waived.  If  all  the  members  assemble  at  any  meeting  and 
it  proceeds  to  business,  this  is  a  waiver  of  want  of  notice  and  the 
action  of  the  body  is  not  affected  thereby.'  In  some  cases  notice 
will  be  presumed  in  the  absence  of  proof  to  the  contrary.  Thus, 
where  it  is  shown  by  the  records  of  a  meeting  of  the  directors  of 
a  corporation  that  a  quorum  was  present,  notice  to  tlie  others  will 
be  presumed.^  And  it  has  been  held  that  the  validity  of  the  acts 
of  directors  cannot  be  collaterally  questioned  on  the  ground  of  the 
want  of  requisite  notice  of  the  meeting  to  all  the  members  of  the 
board.'  The  want  of  irregularity  of  notice  is  generally  held  to 
be  waived,  by  the  presence  of  all  who  have  a  right  to  attend  a 
meetino^.* 


electing  or  removing  officers,  passing 
ordinances,  and  the  like,  the  fact 
should  be  stated  so  that  the  members 
may  know  that  something  more  than 
the  usual  routine  of  business  will  be 
transacted.  Such  great,  importance  is 
attached  to  notice  that  it  can  only  be 
waived  by  universal  consent  ;  but  if 
every  member  of  a  select  body  be 
present  at  a  regular  or  stated  meeting, 
they  may,  if  every  one  consents,  but 
not  otherwise,  transact  any  business, 
ordinary  or  extraordinary ,  though  no 
notice  was  given,  or  an  insufficient  no- 
tice ;    but   the   unanimity  of   consent 

'Rex  V.  Oxford,  Palm.  453;  Eex  v. 
Chetwvnd,  7  B.  &  C.  695  ;  Re  British 
Sugar  Refining  Co.,  3  K.  &  J.  408;  26 
L.  J.  Ch.  369  ;  Samuel  v.  Holliday,  1 
Woolw.  (C.  C.)  400. 

2  Sargent  v.  Webster,13  Metc.(Mass.) 
497;  Lane  v,  Brainard,  30  Conn.  565; 
Middlesex,  etc.  v.  Davis,  3  Mete.  133. 
And  if  the  by-laws  provide  for  the 
place  of  meetings  and  the  records  do 
not  show  that  the  meetings  were  at  a 
different  place,  it  would  be  presumed 
that   the    meetings  were  held  at  the 


should  plainly  appear  from  their  re- 
corded declaration,  acts,  or  conduct. 
This  unanimity  is  only  necessary  to 
enter  upon  the  business  ;  once  com- 
menced ,  the  rules  which  govern  the 
body  and  its  actions  apply."  1  Dill,  on 
Mun.  Corp.,  §  202. 

The  old  English  doctrine  in  relation 
to  municipal  corporations  was,  tliat 
where  corporate  acts  were  to  be  done 
not  on  a  charter  day,  and  by  a  select 
body,  there  must  be  a  summons  of 
every  member,  except  such  a.s  have 
absolute) V  deserted  the  town.  Bac. 
Abr.,  tit.  E..  i^  8. 

place  designated  by  the  by-laws.  Mc- 
Daniels  v.  Flower  Brook  Co  ,22  Vt.274. 

^  Chamberlaine  v.  Painesville.etc,  R. 
Co.,  15  Ohio  St.  225. 

■«  Stebbius  v.  Merritt,  10  Cush.  27  ; 
People  v.  Peck,  11  Wend.  604 ;  Jones 
v.  Milton  T.  Co.,  7  Md.  547.  And  in 
Ohio  notice  need  not  be  jriven  by  those 
named  in  the  original  articles  of  asso- 
ciation, for  the  purpose  of  incorporat- 
ing under  a  general  law.  Chamber- 
laine v.  Painesville,  etc.,  K. Co.,  15  Ohio 
St.  325. 


316  Private  Corporations. 

But  if  one  person  is  absent  who  has  not  received  the  required 
notice,  or  if  present  refuses  his  consent  to  tlie  proceedings,  they 
have  been  held  invalid.'  But  a  subsequent  recognition  by  a 
member,  of  an  agent  appointed  at  a  meeting  held  without  giving 
a  proper  notice  to  him,  has  been  held  to  be  a  waiver  of  such 
notice.''  And  it  is  well  settled  that  where  a  board  of  directors 
of  a  corporation,  formed  for  pecuniary  profit,  orders  an  act  to 
be  done,  and  the  act  is  subsequently  performed,  its  legality  can- 
not afterward  be  questioned  by  any  director  or  stockholder  on 
account  of  the  irregularity  of  the  meeting  where  he  made  no 
objection  to  the  act  at  the  time  or  afterward  when  he  had  an 
opportunity  to  do  so.' 

Sec.  203.  Adjourned  meetings.  —  It  is  a  general  rule  that  corpo- 
rate meetings  may  be  adjourned,  and  if  a  corporate  meeting  is 
regularly  called  any  business  that  might  have  been  lawfully  trans- 
acted at  the  original  meeting  may  also  be  done  at  the  adjourned 
meeting.  This  is  also  in  accordance  with  the  general  rule  of 
parliamentary  proceedings." 

On  this  subject  Mr.  Eedfield  observes :  "  It  is  too  well  settled 
to  require  comment  that  all  corporations,  whether  municipal  or 
private,  may  transact  any  business  at  an  adjourned  meeting  which 
they  could  have  done  at  the  original  meeting.  It  is  but  a  con- 
tinuation of  the  same  meeting.  Whether  the  meeting  is  con- 
tinued without  interruption  for  many  days,  or  by  adjournment  from 
day  to  day,  or  from  time  to  time,  many  days  intervening,  it  is 
evident  it  must  be  considered  the  same  meeting  without  any  loss 
or  accumulation  of  powers."  ^ 

In  the  absence  of  particular  regulations  on  this  subject,  the 
power  to  adjourn  corporate  meetings  is  an  incidental  common- 
law  right,  and  adjournments  may  be  made  in  the  usual  way  to  any 

'  People's    Ins    Co.   v.  Westcott,  14  ■*  1  Dill,  on  Mun.  Corp.,  §  226. 

Gray,  440.  ^  Warner  v.  Mower,  11  Vt.  385.    See, 

2  Bryand  V.  Goodman,  5  Pick.  228.  also.   Smith   v.  Law,   21    N.    Y.  296; 

3  Samuel  v.  Holliday,  Woolw.  (C.C.)  People  v.  Batchelor,22  id.  128;  Farrar 
400.  See.  also,  Leavitt  v.  Yates,  4  Edw.  v.  Perley,  7  Me.  404;  Schoff  v.  Bloom- 
Ch.  134  ;  "Bank  of  Alabama  v.Comegys,  field,  8  Vt.  472  ;  Field  v.  Field, 9  Wend. 
12  Ala.(N.S.)  772;  Williams  V.Christian  394;  Warner  v.  Mower,  11  Vt.  395; 
Female  College,  29  Mo.  250  ;  Port  of  Hudson  Co.  v.  State,  24  N.J.  L.  718; 
Lond.  Assurance  Co.  Case  35  Eng.  L.  Insurance  Co.  v.  Sanders,  36  N.  H. 
&  Eq.   178  ;  Hoyt  v.  Thompson,  19  N.  253. 

Y.  207. 


Corporate  Meetings.  317 

future  time  the  same  day  or  any  other  clay,  and  even  to  another 
place  than  the  oi^e  where  it  originally  met,  it  within  the  territory 
of  its  creation.^ 

Sec.  204:.  General  aud  special  meetings.— The  meetings  of  corpo- 
rate bodies  may  be  denominated  general  and  special.  The  gene- 
ral meetings  are  usually  fixed  by  the  constitution  or  Ijy-laws  of 
the  body,  and  occur  at  stated  times  and  places,  such  as  the  usual 
annual  or  serai-annual  meetings  for  the  election  of  a  board  of 
directors  and  the  transaction  of  other  important  business.  Spe- 
cial meetings  are  such  as  are  called  on  particular  occasions, 
and  for  special  purposes.  They  differ  in  respect  to  the  notice 
required.  In  the  former  case,  if  notice  is  recpiired,  it  would  not  be 
necessary  ordinarily  to  specify  the  business  to  be  transacted,  as 
members  would  be  required  to  take  notice  of  it  if  it  was  not  re- 
ferred to.  But  in  the  latter  case,  it  would  be  necessary  to  partic- 
ularly specify  or  call  attention  to  the  bnsiness  to  be  transacted." 
And  it  has  been  held  that  a  notice  of  a  meeting  extraordinary  in 
respect  to  the  time  of  holding  it  need  not  specify  the  business  if 
it  is  ordinary  business.^ 

On  the  other  hand,  if  the  time  is  that  fixed  by  the  laws  of  the 
body,  but  business  of  an  extraordinary  character  is  to  be  trans- 
acted, the  notice  should  contain  this  special  object.''  And  although 
a  member  is  bound  by  the  action  of  a  majority  in  relation  to  mat- 
ters coming  within  the  scope  of  the  authority  of  a  general  meet- 
ing, still  he  is  not  bound  by  a  notice  of  a  special  meeting,  given 
to  the  attending  members  of  such  general  meeting  ;  for  he  would 
not  reasonably  expect  a  notice  of  that  kind  to  be  thus  given. 

On  the  subject  of  general  and  special  meetings,  Redfield,  J., 
remarks  :  "It  is  to  be  observed  that  a  manifest  distinction  obtains 
between  general  stated  meetings  of  a  corporation  and  special 
meetings.     I  know  that   stated  meetings  may,  nevertheless,   be 

1  Chamberlain  V.  Dover,  13  Me.  466  ;  2   H.    of   L.  Cas.  789;  Dill  on    Mun. 

People  V.  Martin,  5  N.  Y.  22  ;  Hubbard  Corp.,  §  224. 

V.  Winsor,  15   Mich.  146  ;  Kimball  v.  ^Savings   Bank   v.  Davis,  8  Conn. 

Marshall,    44  N.   H.   466;    Goodel   v.  191. 

Baker,  8  Cow.  286.  *  Zabriskie  v.  Railroad  Co.,  23  IIow. 

*  People  V.  Batchelor,  22  N.  Y.  128 ;  381  ;  Sampson  v.  Bowdoinham  Steam 

id.  146;  Downing  v.  Ruger,  21  Wend.  Mill   Corp.,  36  Me.  78;  People's  Ins. 

178  ;  Burgess  v.  Pue,2  Gill,  254  ;  Stow  Co.  v.  Westcott,  16  Gray,  440;  Atlantic 

T.  Wyse,  7  Conn.  214 ;  Smyth  v.  Darley,  Delaine  Co.  v.  Mason,  5  R.  I.  463. 


318  Private  Cokporations. 

special,  i.  e.,  limited  to  particular  business.  But  stated  meetings 
of  a  corporation  are  usually  general,  i.  e.,  for  the  transaction  of  all 
business  within  the  corporate  powers.  Unless  the  object  of  the 
meeting  is  restricted  by  express  provisions  of  the  by-laws,  it  would 
ordinarily  be  understood  to  be  general ;  and  so  every  corporation 
would  be  bound  to  understand  it.  But  if  the  object  of  the  meet- 
ing be  limited  by  the  by-laws,  it  is  then  a  special  meeting,  and  no 
other  business  could  laM'^fully  be  transacted  unless  special  notice 
was  given.  Where  the  meeting  is  stated  and  general,  no  notice 
is  required,  either  of  the  time  or  place  of  holding  the  meeting  or 
of  the  business  to  be  transacted."  ' 

Sec.  205.  The  majority  at  a  corporate  meeting  may  express  the  corpo- 
rate will.  —  Where  no  special  provision  is  made  in  relation  to  the 
matter,  a  majority  of  those  present  may  express  the  corporate 
will;  and  the  whole  body  is  bound  by -their  acts,  whether  the 
number  present  be  a  majority  of  the  whole  number  of  members 
or  not.''  The  whole  are  not  only  bound  by  a  majority  of  the 
members,  but  by  a  majority  of  those  present  at  a  lawful  meeting. 
I'he  majority  of  those  who  appear  constitute  a  body  capable  of 
transacting  business,  m  the  absence  of  any  limitation  as  to  the 
number  who  may  act.  And  the  will  of  the  majority  of  the  stock- 
holders, who  constitute  members  of  the  corporation,  may  adopt 
by-laws  that  shall  direct  and  control  the  directors,  who  are  but  the 
agents  of  the  corporation,  appointed  by  the  corporators. 

It  is  a  common-law  principle  that  if  an  act  is  to  be  done  by  an 
indefinite  body,  as  the  whole  body  of  the  corporators,  it  is  valid, 
if  directed  to  be  done  by  a  majority  of  those  present  at  a  legal 
meeting,  no  matter  how  small  a  portion  they  may  constitute  of  the 
whole  number  that  may  be  entitled  to  be  present,  unless  it  is 
otherwise  provided  by  law.'  But  this  is  not  the  doctrine  where 
a  definite  body,  as  a  board  of  directors,  is  authorized  to  act,  which 
we  have  already  fully  considered  in  treating  of  directors." 

1  Warner  v.  Mower,  11  Vt.  385.  See,  S.  &  R.  (Penn.)  517  ;  Presbyterian 
also,  Redf.  on  Rail.,  chap.  4,  §  4.  Consf.  v.  Johns.  27  Miss.  517  ;  Giflford 

2  See  pos<,  chap.  10.  ^  v.  New  Jersey    R.    Co.,  10  N.  J.   Eq. 

3  Damon  v.  Granby,  2  Pick.  345;  171;  Sprague'v.  Illinois  River  R.  Co. 
Commonwealth  v.  Ipswich,  id.  70;  19  111.174;  East  Tenn.  R.  Co.  v.  Gam- 
Williams  V.  Lunenburgh,  21  id.  75  ;  mon,  5  Sneed,  567  ;  Horton  v.  Baptist 
Church  Case.  5  Rob't  649  ;  First  Parish  Church,  34  Vt.  81G. 

V.  Sterns,  21  Pick.  148;  State  v.  Bind-        •*  See  ante,  chap.  6. 
er,  38  Mo.  450  ;  St.   Mary's  Church,  7 


Corporate  Meetings.  319 

Mr.  Kent  refers  to  this  distinction  and  remarks :  "  There  is  a 
distinction  taken  between  a  corporate  act  to  be  done  l)y  a  select 
and  definite  body,  as  by  a  hoard  of  directors,  and  one  to  be  per- 
formed by  the  constituent  members.  In  the  hitter  case,  a  maj(jrity 
of  those  who  appear  may  act,  but  in  the  former,  a  majority  of  the 
definite  body  must  be  present,  and  then  a  majority  of  the  quorum 
may  decide.  This  is  the  general  rule  upon  the  subject ;  and  if 
any  corporation  has  a  different  modification  of  the  expression  of 
the  binding  will  of  the  corporation,  it  arises  from  the  special  pro- 
visions of  the  act  or  charter  of  incorporation."^ 

In  California  the  power  of  electing  directors  of  a  railroad  cor- 
poration, by  the  statute  of  1850,  vested  in  the  stockholders.'  And 
it  has  been  held  in  that  state  that,  the  exercise  of  this  power  hav- 
ing been  regulated  by  the  statute,  a  corporation  could  not  by 
by-laws,  resolutions  or  contracts,  either  give  or  take  away  the 
authority  thus  conferred.^ 

Sec.  206.  Doctrine  in  case  of  a  pledge  of  stock  —  right  of  pledgee  or 
trustee  to  vote.  —  It  has  been  held  that  where  stock  stood  in  the 
name  of  a  trustee,  although  he  was  a  mere  pledgee,  he  was  enti- 
tled to  vote  in  the  absence  of  any  claim  in  that  respect  of  the 
pledgor ;  and  that  the  corporation  was  not  obliged  to  recognize 
the  claim  of  the  pledgor  until  it  was  established  by  the  court;  and 
that  after  an  election,  where  such  pledgee  was  allowed  to  vote, 
the  result  w^ould  not  be  disturbed  by  a  court  on  the  application 
of  tlie  pledgors.'  But  the  doctrine  generally  recognized  is,  that 
the  pledgees  or  trustees  of  a  corporation,  holding  the  corporate 
stock  as  such,  cannot  be  allowed  to  vote  on  such  stock.  To 
allow  him  so  to  do,  it  is  maintained,  would  be  against  public 
policy.  In  the  case  of  J^x  parte  Willeocks,  the  supreme  court 
of  New  York  remarks  :  "  We  do  not  hesitate  to  say  that  in  a  clear 
case  of  hypothecation  the  pledgor  may  vote.  The  possession  may 
well  continue  with  him,  consistently  with  the  nature  of  the  con- 
tract, and  the  stock  remains  in  his  name.  Till  enforced,  and  the 
title  made  absolute  in  the  pledgee,  and  the  name  changed  on  the 

•  2  Kent's  Com.    293.     See,  also,   1        *  Stat.  Cal.  1850. 
Kyd    on    Corp.    308,  400,   424:1    Bl.         s  Brewster  v.  Hartley,  37  Cal.  15. 
Com.  478  ;  Dill,  on  Corp.,  §  215.  *  Hoppin  v.  Bnifura,  9  R.  I.  513. 


320  Private  Corporations. 

books,  he  should  be  received  to  vote."  ^  But  it  appears  in  this 
case  that  the  decision  rested  upon  the  case  of  Ex  imrte  Holmes^ 
in  which  case  the  shares  stood  in  tlie  names  of  persons  who  were 
the  trustees  of  the  corporation  ;  and  it  cannot  be  considered  as 
determining  that  a  trustee,  other  than  of  the  corporation,  could 
not  vote  on  the  shares  thus  held  by  him  as  such  trustee.^ 

In  case  of  a  pledgee  or  trustee  of  a  corporation,  the  supreme 
court  of  California  remarks :  "  The  question  here  is,  not  whether 
the  pledgee  or  trustee  to  whom  stock  has  been  pledged  or  retrans- 
ferred  by  a  stockholder,  and  who  appears  upon  the  books  of  the 
corporation  to  be  the  owner,  is  entitled  to  vote,  but  it  is,  whether 
the  agent  or  trustee  of  the  pledgee,  who  is  described  in  the  cer- 
tificate book  of  the  corporation  as  a  trustee,  and  who  holds  as 
such  trustee  or  agent  certain  shares  of  stock  which  were  pledged 
by  the  corporation  to  its  creditor,  is  entitled  to  vote  such  stock. 
The  designation  of  McLane  as  trustee  was  insufficient  to  show  that 
he  did  not  hold  the  stock  in  his  own  right,  and  as  the  corporation 
was  one  of  the  parties  to  the  contract,  its  officers  are  chargeable 
with  notice  of  the  manner  in  which  he  held  the  stock. 

The  case  falls  within  the  principle  of  Ex  parte  Holmes,  in  which 
it  was  held  that  there  could  be  no  vote  upon  stock  owned  by  the 
company,  though  held  by  trustees ;  that  it  was  not  stock  to  be 
voted  upon  by  any  one  within  the  meaning  of  the  charter  or  the 
general  act  relating  to  that  subject.  Subsequent  cases,  like  Ex 
parte  Barker,  though  qualifying  and  restricting  the  broad 
language  of  Ex  parte  Holmes,  so  as  not  to  exclude  the  vote  of  a 
trustee  upon  the  stock  held  in  trust  for  a  stockholder,  have  not 
questioned  the  doctrine  that  the  stock  belonging  to  the  corpora- 
tion, though  held  in  the  name  of  trustees,  was  not  entitled  to  be 
voted  upon.  This  doctrine  must  command  the  assent  of  every 
one,  unless  it  can  be  shown  that  a  corporation  can  become  a  stock- 
holder, in  the  sense  of  the  statute,  of  its  own  stock,  receiving  of 
itself  dividends  and  responding  to  itself  for  calls  for  assessments, 
and  being  responsible  for  the  debts  of  the  corporation,  first  as  a 
corporation  and  second  as  a  stockholder."  * 

»  7  Cow.  402.  *  Brewster   v.  Hartley,   37  Cal.    15  ; 

^  5  Cow.  426.  see,   also,    Ex  parte    Holmes,    where 

*  See  Barker,  Ex  parte  rel.  to  Merc,  the    supreme    court    of    New    York 

Ins.  Co.,  6  Wend.  509.  in    construing    the    statute    of     that 


Corporate  Meetings. 


321 


Sec.  207.  Meetings  of  directors.  —  It  will  hardly  be  necessary  in 
this  treatise  to  consider  the  meetings  of  that  class  of  corporations 
which  consist  of  various  integral  and  definite  j)arts.  Our  corpo- 
rations, constituted  for  pecuniary  gain,  are  mainly,  if  not  entirely, 
composed,  as  we  have  seen,  of  an  indefinite  number  of  members 
who  are  stockholders,  and  by  virtue  of  a  law  of  their  institution, 
the  affairs  of  the  company  are  usually  managed  by  a  limited  num- 
ber of  agents  or  directors  who  are  elected  at  stated  times  by  the  cor- 
porators. In  this  connection  we  will  briefly  refer  to  and  consider  the 
subject ^of  their  meetings.  In  reference  to  these,  we  may  observe, 
that  many  rules  and  doctrines  that  we  have  considered  as  appli- 
cable to  the  general  meetings  of  the  body  would  be  applicable  to 
directors'  meetings.     Such  meetings,  if  unusual,  should  be  ap- 


state  relating  to  the  rights  of  stock- 
holders, which  provided  "  that  in  all 
cases  where  the  right  of  voting 
upon  any  share  or  shares  of  stock  of 
any  incorporated  company  shall  be 
questioned,  it  shall  be  the  duty  of  the 
inspector  of  the  election  to  require  the 
transfer  books  of  said  company,  and 
all  such  shares  as  may  appear  stand- 
ing thereon  in  the  name  of  any  per- 
son or  persons  shall  be  voted  on  by 
such  person  or  persons  directly  by 
themselves  or  by  proxy,  subject  to  the 
provision  of  the  act  of  incorporation," 
held  that  the  provision  literally  was 
broad  enough  to  cover  and  include 
parties  who  might  hold  such  stock  as 
mere  trustees. 

The  court  remarks  :  "  But  the  ques- 
tion remains  whether  the  latter  are  to 
be  deemed  stockholders  within  the 
spirit  of  the  act.  True,  the  stock  on 
which  they  voted  in  this  case  stands 
in  their  name,  but  on  the  face  of  the 
entry  they  are  declared  to  be  mere 
nominal  holders.  The  real  owner  of 
the  stock  should  vote,  especially 
where  his  name  is  truly  expressed  in 
the  books,  though  it  might  be  other- 
wise, if  he  chose  to  have  the  entry 
simply  in  the  name  of  another  without 
expressing  any  trust.  Now,  these 
three  persons,  a  majority  of  whom 
claim  the  right  to  vote,  are  mere  trus- 
tees (they  being  trustees  of  the  cor- 
poration), and  they  are  trustees  not 

41 


for  the  directors  but  the  company,  the 
corporation  itself.  If  there  could  be 
a  vote  at  all  upon  such  stock,  one 
would  suppose  that  it  must  be  by  each 
stockholder  of  the  company  in  propor- 
tion to  his  interest  in  it. 

This  brings  us  to  the  important  dif- 
ficulty in  the  case,  which  is,  whether 
stock  thus  held  can  vote  at  all.  And 
we  think  it  is  not  to  be  considered  as 
stock  held  by  any  one  for  the  purpose 
of  being  voted  upon.  No  doubt  the 
company  may,  from  necessity,  as  in 
this  case  take  their  own  stock  in 
pledge  or  payment,  and  keep  it  out- 
standing in  trustees,  to  prevent  its 
merger,  and  convert  it  to  their  security. 
But  it  is  not  stock  to  be  voted  upon, 
within  the  meaning  of  the  charter 
or  the  general  act  upon  which  we 
are  proceeding.  It  is  not  to  be  toler- 
ated that  a  company  should  procure 
stock  in  any  shape  which  its  officers 
may  wield  to  the  purposes  of  an  elec- 
tion, thus  securing  themselves  against 
the  possibility  of  a  removal."  See, 
also,  American  Railway  Frog  Co.  v. 
Haven,  101  Mass.  398. 

In  the  case  of  Ex  parte  Holmes, 
svpra,  the  stock  was  held  in  trust  for 
the  corporation.  But,  as  we  have 
seen,  stock  held  by  trustees  for  the 
benefit  of  others  may  be  voted  upon. 
See,  also,  Barker,  ex  parte,  etc.  G 
Wend.  509  ;  Hoppin  v.  BuflFum,  9  K.  I. 
513. 


322  Private  Cokpoeations. 

pointed  by  the  directors,  or  some  person  duly  authorized  for  that 
pui'pose,  and  the  requisite  notice  given  to  each  director. 

The  notice  and  the  mode  of  serving  it  is  usually  prescribed 
by  the  articles,  by-laws,  or  other  regulations  of  the  body  or  the 
board.  And,  like  meetings  of  the  corporate  body,  the  meetings 
of  the  governing  body  will  not  be  legal,  unless  the  requirement 
of  the  law  in  respect  to  notice  is  complied  with.'  And  it  has 
been  held  in  England,  that  if  an  advertisement  is  required,  as  a 
notice  to  the  members  of  the  board,  a  circular  will  not  be  suffi- 
cient.^ 

Sec.  208.  Acts  at  an  irregrilar  meeting  may  be  valid. —  It  must  not 
be  supposed,  however,  that  all  acts  and  proceedings  at  an  irregu- 
lar meeting  of  the  board  will,  under  all  circumstances,  be  consid- 
ered absolutely  void.  On  the  contrary,  where  the  interests  of 
third  parties  are  concerned,  they  have  '  been  held  valid.  Thus, 
in  a  recent  case,  Mr.  Justice  Miller,  on  this  question,  expresses 
himself  thus:  "  The  rule  is  very  well  settled,  and  is  supported  by 
abundant  reasons,  that  where,  at  a  meeting  of  the  board  of  direct- 
ors of  a  corporation,  formed  for  the  purposes  of  pecuniary  profit, 
an  act  is  ordered  to  be  done  without  objection,  either  then  or 
subsequently  made  to  the  regularity  of  the  meeting,  by  any  di- 
rector or  stockholder,  and  the  act  thus  authorized  is  afterward 
performed,  its  legality  cannot  afterward  be  questioned  in  a  suit  in 
equity,  on  the  ground  of  irregularity. "^ 

Sec.  209.  Can  the  directors  only  act  as  a  board  9  —  Much  contro- 
versy exists  as  to  whether  the  directors  may  act  as  directors  or 
agents  of  the  corporation,  except  as  a  board,  or  whether  they  can- 
not assent  to  matters  relating  to  the  corporation,  separately,  and 
not  at  a  regular  meeting,  in  the  capacity  of  a  board.  Mr.  Red- 
field,  on  this  subject,  observes  :  "  The  decision  of  a  majority  of 
the  board  of  directors  is  usually  regarded  as  binding  upon  the  com- 
pany, and  the  assembling  of  a  majority  will  be  treated  as  a  legal 
quorura  for  the  transaction  of  business,  unless  the  charter  or  by- 

'  Smyth  V.  Darley,  2  H.  of  L.  789.  ^  Samuel  v.  Holladay,  1  Woolw.  (C. 

« Re  British  Sugar   Ref.  Co.,  3  K.  &     C.)  400  ;  With.   Am.    Corp.    Cas.    139. 

J.  408 ;  26  L.  J.  Ch.  369.  See,     also,     Bank    of      Alabany     v. 

Comegys,  12  Ala.  (N.  S.)  772. 


Corporate  Meetings.  323 

laws  contain  some  specific  provision  upon  the  subject,  and  notice 
to  the  absent  directors  will  be  presumed  unless  the  contrary 
appear. 

"  The  general  rule  upon  this  subject  is  that  the  act  of  a  majority 
of  public  officers  is  binding  ;  but  that  if  they  be  of  private  ap- 
pointment, all  must  act,  and  in  general  all  must  concur,  unless  there 
is  some  provision  to  accept  the  decision  of  a  majority.  In  this 
respect  railway  directors  certainly  come  under  the  former  head. 
The  proper  distinction  upon  the  subject  seems  to  be,  that  where 
the  matter  is  of  public  concern,  and  of  an  executive  or  ministerial 
character,  the  act  of  a  majority  of  the  board  will  suffice,  although 
the  others  are  not  consulted.  But  where  the  function  is  judicial, 
involving  the  determination  of  some  definite  question,  the  whole 
body  must  be  assembled  and  act  together.  If  the  matter  is  of 
public  concern,  the  decision  of  a  majority  will  bind,  but  in 
private  concerns,  as  arbitrations,  all  must  concur."^  Thus,  in  Eng- 
land, where  a  quorum  consisted  of  three  directors,  and  the  secre- 
tary had  affixed  the  seal  of  the  corporation  to  a  bond  after 
obtaining  the  written  authority  of  only  two  of  them  at  a  private 
interview  and  at  another  private  interview  the  verbal  promise 
of  another  to  sign  the  authority,  the  court  held  that  there  should 
be  at  least  a  combined  action.^  And  in  New  Hampshire,  it  was 
held  that  where  the  by-laws  of  a  private  corporation  confer  upon 
the  directors  power  to  act  in  behalf  of  the  corporation,  without 
special  limitation  as  to  the  manner,  a  majority  may  act  within 
the  scope  of  the  authority  given  the  board,  and  bind  the  corpora- 
tion, either  where  there  is  a  consultation  of  all  together  and  a 
concurrence  of  a  majority,  or  where  there  is  a  regular  meeting 
at  which  all  might  be  present  and  a  majority  actually  meet 
and  act  by  a  majority  vote ;  that  the  act  of   a  majority  does  not 

'  1  Redf.  on  Rail.,  chap.  4,  §  23  ;  Dis-  Yellow  Jacket  Mining  Co.  v.  Steven- 
patch   Line,  etc.,  v.  Bellamy  Man.  Co.,  son,  5  Nev.  224. 

12N.H  205,  where  a  doubt  is  expressed  ^  D'Arcy  v.  Tamar,  etc.,  R.  Co.,  L. 

on  this   subject.     See,  also,    Edgerly  R.,  2  Ex.  158  ;  36   L.   J.  Ex.  37  ;  4  H. 

V.  Emerson,  3    N.  H.  555  ;  Cammeyer  &  C.  463.  But  see  Re  Bonellis  Tel.  Co. 

V.  German  Churches,  2  Saudf.  Ch.  186;  Collie's  Claim,  L.  R.,  12  Eq.  246,  260. 

Corn   Exchange    Bank  v.  Cumberland  See,  also,  Glover  v.  North-western  R. 

Coal  Co.,  1  Bosw.  436  ;  Dey  v.  Jersey  Co.,  5  Ex.  66  ;  19  L.  J.  Ex.  172. 

City,  19  N.   J.    Eq.    412  ;  Schumm  v.  All  acts  of  the  board  should  be   by 


Seymour,  24  id.  153  ;  Stoystown,  etc. 
T.  Co.  v.  Craver,  45  Penn.  St.  386 
Ross  V.  Crockett,  14  La.    Ann.    811 


resolutions  of  the  board  while  sitting 
as  such  in  consultation.  Ross  v.  Crock- 
ett, La.  Ann.  811. 


324  Private  Corpokations. 

bind  the  corporation  unless  there  is  an  assent  of  all  the  directors 
at  a  meeting,  or  perhaps,  separately  obtained,  or  that  there  was 
a  meeting  and  consultation  of  the  whole  board  and  a  vote  of  the 
majority ;  or  a  meeting  held  at  some  regular  period,  at  which  a 
majority  were  present  and  acted  by  a  majority  vote ;  or  a  meeting 
regularly  notified  at  which  a  majority  assembled  and  acted  by  a 
majority  vote.  But  doubts  are  expressed  as  to  the  validity  of  acts 
secured  by  the  assent  of  directors  separately  obtained.' 

Sec.  210.  Same  continued On  the  other  hand  it  has  been  held 

that  they  might  act  separately,  or  that  for  some  purposes  at  least 
they  might  act  otherwise  than  at  a  board  meeting. 

Thus,  the  supreme  court  of  Vermont  observes  :  "  The  direct- 
ors, in  the  absence  of  restrictions  in  the  charter  or  by-laws,  have 
all  the  authority  of  the  corporation  itself  in  the  conduct  of  its 
ordinary  business.  And  it  is  not  important  that  this  authority 
be  conferred  at  an  assembly  of  the  directors  unless  that  is  the 
usual  mode  of  their  doing  such  acts.  If  they  adopt  the  practice 
of  giving  a  separate  assent  to  the  execution  of  contracts  by  their 
agents,  it  is  of  the  same  force  as  if  done  at  a  regular  meeting  of 
the  board.  If  this  were  not  so,  it  would  lead  to  very  great  injus- 
tice, for  it  is  notorious  that  the  transactions  of  the  ordinary 
business  of  railways,  banks,  and  similar  corporations  in  this  coun- 
try, is  without  any  formal  meetings  or  votes  of  the  board.  Hence 
there  follows  a  necessity  of  giving  effect  to  the  acts  of  such  cor- 
porations according  to  the  mode  in  which  they  choose  to  allow 
them  to  be  transacted."  " 

'  Dispatch  Line,  etc.  V.  Bellamy  Man.  sucli  a   kind    that   the   action  of  the 

Co.,  12  N.  H.  205;  Edgerly  v.  Emerson,  board  by  formal  vote  would  be  essen- 

3  Fost.  555.  tial  to  their  validity.    But,  on  the  other 

'■^  Bank  of  Middlebury  v.  Rutland,  hand,  it  is  not  necessary  that  the  whole 

etc.,  R.  Co.,  30  Vt.  159.  board  should  be  consulted,  or  a  vote 

In  a  subsequent  case  in  Vermont,  taken  upon  every  trifling  detail  of  busi- 
where  this  doctrine  was  followed,  the  ness.  If  a  particular  line  of  proced- 
court  say  :  "  The  question  of  law  is  ure  has  been  resolved  upon  or  is  neces- 
simply  this,  whether  in  all  cases  a  sarily  incident  to  the  business  of  the 
contract  for  services  to  the  bank,  bank,  it  is  not  essential  that  every  ex- 
concluded  by  two  directors  profess-  penditure  of  money,  or  engagement  of 
ing  to  act  for  the  bank,  and  sub-  service,  or  other  item,  within  the  line 
seq  uently  approved  by  a  third,  is  so  marked  out,  should  receive  the  con- 
unauthorized  for  want  of  a  formal  sideration  of  all  the  directors  outside  a 
vote  or  conference  with  the  other  two  meeting,  or  that  a  meeting  of  them 
members  of  the  board.  It  is  very  should  act  upon  it."  Bradstreet  v. 
true  that  there  might  be   contracts  of  Bank  of  Royalton,  42  Vt.  128. 


Corporate  Meetings.  325 

Seo.  211.  What  constitutes  a  quorum. —  What  number  shall  consti- 
tute a  quorum  of  directors  for  the  transaction  of  business  is  fre- 
quently if  not  generally,  as  we  have  before  observed,  fixed  by  the 
articles  or  by-laws  of  the  association.  And,  wliere  it  was  pro- 
vided by  the  by-laws  that  the  president  and  two  directors  should 
constitute  a  quorum,  it  was  held  that  a  majority  of  the  quorum 
could  bind  the  corporation  ;  and  that  where,  at  a  meeting  of  the 
president  and  two  directors,  the  directors  made  a  sale  of  lands  of 
the  company  to  the  president,  it  was  not  invalid  for  the  want  of 
authority. 

The  supreme  court  of  Iowa,  after  citing  many  authorities  bear- 
ing upon  the  subject,  say :  "  It  follows  then,  in  the  light  of  these 
authorities,  that  since  the  president  and  two  of  the  directors  con- 
stituted a  quorum,  it  was  competent  for  two,  being  a  majority  of 
that  quorum,  to  bind  the  corporation  ;  and  if  two  were  able  to 
act  even  as  against  the  opposing  vote  of  the  other,  they  could,  a, 
fortiori,  Q,ct  without  his  concurrence.  Again,  the  ordinary  duties 
of  the  president  are  to  preside,  determine  questions  of  order,  give 
the  casting  vote  in  case  of  a  tie,  etc. ;  and  since  the  vote  of  the 
directors  was  unanimous,  there  was  no  occasion  or  opportunity 
for  the  president  to  cast  his  vote,  even  if  he  had  not  been  dis- 
qualified, and  the  contract  of  sale  was  made  by  just  as  many  di- 
rectors as  were  required  by  the  by-laws,  or  as  it  was  possible  to 
have  in  the  corporation  as  constituted."  ^ 

Sec.  212.  Same  continued.  —  The  general  rule  is,  that  if  a  quorum, 
which  is  usually  a  majority  of  the  whole  number  of  directors,  are 
present,  a  majority  of  that  quorum  may  act.  But  this  would  per- 
haps be  the  rule  only  when  the  meeting  was  a  regular  one,  of 
which  all  the  members  would  be  required  to  take  notice,  or  if  a 
special  one,  where  all  have  been  duly  notified. 

And  where  the  directors  consisted  of  seven  persons,  and  only 
four  of  the  seven  were  duly  assembled,  and  the  meeting  was  not 
a  stated  one,  the  court  observed  :  "  The  meeting  in  question  w^as 
not  a  stated  meeting,  nor  a  meeting  at  which  aU  had  been  notified 

'  Per  Cole,  J.,  in  Buel  v.   Bucking-  Wilcox,  7  Cow.  402  ;  Rex  v.  Monday, 

ham  Co.  ,16  Iowa,284.  See,  also, Sargent  Cowper,   538;    Sawyer    v.   Methodist 

V.  Webster,  13  Mete.  (Mass.)  497;  In  re  Episcopal  Church,  18  Vt.  405. 
Insurance  Co.,  22  Wend.  597;  Ex  parte 


326  Private  Corporations. 

to  be  present.  Four  only  of  the  seven  directors  were  present 
and  no  others  had  been  notified.  The  general  principles  appli- 
cable to  joint  powers  are  well  settled.  When  individuals  or  cor- 
porations give  an  authority,  jointly,  to  two  or  more  persons,  in 
order  to  bind  the  principal,  all  must  act.  But  where  a  number 
of  persons  are  by  law  intrusted  with  a  power,  not  of  mere  private 
convenience,  but  m  some  respects  of  a  general  nature,  and  all  of 
them  are  regularly  assembled,  the  majority  will  conclude  the 
minority,  and  their  act  will  be  the  act  of  the  whole.  There  are, 
however,  many  cases  where  an  authority  is  granted  to  a  board,  or 
to  several  persons,  or  a  majority  of  them,  or  a  certain  limited 
number,  either  more  or  less  than  a  majority,  who  are  thereby  con- 
stituted a  quorum.  Thus,  in  the  usual  form  of  bank  charters, 
there  is  a  provision,  that  '  no  less  than  four  directors  shall  consti- 
tute a  board  for  the  transaction  of  business,'  etc.  The  effect  of 
this  clause  we  deem  the  same  as  a  provision,  that  the  directors,  or 
any  four  of  them,  shall  be  competent  to  transact  any  business  of 
the  bank.  Four  constitute  a  quorum,  and,  when  assembled,  pos- 
sess all  the  powers  of  the  entire  board.'" 

Sec.  213.  Majoritymayact.— Where  three  assessors  were  appointed 
under  an  English  act  for  draining,  but  only  two  signed  the  appoint- 
ment, but  the  other  was  present  at  all  their  meetings,  it  was  held 
that  the  concurrence  and  signatures  of  the  majority  were  sufficient. 

In  tliis  case,  Lord  Tenterden  observed  :  "  Perhaps  it  may  not 
be  necessary  that  all  should  meet.  In  this  case  all  three  had  met. 
Where  it  is  granted  by  a  charter,  that  a  corporation  shall  have  so 
many  aldermen  and  so  many  capital  burgesses,  and  that  when 
one  of  the  latter  shall  die,  depart,  or  be  removed,  another  shall  be 
elected  in  his  place  by  the '  mayor  and  aldermen,'  and  other  capi- 
tal burgesses  then  surviving  or  remaining,  or  a  greater  part  of 
them,  the  election  must  be  made  by  a  majority  of  the  full  num- 
bers of  aldermen  and  of  capital  burgesses,  and  a  mere  minority  of 
members  of  both  bodies  who  happen  to  survive  is  not  sufficient."'' 

Sec.  214.  The  powers  of  directors.  —  It  may,  perhaps,  be  safely 
affirmed  as  the  settled   law,  that  if  the  authority  of  the  directors 

1  Per  Bell,  J.,  in  Edgerly  v.  Emer-        "^  Rex  v.  May,  4  B.  &  Ad.  843. 
son,  3  N.  H.  556.     See,  also,  Cram  v. 
Bangor  House,  12  Me.  359. 


Corporate   Meetings.  327 

to  manage  and  exercise  a  general  superintendence  and  control 
over  the  affairs  of  the  corporation  is  conferred  by  the  fundamen- 
tal law  of  its  constitution,  it  is  an  original  corporate  power  con- 
ferred on  a  definite  number,  and  a  majority  of  tlie  whole  number 
assembled  at  a  regular  meeting  may  act  by  a  majority  vote  of 
those  present ;  and  that  where  the  by-laws  of  a  private  corpora- 
tion confer  upon  the  directors  the  power  to  act  for  it,  without 
special  limitation  as  to  the  manner,  a  majority  may  act,  within 
the  scope  of  the  authority  given  to  them,  and  bind  the  corpora- 
tion, either  in  ease  there  is  a  consultation  of  all  together  and  a 
concurrence  of  a  majority,  or  where  there  is  a  regular  meeting  at 
which  aU  might  be  present,  and  a  majority  actually  meets  and 
acts  by  a  majority. 

Sec.  215.  The  mode  of  expressing  assent  by  the  directors.  —  But 
where,  by  the  fundamental  laws,  or  the  by-laws,  of  a  corporation, 
the  directors  have  power  to  act  for  the  corporation,  without  limi- 
tation as  to  the  manner,  the  assent  of  such  directors  should,  usu- 
ally at  least,  be  expressed  by  a  vote  at  a  meeting  on  consultation 
of  such  directors,  and  the  corporation  be  bound  only  by  a  major- 
ity of  such  directors  thus  assembled ;  *  and  to  constitute  such 
meeting  a  lawful  one,  it  must  be  one  either  fixed  by  law  at  some 
definite  time  and  place,  or  one  lawfully  called,  and  of  which  the 
directors  were  notified  and  a  majority  assembled  ;  and  when  the 
act  purports  to  be  the  act  of  the  'board  of  directors,  it  may  be 
presumed  to  be  the  act  of  the  majority,  until  the  contrary  is 
shown.  ^ 

Sec.  216.  Corporate  meetings  cannot  be  held  outside  the  state. — 
Some  controversy  has  existed  in  reference  to  the  right  of  corpo- 
rators to  hold  corporate  meetings  outside  the  state  where  the 
corporation  was  created.  We  have  already  alluded  to  the  fact 
that  a  corporation  has  a  legal  existence  for  most  purposes,  only  in 
the  state  where  constituted ;  and  strictly  corporate  acts  can  only 
be  performed  in  such  state,  though  by  the  comity  of  states  it  may 
sue  and  be  sued  on  contracts  or  for  torts  in  other  states ;  and  also, 
through  its  agents,  make  contracts  and  do  other  acts  within  the 
scope  of  its  powers,  like  natural  persons,  in  any  state. 

^  See  ante,  chap.  6.  *  Dispatch     Line,  etc.,  v.   Bellamy 

Manuf.  Co.,  13  N.  H.  205. 


328  Private  Corporations. 

But  a  distinction  has  been  drawn  in  respect  to  the  authority  to 
hold  meetings  outside  the  state,  between  strictly  corporate  meet- 
ings, and  meetings  of  the  directors  ;  and  this  distinction  seems  to 
be  supported  by  at  least  a  preponderance  of  authorities.  The 
question  of  the  right  of  a  corporation  to  hold  strictly  corporate 
meetings  outside  the  state  where  they  are  created,  was  recently 
presented  to  the  supreme  court  of  Maine.  The  facts  were  as  fol- 
lows :  A  meeting  of  the  corporators  was  called  to  organize  under 
its  charter  in  the  city  of  ISTew  York,  at  which  meeting  the  charter 
was  accepted  and  its  officers  elected  ;  and  the  question  presented 
was,  whether  the  acts  of  the  corporators  were  lawful.  The  court 
says  :  "  If  the  directors  of  the  corporation  legally  chosen  might 
transact  business  as  such  by  a  vote  of  the  board,  at  a  meeting 
held  in  another  state,  and  might  authorize  persons  to  execute  a 
conveyance  of  real  estate,  yet  it  would  be  necessary  to  show  that 
such  persons  were  legally  chosen  directors,  before  any  conveyance 
made  by  their  direction  would  be  considered  as  legally  made. 
All  votes  and  proceedings  of  persons  professing  to  act  in  the 
capacity  of  corporators,  when  assembled  without  the  bounds  of 
the  sovereignty  granting  the  charter,  are  wholly  void.  The 
directors  of  a  corporation  are  not  a  corporate  body  when  acting 
as  a  board,  but  a  board  of  officers  or  agents,  and  they  may  exer- 
cise their  powers  as  agents  beyond  the  bounds  where  the  coi'pora- 
tion  exists.  Whether  the  statute  provisions  of  this  state  and 
the  intention  of  the  legislative  power,  or  the  general  rule  of 
law  respecting  corporations  be  examined,  the  conclusion  must  be 
the  same  :  that  this  corporation  could  hold  no  meeting  for  the 
election  of  its  officers,  or  for  the  regulation  of  its  affairs  without 
the  limits  of  this  state,  and  all  such  meetings  and  proceedings 
were  without  right  or  authority,  and  wholly  void."  ^ 

The  corporation  can  generally  do  no  acts  either  within  or  with- 
out the  state,  except  such  as  are  expressly  authorized  by  the  or- 

iPerSHEPLET,  J.,  in  Miller  V.  Ewer,  34   N.    Y.   208;    Smith  v.   Alvord,  63 

27  Me.  517.  See,  also.  Freeman  v.  Ma-  Barb.  415  ;  New  York  Floating  Der- 

cliias  Water  Power,etc.,Co.,38  Me. 343;  rick  Co.  v.  New  Jersey  Oil  Co. ,  3  Duer, 

Aspinwall   v.  Ohio,  etc.,  R.    Co.,  20  648;  Stoney  v.  American  Life  Ins.  Co., 

Ind.   497;   Ormsby   v.   Vermont  Cop-  11  Paige,  635;  Bard  v.  Poole,  12  N.  Y. 

per  Mining  Co., 56  N.  Y.  623;  Merrick  495;   Wood   Hydraulic,   etc.,    Co.    v. 

V.    Brainard,    38    Barb.    574;   S.  C,  King,  45  Ga.  34. 


COEPOEATE    MeE'ITNGS. 


329 


ganic  law  of  its  being,  or  to  be  fairly  inferred  from  the  powers 
granted,  and  the  acts  must  be  done  in  the  manner  and  by  the  offi- 
cers or  agents  indicated  in  such  law.  And  if  the  organic  law 
does  not  grant  the  authority,  either  expressly  or  hy  impHcation,  to 
hold  corporate  meetings  without  the  limits  of  the  sovereignty 
creating  it,  it  follows,  that  tliey  could  not  thus  lawfully  meet,  and 
any  acts  or  contracts,  attempted  to  be  executed  while  thus  met, 
would  be  ultra  vires  and  absolutely  void.' 

Sec.  217.  Directors  may  hold  meetings  out  of  the  state. —  111  the 
absence  of  statutory  provisions,  or  conditions  in  the  organic  law  of 
corporations,  the  almost  uniform  current  of  authority  is,  tliat  the 
directors  of  corporations  may  hold  meetings  of  the  board  outside 
the  limits  of  the  state  where  it  was  constituted.'  The  directors 
of  a  corporation  are  not  the  corporation  itself,  and  if  they  meet 
without  the  state  of  their  creation,  their  proceedings  will  be  valid, 
for  in  this  respect  they  are  like  the  agents  of  a  natural  person.' 


'  Bank  of  Augusta  v.  Earle,  13  Pet. 
587.  See,  also,  Hilles  v.  Parrish,  13 
N.  J.  Eq.  380.  It  has  been  held  in 
New  York  that  the  statute,  relative  to 
the  observance  of  Sunday,  does  not  ap- 
ply to  the  proceedings  of  business 
meetings  of  corporate  benevolent  so- 
cieties held  on  that  day  ;  and  that  such 
society  meetings  are  not  on  that  ac- 
count illegal.  People  v.  Young  Men's 
etc.,  Soc,  65  Barb.  357. 

"  Bank  of  Augusta  V.  Earle,  13  Pet. 
587.  They  are  generally  considered  the 
agents  of  the  corporation.  "  Natural 
persons,  through  the  intervention  of 
agents,  are  continually  making  con- 
tracts in  countries  in  which  they  do 
not  reside,  and  where  they  are  not  per- 
sonally present  when  the  contract  is 
made,  and  nobody  has  ever  doubted 
the  validity  of  these  agreements.  And 
what  greater  objection  can  there  be  to 
the  capacity  of  an  artificial  person  by 
its  agents,  to  make  a  contract  within 
the  scope  of  its  limited  powers,  in  a 
sovereignty  in  which  it  does  not  reside, 
provided  such  contracts  are  permitted 
to  be  made  by  them  by  the  laws  of 
the  place  ?  The  corporation  must,  no 
doubt,  show  that  the  law  of  its  crea- 
tion gave  it  authorityto  make  such  con- 

42 


tracts  through  such  agents.  Yet,  as 
in  the  case  of  natural  persons,  it  is  not 
necessary  that  it  should  actually  exist 
in  the  sovereignty  in  which  the  con- 
tract is  made.  It  is  sufficient  that  its 
existence  as  an  artificial  person,  in  the 
state  of  its  creation,  is  acknowledged 
and  recognized  by  the  law  of  the  na- 
tion where  the  dealing  takes  place, 
and  that  it  is  permitted  by  the  laws  of 
the  place  to  exercise  there  the  powers 
with  which  it  is  endowed.  Every 
power,  however,  of  the  description  of 
which  we  are  speaking,  which  a  cor- 
poration exercises  in  another  state, 
depends  for  its  validity  upon  the  laws 
of  the  sovereignty  in  which  it  is  exer- 
cised, and  a  corporation  can  make  no 
vested  contract  without  their  sanction, 
express  or  implied."  Id. 

3  Ohio,  etc.,  R.  Co.  v.  McPherson,  85 
Mo.  13. 

Although  another  state  cannot  create 
a  corporation  in  New  York,  yet,  it  is 
no  objection  to  the  corporate  acts  of  a 
foreign  corporation, done  in  New  York, 
that  they  are  authorized  by  a  board  of 
directors  held  in  the  latter  state,  when 
the  acts  so  done  are  not  repugnant  to 
the  laws  of  the  state.  Smith  v.  Alvord, 
63  Barb.  415. 


330  Pkivate  Corporations. 

Thus,  where  the  directors  of  a  corporation,  created  in  Yermont, 
held  a  meeting  in  Massachusetts,  and  authorized  the  execution  of 
a  mortgage  by  an  agent,  and  its  vahdity  was  in  question,  the 
supreme  court  of  Yermont  said  :  "  The  conferring  of  authority 
by  the  directors  of  a  corporation  ujDon  an  agent  to  execute  a  deed 
is  not  a  corporate  act.  The  directors  act  in  such  a  case  not  as  a 
corporation,  but  as  the  agents  of  and  in  behalf  of  the  corporation. 

"  And  this  authority  may  be  conferred  by  a  vote  passed  at  a 
meeting  of  the  directors  without  the  state  where  the  corporation, 
was  created  and  exists.  *  *  *  ^^Q  have  no  occasion  now  to 
discuss  or  decide  whether  a  corporation  created  in  one  state  can 
legally  hold  a  corporate  meeting  and  pass  corporate  votes  in  another. 
There  certainly  seems  to  be  strong  reasons  for  holding  that  they 
cannot  act  in  a  strictly  corporate  capacity  where  they  have  no 
legal  existence.  But  we  do  not  regard  this  conferring  authority 
by  the  directors  upon  an  agent,  to  execute  a  deed,  as  being  a  cor- 
porate act,  any  more  than  any  and  every  other  act  or  contract  they 
do  or  make  on  behalf  of  the  corporation.  It  is  a  mere  question 
of  authority  in  the  directors,  and  not  one  of  corporate  power ;  and 
when  it  is  established  that  the  power  is  vested  in  the  directors,  it 
cannot,  with  any  more  propriety,  be  said  that  they  are  performing 
a  corporate  act  in  conferring  it,  than  in  every  other  matter  where 
they  bind  the  company  by  their  official  agency  as  directors.  They 
act,  in  neither  case,  as  the  corporation,  but  as  the  agents  of  and  in 
behalf  of  the  corporation."  ^ 

A  contract  with  a  corporation  cannot  be  void  because  executed 
out  of  the  state  of  its  creation,  for,  although  it  seems  well  settled 
that  a  corporation  cannot  as  such  and  in  its  corporate  capacity 
hold  meetings  or  transact  business  out  of  the  sovereignty  of  its 
creation,  or  migrate  to  another  sovereignty,  and  retain  its  legal 
existence  as  such,  this  does  not  prevent  its  directors  or  other 
agents  from  doing  business  within  another  sovereignty,  for  by  the 
comity  between  states  and  nations  they  may  sue  and  be  sued,  and 
may  contract  and  be  contracted  with,  through  their  agents,  the 
same  as  natural  persons. 

"The  mere  place,"  observes  the  supreme  court  of   Indiana, 

1  Arms  V.  Conant,  36  Vt.  744.  See,  also,  Galveston  R.  Co.  v,  Cowdrey,  11 
Wall.  476. 


CoKPORATE  Meetings.  331 

"  where  the  active  agents  of  a  corporation  enter  into  a  contract, 
must  in  general  be  immaterial.  The  important  question  arising 
must  be  one  of  power,  not  of  place.  The  exercise  of  power  has 
relation  to  the  place  of  their  legal  establislunent,  where  the  con- 
tract may  be  subsequently  acted  under.  The  meetings  of  direct- 
ors of  a  business  corporation  are  not  analogous  to  the  sessions  of 
a  judicial  tribunal.  The  coi'poration  is  organized  by  the  election 
of  directors,  but  the  mere  organization  of  directors  into  a  formal 
meeting  for  business  afterward  is  quite  a  different  thing.  States 
cannot  migrate,  but  by  their  agents  they  are  daily  making  con- 
tracts without  their  territorial  boundaries."  ' 

Sec.  218.  Jurisdiction  in  eqmty  to  restrain  by  injunction.  —  It  is  now 
a  generally  received  doctrine  that  courts  of  equity  have  jurisdic- 
tion to  enjoin  corporate  elections.  The  exercise  of  this  power 
and  the  law  upon  this  subject  is,  however,  of  modern  origin. 
But,  as  we  have  already  observed,  the  law  relating  to  private  cor- 
porations has  been  the  growth  largely  of  the  present  century,  and 
due  mainly  to  the  rapid  increase  and  vast  importance  of  the 
various  enterprises  which  have  called  them  into  existence.  Courts 
of  equity,  in  the  exercise  of  their  legitimate  functions,  have 
adapted  their  remedies  to  meet  the  requirements  occasioned  by 
the  growth  of  various  business  interests  and  the  complications  of 
modern  enterprises ;  and  in  modern  times,  in  the  exercise  of  its 
powers,  it  has  assumed  to  control  the  elections  of  private  corpora- 
tions where  the  principles  of  equity  seemed  to  require  it.  This 
power  of  the  courts  of  equity  jurisdiction  has  been  recognized  in 
this  country,"  and  a  succession  of  decisions  have  firmly  established 
this  jurisdiction  of  the  courts.^ 

I  Wright  V.  Sunday,  11  Ind.  404.  missioners,     restraining     them    from 

'-'  Haight   V.    Day,  1  Johns.   Ch.    18  acting  as   inspectors  of   the   election. 

(1814).  And  in  a  case  of  imperious  necessity, 

^  Walker  V.  Devereaux,4  Paige,  229  where  the  complainant  did  not  know 

(1833) ;  Campbell  v.  Poultney,  6  G .  &  and  could  not  ascertain  the  names  of 

J.  94;  Hilles  V.   Parish,  13  N.  J.  Eq.  the  other  stockholders,   I  might  con- 

380;  Webb  v.  Eidgely,  38  Md.  364;  sider   it  my  duty  to  prevent   a  great 

Brown  v.  Pacific  Mail  Steamship  Co.,  and  irreparable  injury  to  him,  although 

5  Blatchf .  (C.  C.)  525.     In  the  case  of  the  effect  of   that  interference  might 

Walker   v.    Devereaux,  above   cited,  be  to  destroy  the  charter  of  the  cor- 

Chancellor      Walworth      observes  :  poration.     But  in  the  exercise  of  such 

"This  court  unquestionably  has   the  apower  the  court  should  require  ample 

power  to  prevent  this  election  by  an  security  from  the  complainant  to  pay 

injunction  operating   upon  the   com-  all  damages  other  persons  might  sua- 


332  Pkivate  Cokporations. 

Although  the  right  to  restrain  the  holding  of  corporate  meet- 
ings seems  to  be  fully  recognized  in  the  cases  cited  in  the  notes, 
the  exercise  of  this  restraining  power  has  been  usually  exercised 
to  restrain  parties  from  casting  illegal  votes  at  such  elections. 

But,  in  Wisconsin,  in  a  case  where  a  complaint  was  filed  by 
a  minority  of  the  directors  of  a  railroad  company  against  the  ma- 
jority and  one  Jones,  a  stockholder,  charging  the  directors  with 
having  fraudulently  conspired  to  obtain  absolute  control  of  the 
affairs  of  the  company ;  with  having  fraudulently  caused  capital 
stock  to  be  issued  to  a  large  amount,  for  the  purpose  of  using  the 
vote  upon  such  stock  for  furthering  their  fraudulent  purposes  at 
the  election ;  with  having  caused,  by  resolution,  the  subscription 
book  of  the  company  to  be  closed  until  after  the  election,  in  order 
to  prevent  hona  fide  subscriptions  to  the  stock,  which  might 
change  the  result  of  the  election ;  that  such  stockholder,  Jones, 
intended  to  vote  on  stock  which  he  had  fraudulently  received 
from  the  company,  under  an  agreement  with  it  to  convey  to  it 
certain  lands,  to  a  portion  of  which  he  was  unable  to  give  a  good 
title ;  and  that  the  corporation  was  entitled  to  a  return  of  such 
shares,  in  proportion  as  such  defendant  failed  to  furnish  the  title  to 
such  lands.  A  preliminary  injimction  which  was  granted  was 
dissolved  by  the  court  below,  and  an  appeal  was  taken  to  the 
supreme  court  of  that  state,  where  the  jurisdiction  of  the  court  in 
the  matter  was  not  questioned,  but  the  judgment  of  the  court  below 
was  sustained  on  other  grounds.  The  opinion  of  the  court  was 
dehvered  by  Mr.  Justice  Cole,  who  observes:  "ISTow,  upon 
general  principles,  it  would  seem  improper  and  most  mischievous 
to  grant  an  injunction  upon  the  complaint  of  a  minority  of  the 
board  of  directors  to  restrain  a  stockholder  from  voting  upon  an 
alleged  excess  of  stock  held  by  him,  before  the  company  had 
taken  any  steps  to  cancel  the  stock  or  declare  it  void.     We  have 

tain  by  the  granting  of  the  injunction,  to   deny    the   allegation   if   it   ia   un- 

if  it   should  be    subsequently    ascer-  founded,  but  it  is  not  sufficient  to  jus- 

tained  that   it  was  not  warranted  by  tify  the  court  in  destroying  or  injur- 

the  real  facts  of  the  case.     The  oath  ing  the  rights  of  others  who  have  not 

of  the  complainant  that  he  is  informed  had  an  opportunity  of  being  heard  by 

and  believes  the  existence  of    a  fact  themselves,  or  by  those  who  are  under 

may  be  sufficient  ground  to  authorize  a    legal   obligation    to   protect    their 

the  issuing  of  an  injunction  against  a  rights." 
defendant  who  has  had  an  opportunity 


Corporate  Meetings.  333 

not  been  referred  to  any  case  where  an  interposition  of  the  court 
by  injunction  has  been  exercised  for  such  purpose,  and  after  some 
research  we  have  been  able  to  find  none.  But  from  the  allega- 
tions of  this  complaint,  it  is  not  easy  to  perceive  how  it  would 
produce  irreparable  and  permanent  injury  to  the  company,  as 
plaintiffs,  even  if  Jones  should  vote  upon  this  alleged  excess  of 
stock.  The  complaint  fails  to  show  that  imminent  danger  to  the 
property  of  the  plaintiffs  is  treated  by  the  contemplated  acts, 
nor  does  it  present  any  other  sufficient  ground  or  reason  for  ar- 
resting or  restraining  him  from  voting  upon  this  stock."  ' 

*  Reed  v.  Jones,  6  Wis.  680  (1857).     See,  also,  post,  as  to  injunction,  §  408. 


334  Pkivate  Corporations. 


CHAPTER  IX. 

CORPORATE   CONTRACTS. 

Sec.  219.  The  power  to  contract,  a  corporate  incident ;  construction  of  the 
power. 

Sec.  220.  Mode  of  exercising  the  power. 

Sec.  221.  Incidental  powers  of  a  corporation. 

Sec.  222.  Cases  illustrating  the  subject. 

Sec.  223.  Contracts  relating  to  bailments. 

Sec.  224.  What  would  and  what  would  not  be  within  the  scope  of  an  agent's 
authority,  in  cases  of  bailments. 

Sec.  225.  Place  of  contracting  by  the  corporation. 

Sec.  226.  Place  of  contracting  by  directors. 

Sec.  227.  Corporate  bills  and  notes  ;  negotiable  quality  of  corporate  bonds. 

Sec.  228.  Coupons  ;  their  incidents  and  qualities. 

Sec.  229.  Ultra  vires  ;  doctrine  of. 

Sec.  230.  DiflFerent  senses  in  which  the  term  is  used. 

Sec.  281.  Are  all  contracts  void,  entered  into  by  corporations,  beyond  the 
powers  conferred  upon  them  ? 

Sec.  232.  Same  continued. 

Sec.  238.  Distinction  between  executed  and  unexecuted  contracts,  in  rela- 
tion to  ultra  vires. 

Sec.  234.  Same  continued. 

Sec.  235.  When  neither  party  can  avoid  a  contract,  although  ultra  vires. 

Sec.  236.  Same  continued. 

Sec.  237.  Form  of  action,  in  case  of  ultra  vires  contracts. 

Sec.  238.  The  doctrine  of  ultra  vires  applied  to  agents. 

Sec.  239.  The  doctrine  of  ultra  vires,  in  cases  of  negotiable  instruments. 

Sec.  240.  Necessary  or  implied  powers,  not  ultra  vires. 

Sec.  341.  Conclusion  as  to  ultra  vires  contracts. 

Sec.  219.  The  power  to  contract,  a  corporate  incident ;  construction 
of  the  power.  —  We  have  noticed  that  it  was  one  of  the  incidental 
powers  of  a  corporation  at  common  law  to  make  contracts  the 
same  as  natm-al  persons,  being  limited  in  this  resj)ect  only  by  the 
general  laws,  or  its  fundamental  laws,  or  the  provisions  of  the 
constating  instruments.'    This  right  embraces  also  all  matters  that 

'Barry  v.    Merchants'  Exch.  Co.,  1  the  same  as  an  individual.    .*      *     * 

Sandf.  Ch.  280  ;  Brady  v.  Mayor,  etc.,  And  every  such  corporation  has  power 

1  Barb.  584.     In  Barry  v.  Merchants*  to  make  all  contracts  which  are  neces- 

Exch.  Co.,  supra,  Sanford,  V.  C,  ob-  sary  and  usual  in  the   course  of  the 

serves:   "  Every  corporation,  as  such,  business   it   transacts,  as  a  means  to 

has  the  capacity  to    take    and   grant  enable  it  to  eflFect  such  object,  unless 

property,  and  to  contract  obligations  expressly  prohibited  by  law." 


Corporate  Contracts.  335 

are  not  only  within  the  express  provisions  of  these  laws  and 
instruments,  but  also  the  right  to  contract,  in  reference  to  all 
matters  and  to  any  extent  that  comes  within  the  scope  of  the 
authority,  as  conferred  by  such  laws  and  instruments,  on  a  fair 
construction  of  the  same,  they  being  interpreted  in  view  of  the 
objects  and  purposes  of  its  creation.  The  power  to  make  con- 
tracts and  to  sue  and  be  sued  thereon  is  usually  conferred  in  gen- 
eral terms  in  the  incorporating  act.  Bat  where  the  power  is  con- 
ferred in  this  manner  it  is  not  to  be  construed  as  authorizing  the 
making  of  contracts  of  all  descriptions,  but  only  such  as  are  neces- 
sary and  usual,  and  fit  and  proper  to  enable  the  corporation  to 
secure  or  carry  into  effect  the  purposes  for  which  it  was  created, 
and  the  extent  of  the  power  will  depend  upon  the  other  provis- 
ions of  the  charter  defining  matters  in  respect  to  which  the  cor- 
poration is  authorized  to  act.  To  the  extent  necessary  to  execute 
the  special  powers  and  functions  with  which  it  is  endowed  by  its 
charter,  there  is  indeed  without  special  authority  an  implied  inci- 
dental authority  to  contract  obligations  and  sue  in  the  corporate 
name,'  in  reference  to  any  and  every  matter  necessary  or  pertain- 
ing even  to  the  business  for  the  prosecution  of  which  it  was 
created.^  The  rule  may  be  stated  to  be  that  when  the  charter  or 
act  of  incorporation,  or  the  statutory  law,  imposes  no  restraint, 
and  is  silent  as  to  what  contracts  it  may  make,  it  has  general 
power,  as  a  general  rule,  to  make  all  such  contracts  as  are  neces- 
sary or  usual  in  the  course  of  its  business,  as  a  means  to  enable  it 
to  attain  the  object  for  which  it  was  created,  and  none  other,^ 
and  like  an  individual  is  not  only  bound  by,  but  may  take  the 
benefit  of  the  general  laws  where  it  is  within  the  reason  of  them, 
unless  there  be  particular  modifications  in  the  charter,  and  their 

1 1  Kyd  on  Corp.  69;  2  Kent's  Com.  458  ;   Miller  v.  Milwaukee,   14  Wis. 

224 ;  Chaffee  v.  Granger,  6  Mich.  51 ;  642. 

Douglas  V.  Virginia  City,  5  Nev.  147;  ■'  Strauss  v.   Eagle  Ins.  Co.,  5  Ohio 

Goodrich   v.    Detroit,   12   Mich.   279;  St.  59  ;  Wickler  v.  First  Nat.  Bank,  42 

Bank   of    Columbia    v.   Patterson,  7  Md.  581  ;    Brooklyn  Grand  Road  Co. 

Cranch,   299  ;    Seibrecht   v.   New  Or-  v.  Slaughter,  33  Ind.  185. 

leans,  12  La.  Ann.  496  ;  Galena  v.  Com-  ^  Broughton   v.  Manchester  Water- 

monwealth,  48  111.  423  ;  Strauss  v.  Ins.  works  Co.,  3  B.  &  Aid.  1  ;  Old  Colony 

Co.,  5  Ohio  St.  59  ;  Bateman  v.  Mayor,  R.  R.  Co.  v.  Evans,  6  Gray,  25  ;  Stur- 

etc,  3  H.  &  N.  322  ;  Rome  v.  Cabot,  tevant  v.  Alton,  3  McLean,  393 ;  Dun- 

28  Ga.  50 ;  Hale  v.  Houghton,  8  Mich,  ning  v.  North-western  Turnpike  Road 

Co.,  6  Gratt.  160. 


336  Prfv^ate  CoEPOKA^noNS. 

rights  and  contracts  are  equally  protected  by  the  general  or  com- 
mon law  and  all  its  processes  and  remedies.' 

Sec.  220.  Mode  of  exercising  the  power.  —  The  Will  or  assent  of 
the  corporation  can  be  expressed  only  by  the  voice  of  the  major- 
ity, or  in  case  of  joint-stock  corporations,  by  the  will  of  those  hold- 
ing a  majority  of  the  shares  of  the  capital  stock.  We  have  also 
noticed,  that  the  power  of  the  corporate  body  in  this  respect,  and 
generally,  for  the  control  and  management  of  the  corporate  busi- 
ness, is  vested  in  a  board  of  directors,  and  that  where  such  is  the 
case,  the  majority,  or  a  quorum  of  them,  may  express  the  corporate 
will  or  assent  in  the  same  manner  as  where  the  authority  rests 
with  the  body  of  the  corporators.  In  this  way  contracts  on  the 
part  of  the  corporation  may  be  either  directly  assented  to,  or 
authority  expressly  conferred  upon  agents  for  this  purpose.  And 
this  authority  thus  conferred  may  be  evidenced  by  an  instrument 
in  writing  signed  by  the  president  and  secretary  and  authenticated 
with  the  common  seal  annexed  or  stamped  upon  the  instrument. 
But  this  is  not  essential  except  in  those  cases  where  the  execution 
of  the  powers  conferred  upon  the  agent  are  required  to  be  by  in- 
strument under  seal,  in  which  case  the  authority  must  be  under 
seal."^     It  is  sufficient  in  order  to  bind  the  corporation  to  show 

1  State  Bank  v.  Cape  Fear  Bank,  13  pay  or  tender  money  for  his  principal, 
Ired.  L.  75.  A  corporation,  unless  pro-  to  redeem  land  sold  for  taxes  ;  Qracie 
hibited  by  its  charter,  has  the  power  v.  White,  18  Ark.  17  ;  or  to  authorize 
to  borrow  money  to  accomplish  the  an  agent  to  sign  the  grantor's  name  to 
purposes  for  which  it  was  formed,  a  bill  of  sale  of  a  mining  claim,  if  the 
Union  Mining  Co.  v.  Rocky  Mt.  Nat.  grantor  had  previously  agreed  -with 
Bank,  2  Cal.  248  ;  Moss  v.  Haspeth  the  grantee  as  to  the  terms  of  the 
Academy,  7  Heisk.  283.  sale ,  Patterson  v.  Keystone,  etc.,  Co., 

2  A  parol  authority  will  support  30  Cal.  360 ;  or  to  execute  simple 
a  written  contract  made  by  an  contracts,  may  be  by  parol.  Stack- 
agent.  Welch  V.  Hoover,  5  Cranch,  pole  v.  Arnold,  11  Mass.  27  ;  Emer- 
444  ;  Webb  v.  Browning,  14  Mo.  354  ;  son  v.  Providence  Manuf.  Co.,  12 
Bank  of  America  v.  Embury,  33  Barb.  id.  237 ;  New  Eng.  Ins.  Co.  v. 
323  ;  21  How.  Pr.  14  ;  or  authorize  the  DeWolf,  8  Pick.  56 ;  Shaw  v.  Nudd, 
performance  of  any  act  which  is  not  id.  9 ;  Small  v.  Owings,  1  Md.  Ch. 
of  such  a  nature  as  to  require  that  it  363.  But  an  authority  under  seal 
should  be  done  under  seal.  A  con-  is  necessary  to  authorize  an  agent 
tract  to  sell  land  may  be  valid,  and  to  sign  a  sealed  instrument.  Rowe  v, 
may  transfer  the  equitable  title.  Ware,  30  Qa.  278 ;  Mans  v.  Worthing, 
although  the  writing,  which  evi-  4  111 .  26 ;  Rhode  v.  Loutham,  8 
dences  the  contract,  may  not  be  under  Blackf.  413  ;  McMenty  v.  Frank,  4  T. 
seal ;  Ledbetter  v.  Walker,  31  Ala.  B.  Monr.  39  ;  Mitchell  v.  Sproul,  5 
175  ;  Johnson  v.  McGruder,  15  Mo.  J.  J.  Marsh.  264 ;  Wheeler  v.  Nevins, 
365  ;  Doughaday  v.  Crowell,  11  N.  J.  34  Me.  54  ;  Baker  v.  Freeman,  35  id. 
Eq.  201  ;  or  to  authorize  an  agent  to  485;    Shuetze  v.  Bailey,  40  Mo.  69  ; 


CoKPOKATE  Contracts,  337 

that  the  corporate  assent  is  given,  and  this  may  be  giv^en  as  above 
stated.  The  formal  execution  of  an  instrnnient  by  the  president 
and  secretary  as  such  officers  on  behalf  of  tlie  corporation  and  au- 
thenticated by  the  common  seal  may  be  convenient  and  desirable 
as  evidence,  but  it  is  not  usually  essential.^ 

Contracts  are  executed  for  the  corporation  by  some  authorized 
agent.  The  requirements  of  the  law  to  constitute  a  valid  con- 
tract in  respect  to  the  form  and  mode  of  its  execution,  applicable 
in  case  natural  persons  are  the  contracting  parties,  are  usually 
equally  applicable  to  corporations.  If  a  verbal  contract,  relating 
to  the  same  subject,  would  be  good  between  private  persons,  it 
would  be  good  between  corporations,  or  between  them  and  pri- 
vate persons  or  copartnerships.  If,  under  the  same  circumstances, 
the  contract  should  be  in  writing,  it  would  be  necessary  in  case  a 
corporation  was  a  party.  If  it  should  be  under  seal,  if  natural 
persons  only  were  parties  to  it,  under  like  circumstances  it  should 
be  under  seal  where  a  corporation  is  a  party.  But  if  the  mode  of 
the  execution  of  contracts  is  prescribed  by  the  statute  as  the  fun- 
damental law  of  the  institution,  that  mode  should  be  followed. 

On  this  subject,  Marshall,  C.  J.,  observes  :  "  The  act  of  incor- 
poration is  to  them  an  enabling  act ;  it  gives  them  all  the  power 
they  possess  ;  it  enables  them  to  contract,  and  when  it  prescribes 
to  them  a  mode  of  contracting,  they  must  observe  that  mode,    or 

Smith  V.  Perry,  29  N.  J.  L.  71  ;  King  (Peun.)   331  ;    Blood   v.   Goodricli,    9 

V.  Brooks,  9  Ired.  (N.  C.)  L.  218  ;  Cain  Wend.  (N.  Y.)  68  ;  Cooper  v.  Kankin, 

V.  Heard,  1  Coldw.  (Tenn.)  163  ;  Hau-  5   Binn.    613:    Bauorgee  v.  Hovey,   5 

ford  V.  M'Nair,  9  Wend.  (N.  Y.)  54  ;  Mass.  11.                           , 
Gordon   y.    Bulkley,    14   Serg.   &    R. 

'  Fanning    y.    Gregoire,     16     How.  tlie  old  technical  rule  lias  heeu  con- 

(U.    S.)    524;     Abby   v.    Billups,    35  demned  as  impolitic   and   essentially 

Miss.   618  ;    Alton  y.  Miilledy,  21  111.  discarded.     Indeed  it  seems  to  result 

76  ;    Western,  etc.,    Society  v.    Phila-  from  the  very  structure  of  these  arti- 

delphia,  31    Penn.   St.    175  ;  Clark  v,  ficial  beings  that  inasmuch  as   there 

Washington,  12  Wheat.  40  ;  Hamilton  are  two  general  modes  in  which  they 

v.    Railroad  Co.,  9  Ind.  359;    Ross  y.  may  express   their   assent,  there   are 

Madison,  1  id.  281  ;  Story  on  Agency,  two  general  modes  in  which  they  ex- 

§  52.  pressly    contract,    first    by   vote    and 

"  In  our  own  country  where  private  secondly    by    their    duly   authorized 

corporations  for  literary,  religious  and  agents."     Aug.     &    Am.     on     Corp., 

commercial  purposes  have  been  multi-  §  228.     And  this  was  the  doctrine  of 

plied    beyond    any    former    example,  the  civil  law.    Ayliffe's  Civ.  L.  Sup., 

their  facility  in  acting  and  contracting  12,  1,22.     See,  also,  Fleckner  v.  U.  S. 

is  involved  with  public  prosperity  it-  Bank,  8  Wheat.  357  ;  Union  Springs 

self ;  and  after  mature  consideration,  Co.  v.  Jenkins,  1  Caines,  381. 

43 


338  Private  Corporations. 

the  instrument  no  more  creates  a  contract  than  if  the  body  liad 
never  been  incorporated."  ' 

Where  the  acts  incorporating  an  insurance  company  provided 
that  all  policies  and  other  instruments  to  bind  the  company  must 
be  signed  by  the  president  or  some  other  officer,  it  was  held  that 
a  contract  to  cancel  a  policy  should  be  signed  })y  the  president  or 
other  of  its  officers.*  But  where  the  charter  of  a  bank  provided 
that  all  contracts  on  behalf  of  the  bank  should  be  signed  by  the 
president  and  countersigned  by  the  cashier,  and  that  the  funds  of 
the  bank  should  not  be  liable  on  any  contract  or  engagement, 
unless  so  signed,  it  was  held  that  the  provision  did  not  cover  con- 
tracts implied  in  law ;  and  that  a  recovery  might  be  had  against 
the  bank,  for  money  advanced  upon  a  check,  signed  by  the  cashier, 
only,  but  made  in  the  usual  course  of  its  business.^  So,  it  has 
been  held,  that  a  bank,  authorized  by  its  charter  to  contract  in  a 
particular  way,  may  nevertheless  be  liable  on  instruments  execu- 
ted in  a  different  mode,  where  such  a  course  has  been  com- 
monly pursued  by  the  bank,  such  provisions  being  considered 
merely  directory.* 

Sec.  221.  incidental  powers  of  a  corporation.  —  It  is  a  familiar  doc- 
trine that  corporations  possess  not  only  such  powers  as  may  be  ex- 
pressly conferred,  but  also  such  as  are  to  be  reasonably  "inferred 
from  those  expressly  granted,  and  necessarily  required  in  the  prose- 
cution of  the  objects  and  purposes  of  the  corporation.^  These 
incidental  powers  are  such  as  are  necessary  for  the  purpose  of  car- 
rying into  effect  the  j^owers  expressly  gi-anted.°     But  the  powers 

'  Head  v.  Insurance  Company,  2  See  furtlier  as  to  matters  in  cliar- 
Cranch,  127 ;  Fanning  v.  Gregoire,  16  ters,  whicli  are  treated  as  merely 
How.  524  ;  White  v.  New  Orleans,  15  directory,  Mott  v.  U.  S.  Trust  Corn- 
La.  Ann.  667  ;  Dey  v.  Jersey  City,  19  pany,  19  Barb.  568  ;  Union  Ins.  Co.  v. 
N.  .r.  Eq.  412  ;  Baltimore  v.  Reynolds,  Keyes,  32  N.  H.  313. 
20  Md.  1  ;  Matthews  v.  Skinker,  62  ^  Morris  R.  Co.  v.  Newark,  10  N. 
Mo.  329.  J.     Eq.    352  ;     Dartmouth    College   v. 

''Id.  See,  also,  Davis  V.  North  River  ■\Voodvvard,  4  Wheat.    636;  Beach  v. 

Ins.  Co.,  1  Cow.  462 ,    Hill  v.  Manches-  The     Fulton    Bank,    3    Wend.     583; 

ter    Water- Works   Co.,   2  Hen.  &   M.  Green's  Brice's  Ultra  Vires,  28  et  seq. 

573  ;  5  B.  &  Ad.  860  ;  Safford  v.  Wyck-  «  Bank  of  Augusta  v.  Earle,  13  Pet. 

koff,  4  Hill,  446.  519  ;    Dartmouth    College    v.    Wood- 

2  Mechanics'  Bank  v.   Bank  of   Co-  ward,  4  Wheal.  636;  Trustees  v.  Peas- 

lurabia,  5  Wheat.  326.  lee,   15  N.   H.   330;   Downing   v.   Mt. 

^Bulkley    v.    Derby  Fishing  Cora-  Washington  R.  Co.,  40  id.  231  ;  People 

pany,  2  Conn.  254.  v.  Utica  Ins.  Co.,  15  Johns.  357  ;  Le 


Corporate  Contracts. 


339 


claimed  as  incidental  must  be  such  as  are  directly  and  immediately 
appropriate  to  the  execution  of  the  specific  power  granted,  and 
not  merely  such  as  have  slight  or  remote  relation  to  it.^  Nor  is 
the  power  or  grant  to  be  construed  to  carry  as  incident  any  au- 
thority to  agents,  not  possessed  by  the  principal,  nor  actually  ap- 
purtenant to  the  business,  or  of  a  similar  character.*  It  is  also  a 
rule  of  construction  of  corporate  statutes  and  constating  instru- 
ments, that  they  must  be  construed  strictly,  and  most  strongly 
against  the  grantee  and  in  favor  of  the  public.  And  this  will  be 
determined  from  the  language  of  such  statutes  and  instruments, 
and  not  from  some  possible  intentions  of  their  framers.  But  the 
language  must  be  reasonably  construed  to  carry  out  the  general 
purposes  of  the  legislature,  and  of  the  framers  of  the  instruments.' 

Couteulx  V.  Cilv  of  Buffalo,  33  X.  Y.  Shawm ut  Bank  v.  Plattsburpfh,  etc., 
383  ;  Railroad  V.  Seeley,  45  Mo.  2-30 ;  R.  Co. ,  31  Vt.  491  ;  Mobile,  etc.,  R.  Co. 
Vandal]  v.  S.  S.  F.,etc.,  Co.,  40  Cal.  83;     v.  Franks,  41  Miss.  494. 


'  Hood  V.  New  York,  etc.,  R.  Co.,  22 
Conn.  1  ;  Curtis  v.  Leavitt,  15  N.  Y. 
157;  Buffett  v.  Troy,  etc.,  R.  Co.,  40 
N.  Y.  17G. 

^  Beaty  v.  Knowler,  4  Pet.  152.  See, 
also,  Cobuan  v.  Eastern,  etc.,  R.  Co., 

10  Beav.  1  ;  Salomons  v.  Lainp,  12  id. 
339  ;  Eastern,  etc.,  R  Co.   v.  Eastern, 

11  C.  B.  775  ;  Shrewsbury,  etc.,  R.  Co. 
V.  London,'  etc. ,  R.  Co. .  22  L.  J.  Ch.  G82 . 

^Charles  River  Bridsje  v.  Warren 
Bridge,  11  Pet.  420  ;  Providence  Bank 
V.  Billings,  4  id.  514  ;  Perrine  v.  Ches- 
apeake, etc..  Canal  Co.,  9  How.  172  ; 
Richmond  R.  Co.  v.  Louisa.  R.  Co.,  13 
id.  71;  Pennock  v.  Coe,  23  id.  117; 
Rice  V.  Railroad  Co.,  1  Black.  358; 
Delaware  Tax  Cases,  18  Wall.  206  ; 
Auburn  Plankroad  Co.  v.  Douglass,  9 
N.  Y.  444;  Rensselaer,  etc.,  R.  Co.  v. 
Davis,  43  id.  137  ;  In  re  New  York, 
etc..  R.  Co.  v.  Kip,  46  id.  546;  Black 
V.  United  Cos.,  22  N.  J.  Eq.  130;  S. 
C,  9  id.  455  ;  Bradley  v.  New  York, 
etc.,  R.  Co.,  21  Conn.  294;  Mohawk 
Bridge  Co.  v.  Utica,  etc.,  R.  Co.,  6 
Paige,  554;  C.  &  A.  R.  Co.  v.  Brifftrs, 
22  N.  J.  L.  623  ;  Townsend  v.  Brown, 
4  id.  80;  Wright  v.  Carter.  27  id. 
76  ;  Bridge  Prop.  v.  Hoboken,  etc.,  Co., 
13  N.  J.^Eq.  81  ;  S.  C,  1  Wall.  116; 
Bardstown,  etc.,  R.  v.  Metcalfe,  4  Mete. 
(Ky.)  199  ;  Bank  v.  Comiuouwealth,19 
Penn.  St.  144;  Penn. ,  etc.,  R.  Co.  v. 


Canal  Coms.,  21  id  9  ;  Commissioners 
V.  Erie,  etc.,  R.  Co.,  27  id.  339. 

A  banking  institution,  created  in  one 
state,  may  through  its  agents  deal  in 
exchange  in  another,  provided  there 
is  nothing  in  the  charter  to  restrict 
such  action  within  the  state  where 
created.  This  right  is  among  its  inci- 
dental powers.  In  Bank  of  Augusta 
V.  Earle,  sujyra.  Chief  Justice  T.\ney 
observed  :  "  It  may  be  safeh-  assumed 
that  a  corporation  can  make  no  con- 
tracts, and  do  no  acts  either  within  or 
without  the  state  which  creates  it,  ex- 
cept such  as  are  authorized  by  its 
charter;  and  those  acts  must  also  be 
done,  by  such  officers  or  agents,  and 
in  such  manner,  as  the  charter  author- 
izes. And  if  the  law  creating  a  cor- 
poration does  not,  by  the  true  con- 
struction of  the  words  used  in  the 
charter,  give  it  the  right  to  exercise 
its  powers  beyond  the  limits  of  the 
state,  all  contracts  made  by  it  in  other 
states  would  be  void. 

"The  cliarter  of  the  Bank  of  Au- 
gusta authorizes  it,  in  general  terms, 
to  deal  in  bills  of  exchange  ;  and,  con- 
sequently, gives  it  the  power  to  jiur- 
chase  foreign  bills  as  well  as  inland  ; 
in  other  words,  to  purchase  bills  pay^ 
able  in  another  state.  The  ])ower  thus 
given  clothed  the  corporation  witli 
the  right  to  make  contracts  out  of  the 


340 


Private  Cokpora'iions. 


Sec.  222.  Oases  illustrating  the  subject.  — It  has  been  lield  tiiat 
corporations  for  i-ailroad  purposes  have  implied  auth(ji'ity  to  erect 


state,  in  so  far  as  Georgia  could  con- 
fer it.  For  whenever  it  purchased  a 
foreign  bill,  and  forwarded  it  to  an 
agent  to  present  for  acceptance,  if  it 
was  honored  by  the  drawee,  the  con- 
tract of  acceptance  was  necessarily 
made  in  another  state  ;  and  the  gene- 
ral power  to  purchase  bills  without 
any  restriction  as  to  place,  by  its  fair 
and  natural  import,  authorizes  the 
bank  to  make  such  purchases,  wher- 
ever it  was  found  most  convenient  and 
profitable  to  the  institution .  And  also 
to  employ  suitable  agents  for  that  pur- 
pose. The  purchase  of  the  bill  in 
question  was,  therefore,  the  exercise 
of  one  of  the  powers  which  the  bank 
possessed  under  its  charter ;  and  was 
sanctioned  by  the  law  of  Georgia  creat- 
ing the  corporation,  so  far  as  that  state 
could  authorize  a  corporation  to  exer- 
cise its  powers  beyond  the  limits  of  its 
own  jurisdiction. 

"  But  it  has  been  urged  in  the  argu- 
ment, that  notwithstanding  the  pow- 
ers thus  conferred  by  the  terms  of  the 
charter,  a  corporation,  from  the  very 
nature  of  its  being,  can  have  no  author- 
ity to  contract  out  of  the  limits  of  the 
state  ;  that  the  laws  of  a  state  can 
have  noextraterritorial  operation  ;  and 
that  as  a  corporation  is  the  mere  crea- 
ture of  a  law  of  the  state,  it  can  have 
no  existence  beyond  the  limits  in 
which  that  law  operates  ;  and  that  it 
must  necessarily  be  incapable  of  mak- 
ing a  contract  in  another  place. 

"  It  is  very  true  that  a  corporation 
can  have  no  legal  existence  out  of  the 
boundaries  of  the  sovereignty  by 
which  it  is  created.  It  exists  only  in 
contemplation  of  law,  and  by  force  of 
the  law  ;  and  where  that  law  ceases 
to  operate,  and  is  no  longer  obligatory, 
the  corporation  can  have  no  existence. 
It  must  dwell  in  the  place  of  its  crea- 
tion, and  cannot  migrate  to  another 
sovereignty.  But  although  it  must 
live  and  have  its  being  in  that  state 
only,  yet  it  does  not  by  any  means  fol- 
low that  its  existence  there  will  not  be 
recognized  in  other  places  ;  and  its 
residence  in  one  state  creates  no  in- 
superable objection  to  its  power  of 
contracting  in  another.  It  is  indeed 
a  mere  artificial  being,  invisible  and 
intangible  ;  yet  it  is  a  person  for  cer- 


tain purposes  in  contemplation  of  law, 
and  has  been  recognized  as  such  by 
the  decisions  of  this  court  It  was  so 
held  in  the  case  of  TheUnited  States 
V.  Amedy,  11  Wheat  413,  and  in  Beas- 
ton  V.  The  Farmers'  Bank  of  Delaware, 
13  Peters,  135.  Now,  natural  persons, 
through  the  intervention  of  agents, 
are  continually  making  contracts  in 
countries  in  vrhich  they  do  not  reside  ; 
and  where  they  are  not  piTsoually 
present  when  the  contract  is  made  ; 
and  nobody  has  ever  doubted  the  valid- 
ity of  these  agreements.  And  what 
greater  objection  can  there  be  to  the 
capacity  of  an  artificial  person,  by  its 
agents,  to  make  a  contract  within  the 
scope  of  its  limited  powers,  in  a  sover- 
eignty in  which  it  does  not  reside  ; 
provided  such  contracts  are  permitted 
to  be  made  by  them  by  the  laws  of  the 
place  ? 

The  corporation  must  no  doubt  show 
that  the  law  of  its  creation  gave  it 
authority  to  make  such  contracts, 
through  such  agency.  Yet,  as  in  the 
case  of  a  natural  person,  it  is  not  nec- 
essary that  it  should  actually  exist  in 
the  sovereignty  in  which  the  contract 
is  made.  It  is  sufficient  that  its  exist- 
ence as  an  artificial  person,  in  the 
state  of  its  creation,  is  acknowledged 
and  recognized  by  the  law  of  the  na- 
tion where  the  dealing  takes  place  ; 
and  that  it  is  permitted  by  the  laws  of 
that  place  to  exercise  there  the  powers 
with  which  it  is  endowed. 

"  Every  power,  however,  of  the  de- 
scription of  which  we  are  speaking, 
which  a  corporation  exercises  in  an- 
other state,  depends  for  its  validity 
upon  the  laws  of  the  sovereignty  in 
which  it  is  exercised  ;  and  a  corpora- 
tion can  make  no  valid  contract  with- 
out their  sanction,  express  or  implied. 
And  this  brings  us  to  the  question 
which  has  been  so  elaborately  dis- 
cussed ,  whether,  by  the  comity  of 
nations  and  between  these  states,  the 
corpoi'ations  of  one  stale  are  permitted 
to  make  contracts  in  another.  It  is 
needless  to  enumerate  here  the  in- 
stances in  which,  by  the  general  prac- 
tice of  civilized  countries,  the  laws  of 
the  one  will,  by  the  comity  of  nations, 
be  recognized  and  executed  in  another, 
where  the  riffht  of  individuals  is  con- 


CoRPOIiATK    CoNTKACTS. 


341 


refresliment  rooms;'  that  a  corporation  authorized  to  erect  a 
market  or  buildings  for  any  jmrpose  can  purchase  hmd  on  which 
to  erect  the  same ;  and  an  authority  granted  to   borrow  money, 


cerned.  The  cases  of  contracts  made 
in  a  foreign  country  are  familiar  ex- 
amples ;  and  courts  of  justice  have 
always  expounded  and  executed  them 
according  to  the  laws  of  the  place  in 
which  they  were  made,  provided  that 
law  was  not  repugnant  to  the  laws  or 
policy  of  their  own  country.  The 
comity  tlius  extended  to  other  nations 
is  no  impeachment  of  sovereignty.  It 
is  the  voluntary  act  of  the  nation  by 
which  it  is  offered;  and  is  inadmissible 
when  contrary  to  its  policy,  or  preju- 
dicial to  its  interests.  But  it  contrib- 
utes so  largely  to  promote  justice 
between  individuals,  and  to  produce  a 
friendly  iutercour.se  between  the  sov- 
ereignties to  which  they  belong,  that 
courts  of  justice  have  continually  acted 
upon  it,  as  a  part  of  the  voluntary  law 
of  nations.  It  is  truly  said,  iu  Story's 
Conflict  of  Laws,  37,  that  'In  the  si- 
lence of  any  positive  rule,  affirming, 
or  denying,  or  restraining  the  opera- 
tion of  foreign  laws,  courts  of  justice 
presume  the  tacit  adoption  of  them 
by  their  own  government;  unless  they 
are  repugnant  to  its  policy, or  prejudi- 
cial to  its  interest.  It  is  not  the  com- 
ity of  the  courts,  but  the  comity  of 
the  nation  which  is  administered,  and 
ascertained  in  the  same  way,  and 
guided  by  the  same  reasoning  by 
which  all  other  principles  of  munici- 
pal law  are  ascertained  and  guided.' 

"  Adopting,  as  we  do,  the  principle 
here  stated,  we  proceed  to  inquire 
whether,  by  the  comity  of  nations, 
foreign  corporations  are  permitted  to 
make  contracts  within  their  jurisdic- 
tion; and  we  can  perceive  no  sufficient 
reason  for  excluding  them,  when  they 
are  not  contrary  to  the  known  policy 
of  the  state,  or  injurious  to  its  inter- 
ests. It  is  nothing  more  than  the 
admissioii  of  the  existence  of  an  arti- 
ficial person  created  by  the  law  of 
another  state,  and  clothed  with  the 
power  of  making  certain  contracts.  It 
is  but  the  usual  comity  of  recognizing 
the  law  of  another  state.     In  England, 


from  which  we  have  received  our  gen- 
eral principles  of  jurisjjrudeuce,  no 
doubt  ap])car3  to  have  been  enter- 
tained of  the  right  of  a  foreia:n  corpo- 
ration to  sue  iu  its  cfiurt.s  ;  since  the 
case  of  Henriquez  v.  The  Dutch  West 
India  Company,  decid(^d  in  1721),  2  Ld. 
Haym.  1532.  And  it  is  a  matter  of 
history,  which  this  court  are  bound  to 
notice,  that  corporations,  created  in 
this  country,  have  been  in  the  open 
practice,  for  many  year.i  past,  of  mak- 
ing contracts  iu  England  of  various 
kinds,  and  to  very  large  amounts  ;  and 
we  have  never  seen  a  doulit  suggested 
there  of  the  validity  of  these  contracts, 
b)' anj' court  or  any  jurist.  It  is  im- 
possible to  imagine  that  any  court  ia 
the  United  Slates  would  refuse  to  exe- 
cute a  contract,  by  which  an  American 
corporation  had  borrowed  money  in 
England  ;  yet  if  the  contracts  of  corpo- 
rations, made  out  of  the  state  by  which 
they  were  created,  are  void,  even  con- 
tracts of  that  description  could  not  be 
enforced. 

"  It  has,  however,  been  supposed 
that  the  rules  of  comity  between  for- 
eign nations  do  not  apply  to  the  states 
of  this  Union  ;  that  they  extend  to 
one  another  no  other  rights  than  those 
which  are  given  by  the  Constitution 
of  the  United  States;  and  tiiat  the 
courts  of  the  general  government  are 
not  at  liberty  to  presume,  iu  the  ab- 
sence of  all  legislation  on  the  subject, 
that  a  state  has  adopted  the  comity  of 
nations  toward  the  other  states,  as  a 
part  of  its  jurisprudence;  or  that  it 
acknowledges  any  rights  but  those 
which  are  secured  by  the  Constitution 
of  the  United  States.  The  court  think 
otherwise.  The  intimate  union  of 
these  states,  as  members  of  the  same 
great  political  family  ;  the  deep  and 
vital  interests  which  bind  them  so 
closely  together,  should  lead  us,  in 
the  absence  of  proof  to  the  contrary, 
to  presuiue  a  greater  degree  of  comity, 
and  friendship,  and  kindness  toward 
one  another,  than  we  should  be  author- 


1  Flanagan    v.    Great    Western    R.     Clark  v.  Cuckfield  Union,  21  L.  J,  Q. 
Co.,    L.    R.,    7   Eq.    116.      See,   also,     B.  349. 


342 


Private  Corporations. 


upon  such  terms  as  may  be  agreed  upon  between  the  parties,  is 
an  authority  to  pay  interest  thereon,  even  beyond  the  sum  author- 
ized by  law,  or  secure  its  payment  by  a  mortgage  upon  its 
property. ' 

So,  a  banking  corporation  would,  in  the  absence  of  limitations, 
have  power  to  perform  the  ordinary  business  of  banking,  and,  of 
course,  to  take  negotiable  paper.'*     The  rule  that  a  corporation 


ized  to  presume  between  foreign  na- 
tions. And  when,  as  witliout  doubt 
must  occasionally  happen,  the  interest 
or  policy  of  any  state  recjuires  it  to 
restrict  the  rule,  it  has  but  to  declare 
its  will,  and  the  legal  presumption  is 
at  once  at  an  end.  But  until  this  is 
done,  upon  what  grounds  could  this 
court  refuse  to  administer  the  law  of 
international  comity  between  these 
states  ?  They  are  sovereign  stales  ; 
and  the  history  of  the  past,  and  the 
events  which  are  daily  occurring,  fur- 
nish the  strongest  evidence  that  they 
have  adopted  toward  each  other  the 
laws  of  comity  in  their  fullest  extent. 
Money  is  frequently  borrowed  in  one 
state  by  a  corporation  created  in  an- 
other. The  numerous  banks  estab- 
lished by  different  states  are  in  the 
constant  habit  of  contracting  and  deal- 
ing with  one  another.  Agencies  for 
corporations  engaged  in  the  business 
of  insurance  and  of  banking  have  been 
established  in  other  states,  and  suf- 
fered to  make  contracts  witliout  any 
objection  on  the  part  of  the  state  au- 
thorities. These  usages  of  commerce 
and  trade  have  been  so  general  and 
public,  and  have  been  practiced  for 
so  long  a  period  of  time,  and  so  gen- 
erally acquiesced  in  by  the  states,  that 
the  court  cannot  overlook  them  when 
a  question  like  the  one  before  us  is 
under  consideration.  The  silence  of 
the  state  authorities,  while  these 
events  are  passing  before  them,  show 
their  assent  to  the  ordinary  laws  of 
comity  which  permit  a  corporation  to 
make  contracts  in  another  state.  But 
we  are  not  left  to  infer  it  merely  from 
the  general   usages   of  trade,  and  the 


silent  acquiescence  of  the  states.  It 
appears  from  the  cases  cited  in  the  ar- 
gument, which  it  is  unnecessary  to 
recapitulate  in  this  opinion,  that  it 
has  been  decided  in  many  of  the  state 
courts,  we  believe  in  all  of  them  wliere 
the  question  has  arisen,  that  a  corpo- 
ration of  one  state  may  sue  in  the 
courts  of  another.  If  it  may  sue,  why 
may  it  not  make  a  contract  ?  The 
right  to  sue  is  one  of  the  powers  which 
it  derives  from  its  charter.  If  the 
courts  of  another  country  take  notice 
of  its  existence  as  a  corporation,  so  far 
as  to  allow  it  to  maintain  a  suit,  and 
permit  it  to  exercise  that  power,  why 
should  not  its  existence  be  recognized 
for  other  purposes,  and  the  corporation 
permitted  to  exercise  another  power 
which  is  given  to  it  by  the  same  law 
and  the  same  sovereignty  —  where  the 
last-mentioned  power  does  not  come  in 
conflict  with  the  interest  or  policy  of 
the  state?  There  is  certainly  nothing 
in  the  nature  and  character  of  a  corpo- 
ration which  could  justly  lead  to  such 
a  distinction  ;  and  which  should  ex- 
tend to  it  the  comity  of  suit,  and  re- 
fuse to  it  the  comity  of  contract.  If  it 
is  allowed  to  sue,  it  would  of  course 
be  permitted  to  compromise,  if  it 
thought  proper,  with  its  debtor  ;  to 
give  him  time  ;  to  accept  something 
else  in  satisfaction  ;  to  give  him  a  re- 
lease ;  and  to  employ  an  attorney  fur 
itself  to  conduct  its  suit.  These  are 
all  matters  of  contract,  and  yet  are  so 
intimately  connected  with  the  right  to 
sue,  that  the  latter  could  not  be  effect- 
ually exercised  if  the  former  were 
denied." 


'  Barry  v.  Merch'ts'  Exchange,  1 
Sandf.  Ch.  280;  Morrison  v.  Eaton, 
etc.,  R.  Co.,l4Ind.  110. 

'■^  Dill.  onMun.  Corp.,^407,citingMc- 
Collough  V.  Moss,  5  Denio,  567;  Straus 


V.  Eagle  Ins.  Co.,  5  Ohio,  59  ;  Mott  v. 
Ilicks,  1  Cow.  518;  Attorney-General 
V.  Insurance  Co. ,  9  Paige,  470;  3  Kent's 
Com.  29t);  1  Pars,  on  N.  and  B.  165; 
Clark  V.  Des  Moines,  19    Iowa,    21:>  ; 


CoRPORATi':  Contracts.  343 

has  authority  to  do  any  act  essential  to  effectuate  tlic  purposes 
for  which  it  was  established,  is  well  settled.  Thus,  where  a  cor- 
poration is  authorized  to  build  a  plankroad,  it  was  held  that  the 
act  conferred  an  implied  power  upon  the  corporation  to  borrow 
money  necessary  for  the  purposes  of  such  construction,  and  to 
issue  its  bonds  therefor.^  So  a  reliii^ious  corporation,  empowered 
by  its  charter  to  build  and  to  hold  property,  has  an  implied 
power  to  borrow  money  for  that  purpose,^  and  i^enerally  it  may 
be  said  that  manufacturing,  trading  or  any  business  corporations 
have  power  to  raise  money  by  loan  as  necessarily  incident  to 
their  power  to  purchase  stock  and  materials  ;  and  as  incident  to 
the  power  to  purchase  and  borrow,  they  have  authority  to  pledge 
the  property  of  the  corporation  as  security.'  The  power  to  pur- 
chase property  necessarily  carries  with  it  the  power  to  purchase 
on  credit  and  give  tlie  necessary  obligations  therefor,  else  the 
power  would  be  useless/  And  it  would  appear  to  be  a  generally 
recognized  doctrine  that  private  corporations  for  pecuniary  gain 
have  incidental  authority  to  borrow  money  for  the  legitimate 
purposes  of  their  business,  unless  restricted  from  so  doing  by  the 
organic  laws  of  their  creation  ;  and  that  they  may  give  the  usual 
obligations  therefor.^  Especially  is  this  the  case  where  they  are 
authorized  to  borrow  money,  because  the  giving  of  an  obligation, 
and  even  security  for  a  loan,  is  one  of  the  necessary  incidents  of 
this  exercise  of  such  a  power. 

In  determining  the  question  of  coi-porate  powers  in  relation  to 
the  execution  of  a  contract,  it  is  proper  to  consider,  first,  whether 
there  is  any  thing  in  the  charter  or  statutes  under  which  it  is  con- 
Barry  V.  Merchants'  Express  Co.,  1  356;  Douglas  v.  Virginia  City,  5  Nev. 
Sandf.  Ch.  280;  Curtis  v.  Leavitt,  15  U7  ;  Came  v.  Brighum,  39  Me.  39  ; 
N.  Y.  9  ;  Smith  v.  Law,  21  id.  296;  Goodnow  v.  Commissioners,  11  Minn. 
Bank,  etc.,  v.  Cliillicothe,  7  Ohio,  part  31. 
2.  31  ;   Ketchum  v.  Buffalo,  14  N.  Y. 

1  Ketchum  v.  City  of  Buffalo,  14  N.  Nat.  Bank,  2  Col.   T.  248  :    Burns  v. 

Y.  356.  Plienix   Glass    Co.,    14     Barb.     358 ; 

-Davis  V.  Proprietors,  etc.,  in  Low-  Partridge     v.    Badger,     25     id.    146; 

ell,  8  Mete.  (Mass.)  321  Mead  v.  Yeeder,   24  id.  30  ;  Lucas  v. 

3Fay  V.  Noble,  12  Cush.  (Mass.)l.  Pitney,  27    N.     Y.     221;     Mobile    & 

^  Barry     v.     Merchants'     Exchange  Cedar     Point    P.    R    Co.    v.   Talman, 

Bank,  I'Sandf.  Ch .  280.  15  Ala.  472;  Moss  v.  Haspeth  Academy, 

s  Stratton  v.  Allen,  16  N.  J.  Eq.  229  ;  7  Heisk.  283. 
Union  Mining  Co.  v.  Kocky  Mountain 


344  Private  Cokporations. 

stituted  which  forbids  or  permits  it  to  make  such  a  contract ;  and 
if  these  ai'c  silent  on  the  subject ;  second,  whether  the  power  to 
make  such  a  contract  may  not  be  implied  as  directly  or  incident- 
ally necessary  to  enable  it  to  fulfill  the  purposes  of  its  existence, 
or  whether  the  contract  is  entirely  foreign  to  that  purpose.^ 

Sec.  223.  Contracts  relating  to  bailments. —  The  general  principles 
and  doctrines  of  the  law  of  bailments,  where  individuals  only  are 
parties,  to  the  contract,  are  equally  applicable  where  a  corporation 
is  the. bailee.^  A  full  consideration  of  the  liability  of  corpora- 
tions in  such  cases  would  not  be  consistent  with  the  limits  of 
this  treatise.  Most  of  the  important  questions  on  this  subject, 
affecting  corporations,  relate  to  railroad  corporations,  which  are 
the  subject  of  special  treatises.^  But  in  relation  to  the  duties  and 
liabilities  in  general  of  bailees,  there  are  also  special  treatises 
which  may  be  consulted.'*  The  liability  in  such  cases  would,  of 
course,  depend  upon  the  nature  and  character  of  the  bailment. 
It  may,  however,  be  proper  to  refer  to  some  of  the  more  common 
cases  of  liability,  for  the  acts  of  agents  of  a  corporation  in  cases' 
of  bailment.     In  respect  to  the  liability  of  the  principal  in  such 

'  Barnes  V.  Ontario  Bank,  19  N.  Y.  privileges   designed   to   be   exercised 

152  ;    Curtis    v.    Leavitt,    15    id.     9 ;  with  special    reference  to  their  own 

Leavitt    v.    Blatchford,    17    id.  521  ;  advantage,  although  involving  in  their 

Weckler     v.    First     INational    Bank,  exercise  incidental  benefits  to  the  com- 

42  Md.  581.  munity  generally.       The  former  are 

On  the  subject  of  the  construction  to  be   expo^unded  largely   and  benefi- 

of   statutes  of    incorporation   the   su-  cially  for  the  purposes  for  which  they 

preme  court  of  Pennsylvania  observe:  were  enacted;  the  latter  liljerally,  in 

"  When  a  state  means  to  clothe  a  cor-  favor  of    the  public,  and  strictly   as 

porate  body  with  a  portion  of  her  own  against  the  grantees.     The  power  in 

sovereignty,  and  to  disarm  herself  to  the  one  case   is  original  and  inherent 

that  extent  of  the  i>ower  that  belongs  in  the  state  or  sovereign  power  and  is 

to  her,  it  is  so  easy  to  say  so,  that  we  exercised  solely  for  the  general  good 

will  never  believe  it  to  be  meant  when  of  the  community  ;  in  the  other,  it  is 

it  is  not   said.     *     *     *     In  the   con-  merely    derivative,  is   special  if   not 

struction  of  a  charter,  to  be  in  doubt  exclusive  in  its  character,    and  is  in 

is  to  be  resolved  ;  and  every  resolution  derogation   of  common    right,  in  the 

which   springs  from  doubt  is  against  sense    that    it    confers    privileges    to 

the  corporation."  Pennsylvania  li.  Co.  which  the  members  of  the  community 

V.  Canal  Commrs.,  31  Penn.  St.  22.  at  large  are  not  entitled."     Bradley  v. 

And  on  the    same    subject   the  su-  New  York,  etc.,  E.  Co.,  21  Conn.  806. 

preme  court  of  Connecticut  say  :  "The  **  Foster  v.  Essex  Bank,    17  Mass. 

rules  of  construction  which  apply  to  496. 

general  legislation  in  regard  to  those  '^  See   Redfield  on   Railways  ;  Bon- 
eubjects  in  which  the  public  at   large  ney's    Am.  Ry.  Cas. ;  Pierce  on  Rail- 
are  interested  are  essentially  different  ways  ;  Lacy's  Dig.  R.  Cas. 
from    those   wliich    apply  to    private  •*  See  Story  on  Bailments ;  Edwards 
grants   to   individuals   of  powers    or  on  Bailments  ;   Redfield  on  Bailments. 


Corporate  Contracts.  345 

cases,  it  may  be  affirmed,  as  a  general  rule,  tliat  lie  is  liable  in  all 
cases  where  the  business  is  transacted  by  an  agent,  if  such  agent 
acts  in  the  matter,  within  the  scope  of  the  authority  conferred 
upon  him  ;  and  the  practice  or  custom  of  the  agent,  to  act  in  a 
particular  business  for  the  corporation,  and  with  the  knowledge 
and  approbation  of  the  principal,  would  furnish  evidence,  in  that 
respect,  of  his  authority  to  act,  generally,  in  a  similar  matter. 

Sec.  224.  what  would  and  would  not  be  within  the  scope  of  an 
agent's  authority  in  case  of  bailments. —  An  illustration  of  what  is 
within  the  scope  of  the  authority  of  an  agent  may  be  found  in 
the  business  of  banking.  If  a  party  deposits  with  a  bank  and 
receives  from  the  cashier  or  other  proper  agent  or  officer  a  cer- 
tificate of  his  deposit,  he  should,  in  the  usual  course  of  busi- 
ness, receive  a  credit  for  such  deposit,  and  if  such  moneys  should 
afterward  be  fraudulently  or  feloniously  appropriated  or  taken 
by  such  officer  or  agent,'  or  other  persons,  the  bank  would  be 
liable  for  the  deposit,  as  it  would  be  within  the  scope  of  the  au- 
thority of  such  officer  or  agent  to  receive  and  credit  the  same ; 
but,  if  such  person  should,  by  a  personal  and  private  arrangement 
with  such  cashier  or  other  officer  or  agent,  make  a  special  deposit 
of  money  with  him,  from  which  the  bank  could  receive  no  bene- 
fit, this  would  not  be  within  the  usual  scope  of  his  authority  ;  and 
if  such  agent  should  fraudulently  or  feloniously  abstract  such 
special  deposit  from  the  vaults  of  the  bank,  without  the  gross 
negligence  of  the  bank,  it  would  not  be  liable  therefor. 

In  a  case  of  this  character  the  supreme  court  of  Massachusetts 
say:  "  The  bank  was  no  moi'e  liable  for  this  act  of  his  (the  cash- 
ier) than  they  would  be  if  he  had  stolen  the  pocket-book  of  any 
person  who  might  have  laid  it  upon  the  desk  while  he  was  trans- 
acting some  business  at  the  bank.*'  '  But  in  this  case  the  agent 
did  not  act  for  the  bank,  nor  bind  the  bank  by  any  valid  contract 
in  reference  to  the  deposit.  The  officer,  however,  would  be  per- 
sonally liable  for  the  conversion.  And  the  bank  would  also  be 
liable  for  the  conversion  if  the  act  was  authorized. ^  The  general 

1  Foster   v.    Essex    Bank,   17  Mass.     Knapp,  3  Pick.   96;    Fulton  Bank  v. 
479.      See,     also,     Manhattan   Co.    v.     New  York  Canal  Co.,  4  Paige,  127. 
Lydig,  4  Johns.  377  ;  Union  Bank  v.         ''See  post,  chap.  13. 

44 


346  Private  Corporations. 

principles  of  the  law  of  agency  are  applicable  to  corporations  ;  as 
for  instance,  where  a  note  or  other  negotiable  instrument  is  left 
with  a  bank  for  collection.  It  would  be  the  duty  of  the  bank  to 
use  due  care  and  diligence  in  procuring  a  demand  to  be  made  of 
parties  liable  thereon,  and  giving  notice  to  the  indorsers,  and  for 
this  purpose  to  secure  the  services  of  a  notary.  And  a  failure  so 
to  do  would  render  the  bank  liable  for  any  damages  caused  by 
such  failure . ' 

Sec.  225.  Place  of  contracting  by  the  corporation.  —  A  corporation 
can  have  a  legal  existence,  only,  within  the  state  creating  it.^  For 
the  purpose  of  determining  questions  relating  to  the  jurisdiction 
of  courts  it  is  also  treated  only  as  a  citizen  of  the  sovereignty  by 
whose  authority  it  exists  ;  and  acts  of  the  corporate  body,  as  such, 
can  only  be  performed  within  the  limits  of  such  sovereignty. 
But  it  is  also  the  genei'ally  received- doctrine  of  the  courts,  that 
such  corporations  may,  by  their  agents,  execute  contracts  without 
the  limits  of  the  terrritory  of  its  creation  ;  the  only  controversy 
growing  out  of  the  proposition  relates  to  the  question  whether  the 
party  acting  is  an  agent,  or  whether  such  party  does  not  stand  for 
or  represent  practically  the  corporate  body.  This  question  arises 
where  the  duly  constituted  directors  of  a  corporation  undertake 
to  act  without  the  limits  of  such  territory.^  It  may  be  safely 
assumed  that  a  corporation  can  make  no  contracts,  and  do  no  acts 
either  within  or  without  the  State  which  creates  it,  except  such 
as  are  authorized  by  its  charter ;  and  those  acts  must  also  be 
done  by  such  officers  or  agents  and  in  such  a  manner  as  the 
charter  authorizes,  xlnd  if  the  law  creating  a  corporation  does 
not,  by  the  true  construction  of  the  words  used  in  the  charter, 
give  it  the  right  to  exercise  its  powers  beyond  the  limits 
of  the  state,  all  contracts  made  by  it  in  other  states  would  be  void. 

'  Agricultural  Bank  v.  Commercial  state  by  which  it  is  incorporated  ;  but 

Bank,?  S.  &  M.  592;  Frazier  v.  N.  O.  agents  and   otficera  of    a    corporation. 

Gas,     etc.,    2    Rob.    (La.)  294;    Bank  chartered  in  one  state,  may  bind  it  by 

of  Oswego  V.  Babcock,    5    Hill,    152  ;  contracts  and    engagements,    made  in 

Warren    Bank    v.    Suffolk    Bank,   10  another  state,  and  the  minutes  of   its 

Cush.  582  ;  Citizens'  Bank  v.  Howell,  board  of  directors,  may  be  used  as  evi- 

8  Md.  530.  dence  of  the  acts  of  the  board,  even 

^Aspinwall  v.  Ohio,  etc  ,  R.  Co.,  20  though  the  meetings  appeared  to  have 

Ind.  497  ;  Freeman  v.   Machias  Water  been    held    out   of    the   state.     Wood 

Power  Co.,  38  Me.  345.  Hydraulic,  etc.,  Co.  v.  King,  45   Ga. 

^  A  corporation,  acting  as  such,  can  34. 
do  no  acts  outside  the  limits  of  the 


Corporate  Contracts.  347 

Natural  persons,  tlirougli  the  intervention  of  agents,  are  continu- 
ally making  contracts  in  countries  in  which  they  do  not  reside, 
and  where  they  are  not  personally  present  when  the  contract  is 
made,  and  nobody  has  ever  doubted  the  validity  of  these  agree- 
ments. And  what  greater  objection  can  there  be  to  the  capacity 
of  an  artificial  person,  by  its  agents,  to  make  a  contract  within  the 
scope  of  its  limited  ])0\vcrs,  in  a  sovereignty  in  whicli  it  does  not 
reside  ;  provided  such  contracts  are  permitted  to  bo  made  by  tlieni 
by  the  laws  of  the  place?  The  corporation  must  no  doubt  show 
that  the  law  of  its  creation  gave  it  authority  to  make  such  con- 
tracts through  such  agents.  Yet,  as  in  the  case  of  a  natural  person, 
it  is  not  necessary  that  it  should  actually  exist  in  the  sovereignty 
in  which  the  contract  is  made.  It  is  sufKcient  that  its  existence  as 
an  artificial  person,  in  the  state  of  its  creation,  is  acknowledged 
and  recognized  by  the  law  of  the  nation  where  the  dealing  takes 
place,  and  that  it  is  permitted  by  the  laws  of  the  place  to  exercise 
these,  the  powers  with  which  it  is  endowed.  Every  power, 
however,  of  the  description  of  which  we  are  speaking,  which  the 
corporation  exercises  in  another  state,  depends  for  its  validity 
npon  the  laws  of  the  sovereignty  in  which  it  is  exercised,  and  a 
corporation  can  make  no  valid  contract  without  their  sanction,  ex- 
press or  implied.  There  can  be  no  sufficient  reason  for  excluding 
them,  when  they  are  not  contrary  to  the  known  policy  of  the 
state,  or  injurious  to  its  interests.  It  is  nothing  more  than  the 
existence  of  an  artificial  person  created  by  the  law  of  another 
state,  and  clothed  with  the  power  of  making  certain  contracts. 
It  is  but  the  usual  comity  of  recognizing  tlie  law  of  another 
state."  ^  By  the  comity  of  nations,  a  corporation  chartered  in 
one  county  or  state  may,  in  the  absence  of  any  statute  prohibiting 
it,  transact  its  corporate  business  and  make  contracts  in  another 
state.^     The  comity  between  states,  so  far  as  it  relates  to  corpora- 

'  Bauk  of  Augusta  v.  Earle,  13  Pet.  may  impose  any  conditions  it  plea^^es 

587.  "  upon    wliicli    sucb    corporations   may 

'■'  Petroleum  Co.    v.  Weare,  27  Ohio  transact   business   within  their  limits. 

St.  343  ;  unless  its  acts  are   repuixnant  Western   Union  Tel.  Co.  v.  MavHr,  08 

to  the  policy  of   its   laws.      Smith  v  Ohio   St.  521  ;  Farmers  and  Merchants' 

Alvord,  63  Barb.    415.     Such  corpora-  Ins.  Co.  v.  Harrah,  47  Ind.  23(5  ;  Ihnne 

tious  have  no  status  in  other  states  as  Ins.  Co.  v.  Davis,  29  Mich.  238  ;    Wey- 

citizens   of   the  state    creating  them,  mouth  v.  Washington  R.  R.  Co.,lMc- 

Ducatv.  Chicago,  48  111.  172;  Paull  v.  Arthur  (U.  S.),  19. 
Virginia,  8  Wall.  1G8  ;  and  such  states 


348  Private  Cokporations. 

tions,  depends  for  its  exercise  upon  the  laws  of  the  state  in  which 
it  is  to  be  exercised,  and  the  question  as  to  whether  it  can  exer- 
cise all  its  functions  there  depends  upon  the  laws  of  each  state, 
and  not  in  any  measure  upon  the  laws  of  the  state  that  gave  it  its 
existence.^  In  Tennessee  it  has  been  held  that  a  savings  bank 
incorporated  in  and  for  the  District  of  Columbia  might  do  busi- 
ness there,  and  that  depositors  in  that  state  might  proceed  against 
it  there.^  But  where  a  charter  is  granted  in  one  state  with  a 
provision  that  it  may  do  business  anywhere  except  in  the  state 
in  which  the  charter  is  granted,  the  courts  will  not  be  inclined  to 
extend  the  doctrine  of  comity  to  it,  as  no  rule  of  comity  allows 
one  state  to  send  corporations  chartered  there  into  another  state 
to  do  business  which  they  are  forbidden  to  do  in  the  state  of  their 
origin.'  The  right  of  a  corporation  to  do  business  in  another 
state  or  country,  resting  purely  in  comity,  it  follows  that  such 
states  may  prescribe  the  terms  and  conditions  upon  which  they 
shall  be  permitted  to  exercise  the  corporate  functions  there,  and 
it  has  been  held  that  a  state  may  impose  a  license  upon  a  foreign 
corporation,  as  a  condition  precedent  to  the  exercise  by  it  of  its 
corporate  powers  there."  Or  that  it  shall  aj^point  a  general  agent 
upon  whom  service  of  process  may  be  made.*  Or  indeed  any 
reasonable  condition  it  pleases,  and  until  such  condition  is  complied 
with,  it  cannot  enforce  any  contract  made  there  by  it.°  Even  if 
the  restriction  imposed  is  unreasonable,  unconstitutional  and  void.'' 
Yet  as  each  state  has  the  right  to  deny  to  foreign  corporations 
the  privilege  of  carrying  on  business  within  the  state,  the 
courts  cannot  enjoin  the  officers  of  the  state  from  revoking  its 
license,  although  the  alleged  reason  of  its  revocation  is  its  failure 
to  comply  w^ith  such  law.* 

'  Carroll  v.  City  of   East  St.   Louis,  *  In  re  Comstock,  3  Sawyer,  218. 

67  111.  568  ;  Williams  v.    Creswell,  51  «  Lamb  v.Lamb,  13  Bankr.  Reg.  17  ; 

Miss.  717  ;  Second  Nat.  B'k  v.  Lavell,  Western    Union    Tel.    Co.    v.    Mayer, 

2     Cin.     (Ohio)     397 ;    Thompson    v.  ante ;   Home   Ins.    Co.    v,    Davis,    21 

Waters,  25  Mich.  214.  Mich.  238. 

'■*  Hadley  v.  Freedman's  Savings  B'k,  '  Home  Ins.  Co.   v.  Morse,  20  Wall. 

2  Tenu.  Ch.  123.  445. 

3  Land   Grant  R.   R.   Co.  v.    Coffey  «  Doyle  v.  Cont'l  Ins.  Co.,  94  U.  S. 

County,  6  Kans.  245.  535. 

■*  Liverpool  Ins.  Co.  v.  Massachusetts 
10  Wall.  560. 


Corporate  Contracts.  349 

Sec.  226.  Place  of  contracting  by  directors.  —  The  question  has 
been  presented  whether  the  directors,  with  the  usual  powers  and 
authority  of  such  othccrs  and  representatives  of  the  corporate 
person,  are  such  agents  of  the  corporation  as  will  enable  them  to 
hold  meetings,  appoint  agents  and  make  contracts  acting  as  a 
board  for  the  corporation,  outside  the  jurisdiction  of  the  sover- 
eignty, under  which  the  corporation  was  instituted. 

This  question  was  presented  to  the  supreme  court  of  the  United 
States  in  a  recent  case  where  the  directors  of  a  railroad  corpora- 
tion, organized  in  Texas,  met  in  the  city  of  New  York,  and  there 
authorized  the  execution  of  the  mortgages  on  which  suit  was 
brought ;  and  one  defense  was  a  want  of  authority  of  the  dii-ect- 
ors  to  execute  or  authorize  their  execution  in  New  York.  The 
court  say  :  "  It  is  next  objected  that  the  mortgages  were  not  prop- 
erly executed,  because  the  meetings  of  the  directors,  by  which  the 
mortgages  were  authorized  to  be  executed,  were  held  in  the  city  of 
New  York,  It  is  not  denied  that  the  mortgages  were  executed  in 
good  faith  under  the  corporate  seal,  and  signed  by  the  ])resident 
and  countersigned  by  the  treasurer  of  the  company,  and  duly 
recorded  in  the  proper  offices  of  registry  in  the  state  of  Texas. 
No  doubt  it  can  be  -true,  in  many  cases,  that  the  extra-territorial 
acts  of  directors  would  be  held  void,  as  where  a  set  of  directors 
of  a  New  Jersey  corporation  met  in  Philadelphia,  against  a  posi- 
tive prohibitory  statute  of  New  Jersey,  and  improperly  voted 
themselves  certain  shares  of  stock.  And  other  cases  might  be  put 
where  their  acts  would  be  held  void  without  a  prohibitory  statute  ; 
and  it  is  generally  true  that  a  corporation  exists  only  within  the 
territory  of  the  jurisdiction  that  created  it.  But  it  is  well  settled 
that  a  corporation  may,  by  its  agents,  make  contracts  and  transact 
business  in  another  territory  and  may  sue  and  be  sued  therein."  ^ 
So  in  Vermont  it  has  been  held  that  the  conferring  of  authority 
by  the  directors  of  a  corporation,  upon  an  agent  to  execute  a  deed, 
was  not  a  corporate  act ;  that  the  directors  in  such  cases  do  not 
act  as  the  corporation  but  as  its  agents,  and  that  this  authority  may 
be  conferred  by  such  directors,  at  a  meeting  held  without  the  state 
of  the  legal  existence  of  the  corporation  ;  that  though  the  corpo- 
ration as  such  cannot  hold  corporate  meetings  or  pass  corporate 

1  Galveston   R.   Co.  v.   Cowdry,    11  Wall.  476. 


350  Private  Corpokations. 

acts  ill  another  state,  still,  if  the  directors  have  authority  to  act, 
they  do  not  act  as  the  corporation  but  as  its  agents,  and  may  exe- 
cute such  authority  outside  the  state  where  the  corporation  exists.^ 
The  general  doctrine  applicable  to  such  cases  is  that  the  directors 
are  agents,  and  not  the  corporation,  and  according  to  the  general 
rule  they  may  meet  anywhere,  and  that  their  proceedings  at  such 
meetings  in  the  absence  of  fraud  will  be  as  binding  upon  the 
corporation  as  though  held  in  the  state  where  it  was  organized.^ 
But  where  the  acts  or  constating  instruments  prohibit  such  a 
meeting  of  the  directors,  this  is  conclusive,  and  no  authority 
would  exist  in  such  board  to  contract  or  authorize  a  contract  to  be 
made  binding  upon  the  corporation,  outside  the  limits  of  the  sov- 
ereignty of  its  legal  existence.  ^ 

SPjC.  227.  Corporate  bills  and  notes  —  negotiable  quality  of  corporate 
bonds.  —  It  is  not  unusLial  for  the  eorpomte  seal  to  be  annexed  to 
negotiable  instruments  of  a  corporation,  such  as  notes  and  bills. 
The  general  doctrine  in  England  and  in  this  country  is  that  such 
seal  does  not  affect  the  negotiable  qualities  of  such  instrument.* 
In  fact  it  has  been  held  in  this  country  that  municipal  bonds,  as 
well  as  the  bonds  of  private  corporations,  issued  and  intended  to 
be  passed  from  one  to  another  by  delivery  merely,  have  the  prop- 
erties of  negotiable  paper,  though  under  seal,  and  even  although 
they  may  not  be  made  payable  to  bearer  or  order,  but  are  trans- 
ferred by  indorsement  in  the  usual  way  of  negotiable  instruments. 
On  this  question  the  supreme  court  of  the  United  States,  through 
Mr.  Justice  Grier,  has  said  :  '"  This  species  of  bonds  is  a  modern 
invention,  intended  to  pass  by  manual  delivery,  and  to  have  the 
qualities  of  negotiable  paper  ;  and  their  value  depends  mainly 
upon  this  character.  Being  issued  by  states  and  corporations,  they 

1  Arms  V.  Conant,  36  Vt.    745.    See,  Poole,   13   N.   Y.   495  ;  Wood   v.   Hy- 
also,  Miller  v.  Ewer,  27  Me.  517  ;  Mc-  diaulic,  etc.,  Co.  v.  Kin^,  45  Ga.  34. 
Call   V.  Byram  Man.  Co.,  6  Conn.  428.         *  See  Ag-gs  v.  Nicholaou,  1  H.  &  N. 

2  Ohio,  etc.,  R.  Co.  v.  McPherson,  85  1G5  ;  25  L.  ,J,  Eq.  248  ;  Bateman  v. 
Mo.  13;  Wright  v.  Buudy,  11  Ind.  398.  Mid- Wales  R.  Co.,  L.  R.,  1  C.  H.   499; 

^Ormsby  v.  Vermont,  etc.,  Co.,    56  Green's  Brice's  Ultra  Vires,  1(53  ;  New 

N.  Y.  623  ;  Hilles  v.  Parriah,  14  N.  J.  Zealand  Caulking  Co.    v.    Blakely  Or- 

Eq.  380.      See,  also,  Merrick  V.  Brain-  dinance   Co  .  L.   R. ,  3  Ch.    154;  In  re 

ard,  38  Barb.  574  ;  S.  C,  34  N.  Y.  208;  Agra  and  Masterman   Bank,  ex  parte 

Smith  V.    Alvord,  63  Barb.  415  ;    New  Asiatic  Banking  Corp.,    L.   R.,  2    Ch. 

York    Floating    Derrick    Co.    v.    New  391  ;  Myers   v.    York,   etc.,  R.  Co.,  43 

Jersey  Oil  Co.,  3  Duer,  648  ;  Bond  v.  Me.  232. 


Corporate  Contracts.  351 

are  necessaril}^  under  seal.  But  tliere  is  notliing  immoral  or  coi- 
trary  to  good  policy  in  making  them  negotiable,  if  the  necessities 
of  commerce  require  that  they  should  be  so.  A  mere  technical 
dogma  of  the  courts  or  the  common  law  cannot  prohibit  the  cpm- 
mercial  world  from  inventing  or  using  any  species  of  security  not 
known  in  the  last  century.  Usages  of  trade  and  commerce  are 
acknowledged  by  the  courts  as  a  part  of  the  common  law,  although 
they  may  have  been  unknown  to  Bracton  or  Blackstone.  And 
this  malleability  to  suit  the  necessities  and  usages  of  the  mercantile 
and  commercial  world  is  one  of  the  most  valuable  characteristics 
of  the  common  law.  When  a  corporation  covenants  to  pay  bearer, 
and  gives  a  bond  with  negotiable  qualities,  and  by  this  means  ob- 
tains funds  for  the  accomplishment  of  the  useful  enterprises  of 
the  day,  it  cannot  be  allowed  toev'ade  judgment  by  parading  some 
obsolete  judicial  decision  that  a  bond,  for  some  technical  reason, 
caimot  be  made  payable  to  bearer.  That  these  securities  are 
treated  as  negotiable  b}'  the  commercial  usages  of  the  whole  civ- 
ilized world,  and  have  received  the  sanctions  of  judicial  recogni- 
tion, not  only  in  this  court,  but  of  nearly  every  state  in  the  union, 
is  well  known  and  admitted."  ' 

In  the  case  of  bank  bills  and  notes  and  promissory  notes  made 
payable  to  bearer,  or  if  not  so  payable,  still  if  by  a  blank  or  other 
indorsement  by  the  payee  it  is  made  so  payable,  the  holder  is 
usually  treated  as  the  owner.  By  analogy  the  rule  in  such  cases 
has  been  applied  to  the  ordinary  bonds' of  corporations,  and  they 
are  regarded  by  the  almost  uniform  decisions  of  our  courts  as  pos- 
sessed of  the  qualities  of  negotiable  instruments."     This  doctrine 

'Mercer  Co.  v.  Hackett,  1  Wall.  95.  8  Gray,  577  ;  Haven  v  Grand  Junction 
See,  also,  Gelpcke  V.  City  of  Dubuque,  R.  Co.,  109  Mass.  88;  National  Ex- 
id.  175  ;  Murray  v.  Lardner,  2  id.  110  ;  change  Bauk  v.  H.  P.,  etc.,  R.  Co.,  8  R. 
Thompson  v.  Lee  Co.,  3  id.  327  ;  Au-  I.  375;  Society,  etc.,  v.  City  of  New 
rora  City  v.  West,  7  id.  82  ;  Citv  of  London,  29  Conn.  174  ;  State  v.  Dela- 
Kenosha  v.  Lamson,  9  id.  481  ;  Smith  field,  8  Paige,  527  ;  S.  C,  2  Hill,  159  ; 
V.  Sac  Co.,  11  id.  150;  Police  Jury  t*.  Bauk  of  Rome  v.  Village  of  Rome,  19 
Britton,  15  id.  566  ;  Kenicott  v.  Super-  N.  Y.  20  ;  Brainerd  v.  New  York,  etc., 
visors,  16  id.  452  ;  St.  Joseph  v.  Rog-  R.  Co.,  25  id.  490  ;  S  C,  10 Bos w.  332; 
ers,  16  id.  644  ;  Nugent  v.  Supervisors,  Connecticut  Mut.  L.  Ins.  Co.  v.  Cleve- 
19  id.  241 ;  Clark  v.  Iowa  City,  20  id.  land,  etc.,  R.  Co.,  41  Barb.  9;  Blake 
583;  White  V.  Vermont,  etc.,  R.  Co.,  v.  Living.ston  Co.,  01  id.  148;  Morris 
21  How.  (U.  S.)  575.  Canal  Co.  v.  Lewis,  12  N   J.  Eq.  323; 

'^Durant  v.  Iowa  Co.,  1  Woolw.  69;  Winfield  v.  City  of  Hudson,  28  N.  J. 

Miller  V.  Rutland,  etc.,  R.  Co.,  40  Vt.  L.    255;    De    Voss    v.    Richmond,    18 

399  ;  Chapin  v.  Verniout,  etc.,  R.  Co.,  Gratt.  338  ;  Barrett  v.  Schuyler  Co.,  44 


352 


Private  Corporations. 


has  been  aided  not  only  by  the  tendencies  of  judicial  opinions, 
but  sometimes  by  positive  legislative  enactments.^ 


Mo.  197;  Smith  v.  Clark  Co.,  54  id. 
58  ;  Porter  v.  McCollam,  15  Qa.  528  ; 
Craig  V.  City  of  Vicksburg,  31  Miss. 
217  ;  Maddox  v.  Graham,  2  Mete.  (Ky  ) 
5G  ;  New  Albany  P.  R.  Co.  v.  Smith, 
2;J  lud.  353  ;  Johnson  v.  County,  24  111. 
92  ;  Clapp  v.  County  of  Cedar,  5  Iowa, 


15 ;  Clark  v.  City  of  Janesville,  10 
Wis.  136  ;  Langston  V.  South  (Carolina, 
etc.,  R.  Co.,  2  S.  C.  248.  See,  also, 
opinion  of  Mr.  Justice  Dillon  upon 
the  legality  of  municipal  railway  aid 
bonds,  1  Dill.  (C.  C.)  555. 


'  An  interesting  statement  and  his- 
tory of  the  law  relating  to  corporate 
bonds  may  be  found  in  the  opinion  of 
the  court  of  appeals  in  New  Jersey  in 
the  case  of  the  Morris  Canal  and  Bank- 
ing Co.  V.  Fisher,  9  N.  J.  Eq.  067. 
The  court  say  :  "  That  under  ordinary 
circumstances  the  property  of  bank 
notes  and  of  bills  and  promissory 
notes  payable  on  their  face,  or  by  a 
blank  indorsement  to  a  bearer,  follows 
the  possession,  has  long  been  settled. 
By  analogy  to  this  class  of  cases  the 
exigencies  of  business  have  from  time 
to  time  introduced  other  securities 
into  the  same  category.  The  court  of 
king's  bench  seems  to  have  hesitated 
to  recognize  India  bonds  as  belonging 
'to  it.  Glyn  v.  Baker,  13  East,  509. 
But  parliament  immediately  inter- 
fered and  declared  them  negotiable 
instruments.  Exchequer  bills  were 
so  regarded  in  Wookey  v.  Pole,  4  B.  & 
Aid.  1.  In  the  case  of  Gorgier  v. 
Mieville,  3  B.  &  C.  45,  bonds  of  the 
king  of  Prussia,  which  were  shown  to 
be  ordinarily  passed  from  hand  to 
hand  by  delivery  and  so  designed, 
were  held  to  be  like  money  bills,  so 
as  to  give  a  bona  fide  possessor  the 
legal  title.  And  in  the  case  of  Lang 
V.  Smith,  7  Bing.  284,  the  same  prin- 
ciple was  applied  to  the  case  of  instru- 
ments issued  by  the  government  of 
Naples,  although  in  that  case  they 
were  held  not  to  be  negotiable,  be- 
cause it  was  found  that  they  did  not 
usually  circulate  without  a  certificate, 
which  did  not  accompany  them.  The 
manner  in  which  these  bonds  are  en- 
graved with  coupons,  making  the  in- 
terest payable  half  yearly  to  the 
bearer  of  them,  and  all  the  evidence 
before  us,  conspire  to  show  that  the 
company     which    issued    them    and 


which  now  disputes  the  title  of  the 
holder,  on  the  ground  that  they  put 
them  into  the  hands  of  the  seller  for  a 
special  purpose,  which  did  not  author- 
ize him  to  dispose  of  them  as  he  did, 
really  intended  them  to  circulate  as 
they  do. 

"  This  design  is  indeed  quite  as  ap- 
parent as  if  it  was  engraved  on  their 
face  in  express  words.  The  objection 
now  made,  that  the  legal  character  of 
the  instrument  is  such  as  to  frustrate 
this  design  certainly  comes  with  a  bad 
grace  from  the  party  which  put  them 
in  circulation.  Even  as  between  third 
parties  we  suppose  the  common  usage 
to  transfer  them  by  delivery  without 
inquiry  as  to  the  title  of  the  transferor 
would  justify  us  in  holding  these  se- 
curities to  differ  from  common  obliga- 
tions, in  being  so  far  negotiable  that 
the  bona  fide  possessor  shall  be  held  to 
have  a  good  title.  But  the  case  is  still 
stronger  against  the  party  which  made 
and  issued  them,  with  full  knowledge 
of  the  prevailing  usage,  and  with 
manifest  design  that  they  should  be  so 
circulated.  To  permit  such  parties  to 
dispute  this  result  of  the  usage  would 
be  to  permit  them  to  take  advantage 
of  their  own  wrong;  and,  besides,  the 
obvious  interest  of  the  companies  is, 
that  these  bonds  should  be  salable  free 
from  all  questions  of  equity.  They 
are  generally  issued  for  the  express 
purpose  of  raising  money  by  their  sale. 
To  declare  them  subject  to  the  equi- 
ties existing  in  the  case  of  ordinary 
bonds  upon  every  transfer  of  them, 
would  be  to  strike  a  blow  at  the  credit 
of  the  great  mass  of  these  securities 
now  in  the  market,  the  consequence  of 
which  it  would  be  impossible  to  pre- 
dict." 


CoEPOKATE  Contracts.  353 

Sec.  228.  Coupons  ;  their  incidents  and  qualities.  —  It  18  USUal  tO 
have  attached  to  corporution  bonds,  and  executed  in  the  same 
manner  as  the  bonds,  coupons,  or  certificates  of  the  amount  of  in- 
terest to  become  periodically  due  on  such  bonds  and  a  promise  to 
pay  the  same,  and  specifying  the  time  and  place  of  payment. 
These  are  designated  to  be  cut  off  and  presented  for  payment 
when  due. 

Interesting  and  important  questions  relating  to  the  character 
and  qualities  of  such  instruments  have  been  presented  to  the 
courts.  May  they  be  dissevered  from  the  bonds,  and  transferred 
like  negotiable  instruments  ?  Do  they  in  turn  draw  interest,  if 
not  paid  when  due  ?  Are  they  to  be  considered  as  secured  by  the 
mortgage  or  other  security  given  to  secure  the  bond  from  which 
they  have  been  detached  ?  When  are  they  barred  by  the  statute 
of  limitations  ?  Do  they  lose  their  validity,  if  the  bonds  are  paid 
or  canceled  before  maturity  of  the  coupons  ? 

These  and  other  questions  relating  to  coupons  have  been  deter- 
mined and  settled  by  the  courts.^ 

Thus,  it  has  been  held  that  coupons  may  be  detached  from  the 
bonds,  and  that  thus  detached  they  possess  the  same  commercial 
and  negotiable  qualities  as  the  bonds  themselves ;'  that  after  they 
are  due  they  bear  interest  from  the  time  of  a  demand  of  payment 
and  refusal  ;^  that  they  are  liens  upon  the  land  or  other  secu- 
rities given  to  secure  the  bond ; '  that  the  right  to  recover  on 
the  same  is  barred  by  the  statute  of  limitations,  by  lapse  of  time, 
sufficient  therefor  after  the  right  of  action  accrued  thereon,  and 
not  on  the  bond  itself;  and  that  they,  when  detached  from  the 
bonds,  do  not  lose  their  virtue  or  validity,  even  when  they  are  not 
due,  and  the  bonds  are  paid  off  or  canceled  before  the  coupons 
are  due. 

'  City    of    Kenoslia    v.    Lamson,    9  Connecticut  L.  Ins.  Co.  v.  C.  C.  R.  Co., 

Wall.  477 ;  Thomson  v.  Lee  Co.,  Sid.  41    Barb.  9;  North   Pennsylvania    R. 

337;    Murrey   v.  Lardner,  2   id.  110;  Co.    v.     Adams,    54    Penn.     St.    94; 

Spooner   v.  Holmes,  103   Mass.    503;  Burroughs  v.  Richmond,  65  N.  C. 234; 

National  Exchange  Bank  v.  Hartford,  Mills  v.  Jetferson,  30  Wis.  50. 

etc.,  R.  Co.,  8  R.  I.  375  ;  Johnson  v.  '^  Sewall  v.   Brainerd,    38   Vt.  364  ; 

County,  34   111.   75;    San  Antonio  v.  Miller  v.  Rutland,  etc.,  R.  Co.,  40  id. 

Lane,  33  Tex.  405  ;  Arenta  v.  Commis-  399. 

sioners,  18  Gratt.  750  ;  Aurora  City  v.  ^  City   of    Kenosha    v.    Lamson,    9 

West,  7  Wall.  105  ;  Gelpecke  v.   City  Wall.  477  ;  Lexington  v.  Butler,  14  id. 

of  Dubuque,  1  id.  105  ;  Whitaker  v,  383. 
Hartford,  etc.,  R.   Co.,   8  R.    L  47; 

45 


364  Pkivate  Corporations. 

On  this  subject  the  supreme  court  of  the  United  States  recently- 
held  :  "  Most  of  the  bonds  of  municipal  bodies  and  private  corpo- 
rations in  this  country  are  issued  in  order  to  raise  funds  for  works 
of  large  extent  and  cost,  and  their  payment  is,  therefore,  made  at 
distant  periods,  not  unfrequently  beyond  a  quarter  of  a  century. 
Coupons  for  the  different  installments  of  interest  are  usually 
attached  to  these  bonds,  in  the  expectation  that  they  will  be  paid 
as  they  mature,  however  distant  the  period  fixed  for  the  payment 
of  the  principal.  These  coupons,  when  severed  from  the  bonds, 
are  negotiable  and  pass  by  delivery.  They  then  cease  to  be  inci- 
dents of  the  bonds,  and  become,  in  fact,  independent  claims ;  they 
do  not  lose  their  validity,  if  for  any  cause  the  bonds  are  canceled 
or  paid  before  maturity  ;  nor  their  negotiable  character ;  nor  their 
ability  to  support  separate  actions  ;  and  the  amount  for  which 
they  are  issued  draws  interest  from  their  maturity.  They  then 
possess  the  essential  attributes  of  commercial  paper,  as  has  been 
held  by  this  court  in  repeated  instances.  Every  consideration, 
therefore,  which  gives  efficacy  to  the  statute  of  limitations,  when 
applied  to  actions  on  bonds  after  their  maturity,  equally  requires 
that  similar  limitations  should  be  applied  in  actions  upon  the  cou- 
pons after  their  maturity.  Coupons  when  severed  from  the  bonds 
to  which  they  were  originally  attached,  are,  in  legal  effect,  equiva- 
lent to  separate  bonds  for  the  different  installments  of  interest. 
The  like  action  may  be  brought  upon  each  of  them,  when  they 
respectively  become  due,  as  upon  the  bond  itself,  when  the  prin- 
cipal matures ;  and  to  each  action,  to  that  upon  the  bond  and  to 
each  of  those  upon  the  coupons,  the  same  Hmitations  must  upon 
principle  apply.  All  statutes  of  limitations  begin  to  run  when 
the  right  of  action  is  complete ;  and  it  would  be  exceptional  and 
illogical  to  hold  that  the  statute  sleeps  with  respect  to  claims  upon 
detached  coupons,  while  a  complete  right  of  action  upon  such 
claims  exists  in  the  holder."^ 

'  Clark  V.  Iowa  City,  20  Wall.  585.  supreme    court    of    United     States, 

See,  also,  De  Cordovah  v.  Galveston,  4  above  cited. 

Tex.  470 ;  Underbill   v.   Trustees,  17        But  municipal  warrants  or  orders, 

Cal.  172.  though  negotiable  in  form  and  trans- 

The  holder  may  sue  on  the  coupons  ferable  by  delivery,  so  that  the  holder 

without  being    interested   in   or   pro-  may  sue  thereon  in  his  own  name,  do 

ducing  the  bonds  to  which  they  were  not  possess  the  qualities  of  negotiable 

originally  attached.     See  decisions  in  paper,  even  in  the  hands  of  an  inno- 


Corporate  Contracts. 


355 


Sec.  229  Ultra  vires  —  doctrine  of.— The  doctrme  oi  ul^a  vi7'e8 
is  so  frequently  referred  to  in  connection  witli  corporate  contracts 
that  a  particular  consideration  of  it  seems  to  have  been  required. 
This  doctrine,  as  applied  at  least  to  municipal  corporations,  is  that 
they  cannot  be  bound  by  any  contract  executed  by  any  of  their  ofl5- 
cers  or  agents,  which  is  entirely  beyond  the  scope  of  their  powers, 
or  entirely  foreign  to  the  purposes  of  their  creation,  or  absolutely 
immoral  or  against  public  policy ;  ^  that  contracts  thus  made  are 
absolutely  void  ;  and  that  no  recovery  can  be  had  thereon,  when 
the  defense  set  up  to  the  same  is  the  want  of  power  to  so  con- 
tract." 


cent  holder,  so  as  to  preclude  inquiry 
into  the  legality  of  their  issue,  or  pre- 
clude defenses  thereto.  Clark  v.  Des 
Moines,  19  Iowa,  199 ;  Clark  v.  Polk 
County,  id.  248  ;  People  v.  County,  11 
Cal.  170  ;  Sturtevaut  v.  Liberty,  46  Me. 
457  ;  Emery  v.  Mariaville,  56  id.  315  ; 
Smith  V.  Cheshire,  13  Gray,  318  ; 
Commissioner  v.  Keller,  6  Kans.  510. 
But  compare  with  the  foregoing  au- 
thorities, Hyde  v.  Franklin,  27  Vt. 
185  ;  Dalrymple  v.  Whitingham,  26  id. 
345  ;  Bank  v.  Farmington,  41  N.  H.  32  ; 
Inhabitants  v.  Weir,  9  Ind.  224  ;  Taft 
V.  Pittsford,  28  Vt.  286  ;  Halstead  v. 
Mayor,  etc.,  3  N.  Y.  430  ;  The  Floyd 
Acceptances,  7  Wall.  666  ;  People  v. 
Gray,  23  Cal.  125  ;  School   District  v. 


Thompson,  5  Minn.  280;  Philadelphia 
V.  Lewis,  etc.,  R.  Co.,  33  Penn.  St.  38; 
Commonwealth  v.  Pittsburgh ,  34  id, 
496;  King  v.  Wilson,  1  Dill.  (C.  C.) 
555. 

In  the  case  of  Everston  v.  National 
Bank  of  Newport,  13  Alb.  L.  J.  350,  the 
court  of  appeals  of  New  York  recently 
held,  that  where  coupons  of  a  railroad 
company  were  made  payable  to  bearer, 
they  were  negotiable  and  entitled  to 
all  the  incidents  of  negotiable  paper, 
such  as  days  of  grace  ;  and  that  a 
6o?i«^(Ze  purchaser  of  the  same,  after 
the  time  fixed  for  payment,  but  be- 
fore the  days  of  grace  had  expired, 
was  entitled  to  recover  on  them,  al- 
though they  had  been  stolen. 


'  Martin  v.  Mayor,  1  Hill,  345  ;  Boon 
V.  Utica,  2  Barb.  104  ;  Cornell  v.  Guil- 
ford, 1  Denio,  510 ;  Boyland  v.  Mayor, 
etc.,  1  Sandf.  27  ;  Dill  v.  Warebam.  7 
Mete.  438  ;  Parsons  v.  Inhabitants  of 
Goshen,  11  Pick.  396  ;  Vincent  v.  Nan- 
tucket, 12  Cush.  103;  Stetson  v.  Kemp- 
ton,  13  Mass  272  ;  Spaulding  v.  Lowell, 
23  Pick.  371;  Clark  v.  Polk  Co.  19  Iowa, 
248  ;  Estep  v.  Keokuk  Co.,  18  id.  199  ; 
Mitchell  V.  Rockland,  45  Me.  496  ;  S. 
C,  41  id.  363  ;  Anthony  v.  Cleveland, 
12  Ohio,  375  ;  Commissioners  v.  Cox,  6 
Ind.  403 ;  Inhabitants  v.  Weir,  9  id. 
224;  Smead  v.  R.  Co.,  11  id.  104; 
Brady  v.  Mayor,  etc.,  20  N.  Y.  312; 
Appleby  v.  Mayor,  etc.,  15  How.  Pr. 
428  ;  Ciiyler  v.  Rochester,  12  Wend. 
165  ;  Hodges  v.  Buffiilo,  2  Den.  110. 

But  it  has  been  held  that,  where 
money  has  been  advanced  to  a  muni- 
cipal corporation  on  a  contract  void  for 


want  of  authority  on  the  part  of  the 
corporation  to  make  it,  and  the  corpo- 
ration afterward  refuses  to  fulfill  the 
contract,  the  party  thus  advancing  the 
money  may  without  a  demand  of  it 
recover  it  back  in  an  action  for  money 
had  and  received.  Dillon  v.  Ware- 
ham,  7  Mete.  438.  See,  also,  McCracken 
V.  San  Francisco,  16  Cal.  571. 

2  Dill,  on  Mun.  Corp.,  ^  381  ;  Marsh 
V.  Fulton  Co.,  10  Wall.  676;  Thomas 
V.  Richmond,  12  id.  349  ;  Bridgeport  v. 
Housatonic,  etc.,  R.  Co.,  15  Conn.  475  ; 
Leavenworth  v.  Rankin,  2  Kans.  358. 
But  this  doctrine  seems  to  be  some- 
what qualified  in  Allegheny  City  v.  Mc- 
Clurkan,  14  Penn.  St.  81,  where  it  wag 
held  that  a  municipal  corporation  may 
be  liable  for  the  unauthorized  con- 
tracts of  its  officers,  when  these  are 
publicly  entered  into  with  the  knowl- 
edge of  the  citizens  and  not  objected 


356 


Private  Coepokations. 


In  favor  of  hona  fide  holders  of  securities,  the  corporation 
may  be  estopped  to  avail  itself  of  irregularities  in  the  exercise  of 
power  conferred,  but  it  may  always  be  shown  that  under  no  cir- 


to,  until  the  rights  of  third  persons 
have  attached.  Starting  out  with  the 
proposition  that  a  corporation  is  a  mere 
creature  of  law,  and  possesses  no 
powers  except  such  as  are  expressly 
conferred  upon  it,  or  are  necessarily 
incident  to  the  purpose  for  which 
they  are  formed,  Head  v.  Providence 
Ins.  Co.,  3  Cranch  C.  C.  127  ;  Dart- 
mouth College  V.  Woodward,  4  Wheat. 
636  ;  Betts  v.  Menard,  1  111.  14  ;  State 
V.  Stebbins,  1  Stew.  299;  Beaty 
V.  Knowler,  4  Pet.  152;  Beatty  v. 
Marine  Ins.  Co.,  2  Johns.  109; 
People  v.  Utica  Ins.  Co.,  15  id.  358  ; 
2  Cow.  657  ;  Fuller  v.  Plainfield 
Academic  School,  6  Conn.  532 ;  Gozzler 
V.  Corp.  of  Georgetown,  6  Wheat.  597; 
State  V.  Mayor  of  Mobile,  5  Port. 
279 ;  City  Council  of  Montgomery  v. 
Plankroad  Co.,  31  Ala.  76;  Smith  v. 
Morse,  2  Cal.  524  ;  Smith  v.  Eureka 
Flour  Mills,  6  id.  1  ;  Winter  v.  Mus- 
cogee Ry.  Co.,  11  Ga.  438  ;  Kinzie  v. 
Chicago,  3  111.  187;  President,  etc.,  of 
Jacksonville  v.  McConnel,  12  id.  188  ; 
Petersburgh  v.  Matzker,  21  id.  205  ; 
La.  State  B'k  v.  Orleans  Nav.  Co.,  5 
La.  Ann.  294  ;  Baltimore  v.  Baltimore, 
etc.,  E.  R.  Co.,  21  Md.  50 ;  Whiman 
Mining  Co.  v.  Baker,  3  Nev.  386; 
Downing  v.  Mt.  Washington,  etc.,  Co., 
40  N.  H.  230  ;  Strauss  v.  Eagle  Ins. 
Co.,  6  Ohio  St.  59  ;  While's  Bank  v. 
Toledo  Ins.  Co.,  12  id.  601  ;  McMasters 
v.  Reed,  1  Grant's  (Penn.)  Cas,  36,  it 
would  seem  comparatively  easy  to  de- 
termine whether  an  act  done  by  it  was 
nltra  vires  or  not.  But  the  great 
difficulty  that  stands  in  the  way  is  to 
determine  what  acts  are  to  be  regarded 
as  incident  to  the  powers  granted. 
Many  powers  are  necessarily  tacitly 
annexed  to  a  corporation,  as  it  would 
be  impossible  to  embrace  them  speci- 
fically in  the  charter  or  laws  which 
gives  them  a  legal  status,  so  that 
ordinarily  instead  of  specifically  defin- 
ing what  a  corporation  may  do,  it  is 
more  common  to  specify  those  things 
which  it  may  not  do,  leaving  the  courts 
to  regulate  and  determine  the  extent 
of  its  powers  in  view  of  the  grant  and 
of  the  nature,  character  and  purposes 
of  the  corporation.     It  is  quite  evident 


that  the  implied  powers  of  a  corpora- 
tion, instituted  for  the  purposes  of 
manufacturing  a  certain  class  of  goods, 
would  be  quite  different  from  those 
established  for  the  purpose  of  carry- 
ing on  the  business  of  banking,  and, 
independently  of  any  express  pro- 
visions in  the  law  creating  the  two 
classes  of  corporations,  the  nature  of 
the  business  suggests  at  once  the 
distinction  as  to  the  extent  and  scope 
of  the  implied  powers  possessed  by 
either,  and  this  distinction  extends 
through  the  whole  catalogue  of  pur- 
poses for  which  corporations  are 
formed.  In  determining  then,  in  a 
given  case,  whether  an  act  done  by  a 
corporation  or  a  contract  entered  into 
by  it  is  ultra  vires  in  the  absence  of 
any  express  prohibition,  two  things  are 
to  be  looked  to  ;  First,  the  laws  under 
which  the  corporation  was  formed ; 
and  second,  the  nature  of  the  business 
and  the  expressed  purposes  for  which 
it  was  formed.  Thus,  a  turnpike  com- 
pany, incorporated  for  the  purpose  of 
building  and  maintaining  a  turnpike, 
and  authorized  to  take  tolls  thereon, 
as  an  incident  to  the  grant,  has  author- 
ity, although  not  expressly  conferred, 
to  erect  gates  thereon,  and  toll-houses 
at  suitable  and  proper  places  for  its 
own  protection,  and  under  its  authority 
to  take  lands  for  the  construction  of 
the  road,  would  also  have  authority 
to  take  such  land  as  is  necessary  for 
the  erection  and  maintenance  of  such 
toll-houses,  and  the  reason  is  that  the 
grant  would  be  valueless  unless  it 
could  adopt  such  reasonable  precau- 
tious for  the  collection  of  its  tolls,  and 
every  thing  reasonably  necessary,  and 
secure  a  beneficial  exercise  of  the 
grant,  will  be  presumed  to  have  been 
impliedly  granted.  Wright  v.  Carter, 
27  N.  J.  L.  76  ;  Redge  Turnpike  Co.  v. 
Staener,  6  W.  &  S.  (Penn.)  378.  But  a 
corporation  established  for  such  a 
purpose  does  not,  as  an  incident  to  its 
grant,  possess  the  power  to  establish 
a  line  of  stages  thereon,  because  by 
no  possible  line  of  reasoning  or  con- 
struction can  the  latter  business  be 
said  to  be  an  incident  of  the  former. 
Wiswall  V.  Greenville,  etc.,  Plankroad 


Corporate  Contracts. 


357 


cumstances  could  the  corporation  lawfully  make  a  contract  of  the 
character  in  question.  This  was  the  early  rule  of  the  English 
cases,  in  the  application  of  the  doctrine  of  ultra  vires  to  private 


Co.,  3  Jones'  (N.  C.)  Eq.  183  ;  Dawning 
V.  Mount  Washington  Co.,  40  N.  H. 
230.  In  construing  a  charter  or  law 
under  which  a  corporation  is  formed, 
the  courts  will  not  generally  be  in- 
clined to  construe  it  either  strictly  or 
liberally  but  rather  according  to  the 
fair  and  natural  import  of  it  with  refer- 
ence to  the  objects  and  purposes  of 
the  corporation,  Downing  v.  Mount 
Washington,  40  N.  H.  330  ;  and  such 
as  will  give  them  full  effect.  The 
Enfield  Toll  Bridge  Company  v.  The 
Hartford  and  New  Haven  R.  R.  Co.,  17 
Conn.  454.  There  is  no  rule  or  prin- 
ciple by  which  an  act  creating  a  corpo- 
ration for  certain  specific  purposes  is 
to  be  strictly  construed  as  prohibitory 
of  all  other  dealings  or  transactions 
not  coming  within  the  exact  scope  of 
those  designated,  nor  on  the  other 
hand  that  it  shall  be  construed  so 
liberally,  as  to  give  it  authority  to 
carry  on  business  entirely  foreign 
thereto  ;  but  its  main  business  is  to 
be  confined  to  that  class  of  operations 
which  properly  appertain  to  the  gen- 
eral purposes  for  which  its  charter 
was  granted,  or  for  which,  under  the 
general  law  relating  to  the  forma- 
tion of  such  companies,  it  was 
formed.  It  may  enter  into  transac- 
tions which  are  incidental  or  aux- 
iliary to  its  main  business,  or  which 
are  or  by  the  force  of  circum- 
stances become  necessary,  expedient 
or  profitable  in  the  prosecution  of  its 
business,  and  the  care  and  manage- 
ment of  the  property  which  it  was  au- 
thorized to  hold  under  the  law  creat- 
ing it.  Brown  v.  Winnisimmet  Co., 
11  Allen,  326.  Thus,  in  the  case  last 
cited,  where  a  corporation  was  estab- 
lished with  power  to  establish  and 
maintain  a  ferry,  and  to  own  and  pos- 
sess vessels,  steamboats  and  other  per- 
sonal property,  not  exceeding  a  cer- 
tain amount  in  value,  it  was  held 
that  the  court  could  not  say  that  a 
contract  by  the  company  to  let  one  of 
its  steamboats  at  a  certain  rate  per 
day,  to  be  used  for  no  specified  length 
of  time,  and  in  no  specified  place,  is  in 
excess  of  its  corporate  powers,  if  there 
is  no  proof  that  the  steamboat  icas  not 


necessary  or  proper  to  be  iised  in  the 
prosecution  of  the  business  of  the  ferry 
or  that  by  reason  of  owning  it  the  com- 
pany exceeded  the  limits  of  property 
which  it  teas  authorized  to  hold.  It 
would  be  destructive  to  the  purposes 
for  which  corporations  are  formed,  to 
hold  them  up  to  a  strict  construction 
of  the  grant  of  authority,  and  to  hold 
that  they  should  not  be  permitted  to 
exercise  all  those  powers  fairly  inci- 
dent to  the  business  which  they  are 
organized  to  perform,  and  to  say  that 
if  they  exceeded  the  express  powers 
conferred  upon  them  their  acts  should 
be  ultra  vires,  and  void  ;  and  no  such 
rule  obtains,  and  acts  of  a  corporation 
not  entirely  foreign  to  the  purposes  of 
its  institution  are  not  void,  although  it 
may,  in  some  respects,  have  exceeded 
its  authority.  Miners'  Ditch  Co.  v. 
Zellerbach,  37  Cal.  543  ;  McPherson 
V.  Foster,  43  Iowa,  48  ;  State  Board 
of  Agriculture  v.  Citizens  Street  Rail- 
way, 47  Ind.  407.  For  an  abuse  or  an 
excessive  exercise  of  its  power  the  state 
may  interpose  and  revoke  the  grant, 
but  a  person,  who  was  a  party  to  such 
a  transaction  or  contract  cannot  avoid 
his  liability  upon  that  ground.  The 
rule  was  clearly  and  forcibly  ex- 
pressed in  a  Massachusetts  case, 
Monument  National  Bank  v.  Globe 
Works,  101  Mass.  57,  substantially 
that  the  doctrine  of  ultra  vires  has 
full  application  to  avoid  only  those 
transactions  which  involve  an  attempt 
to  exercise  a  power  ichich  has  not 
been  confurred  on  the  corporation  ;  and 
that  the  abuse  in  a  particular  instance 
of  a  general  power  which  a  corpora- 
tion does  possess  cannot  be  shown  to 
avoid  a  contract  made  by  it,  either  by 
the  corporation  or  the  person  with 
whom  it  dealt.  Thus  if  a  corporation 
has  power  to  borrow  monej'  for  some 
purposes,  and  has  done  so,  it  cannot 
impeach  the  security  or  evidence  of 
debt  given  therefor  upon  the  ground 
that  the  money  was  applied  to  a  pro- 
hibited purpose.  Thompson  v.  Lam- 
bert, 44  Iowa,  239  ;  Bradley  v.  Bal- 
lard, 55  111.  413  ;  Whitney  Arms  Co. 
V.  Barlow,  63  N.  Y.  68. 

In  order  to  be  operative  as  a  defense. 


358 


PjRIVATE    C0KPOKATION8. 


corporations,  viz. :  that  such  corporations  have  the  powers  only 
which  are  conferred  by  the  charter,  the  incorporating  statutes  or 
the  constating  instruments,  and  that  they  can  only  be  bound  by 


there  must  be  a  total  want  of  power, 
and  where,  on  their  face,  the  dealings 
of  a  corporation  are  within  the  scope 
of  its  charter,  they  will  be  presumed 
to  be  legal  and  authorized  until  some 
proof  is  given  to  the  contrary.  Like 
individuals,  corporations  are  entitled 
to  the  benefit  of  the  presumption  that 
Imputes  innocence  rather  than  wrong 
to  the  conduct  of  their  affairs.  Mon- 
tague V.  Church  School  District,  34  N. 
J.  L.  218  ;  Chautauqua  County  Bank  v. 
Risley,  19  N.  Y.  369  ;  De  Graff  v.  Amer- 
ican Linen  Thread  Co.,  21  id.  124  ; 
McDaniels  v.  Flower  Brook  Manuf.  Co., 
22  Vt.  274  ;  Farmers'  Loan  and  Trust 
Co.  V.  Clowes,  3  N.  Y.  470 ;  N.  Y. 
Fireman's  Ins.  Co.  v.  Sturges,  2  Cow. 
664  ;  Safford  v.  Wyckoff,  4  Hill,  442  , 
Bates  V.  State  Bank,  2  Ala.  451  ;  Bank 
of  Kentucky  v.  Schuylkill  Bank,  Pars. 
Sel.  Cas.  180  ;  Ex  parte  Grady,  8  L.  T. 
(N.  S.)  98.  There  are,  as  we  have 
seen,  certain  incidental  powers  pos- 
sessed by  corporations,  but  there  can 
be  no  incidental  power  that  is  not 
appurtenant  to  the  principal,  and  not 
possessed  of  a  similar  character,  nor  can 
there  be  any  incidental  power  which 
would  have  been  refused  as  a  principal, 
or  any  thing  on  the  most  liberal  con- 
struction, which  is  not  necessary  and 
proper  to  carry  the  principal  express 
powers  into  effect.  Sumner  v.  Marcy, 
3  Wood.  &  M.  105.  And  in  the  case 
last  cited  it  was  held  that  the  inci- 
dental power  of  a  businesBS  corporation 
to  borrow  money  did  not  extend  to 
justify  it  in  purchasing  a  controlling 
interest  in  a  bank  so  as  to  be  able  to 
lend  to  themselves.  If  a  corporation, 
as  a  dock  company,  is  clothed  with 
authority  to  buy,  improve  or  dispose 
of  real  property,  the  power  to  improm 
will  be  treated  as  extending  the  powers 
of  the  company  to  the  performance  of 
any  act  whether  on  or  off  the  land, 
the  direct  and  proximate  tendency  of 
which  will  be  to  enhance  its  market 
value.  Vandall  v.  South  San  Fran- 
cisco Dock  Co.,  40  Cal.  83.  So  the 
building  of  saw-mills  and  a  hotel  for 
those  having  business  at  the  location 
of  the  company  was  held  to  be  within 


the  power  of  a  corporation  owning  a 
very  large  body  of  land  and  authorized 
by  their  charter  to  aid  in  the  develop- 
ment of  minerals  and  other  materials 
and  to  promote  the  clearing  and  settle- 
ment of  the  country.  Watt's  Appeal, 
78  Penn.  St.  370.  So  it  has  been  held 
that  the  power  to  mortgage  is  so  far 
incidental  to  or  implied  from  a  power 
to  acquire  and  hold  real  estate,  that  an 
agricultural  society  which  has  bor- 
rowed money  upon  a  mortgage  of  its 
fair  grounds,  for  money  borrowed  for 
the  erection  of  buildings  thereon,  is 
estopped  from  repudiating  the  mort- 
gage as  ultra  vires.  West  v.  Madison 
County  Agricultural  Board,  82  111.  205 
But  it  has  been  held  that  for  an  agri- 
cultural society  to  establish  a  horse 
fair  for  the  purpose  of  testing  the 
speed  of  horses  by  trotting,  and  to  pay 
premiums  for  such  as  excel,  out  of  a 
fund  raised  by  assessments  on  the 
owners  of  horses  entered,  and  by  an 
admission  fee  to  the  grounds  is  ultra 
mres  and  illegal.  Bronson  Agricul- 
tural, etc. ,  Ass'n  v.  Ramsdell,  24  Mich. 
441.  And  without  stopping  to  enu- 
merate the  instances  in  which  acts  of 
corporations  have  been  valid  or  invalid 
as  being  within  or  beyond  the  express 
or  implied  powers  conferred  upon  it 
it  may  be  said  that  in  general  a  corpo- 
ration created  for  a  specific  purpose  can 
make  only  such  contracts  as  are  neces- 
sary, either  directly  or  incidentally,  to 
enable  it  to  answer  that  purpose.  In 
deciding,  therefore,  whether  such  a 
corporation  can  make  a  particular  con- 
tract, the  questions  are,  first,  whether 
its  charter,  or  some  statute  binding 
upon  it,  forbids  or  permits  it  to  make 
such  a  contract ;  and  if  the  charter 
and  valid  statutory  law  are  silent  upon 
the  subject  ;  then  second,  whether  the 
power  to  make  such  a  contract  may 
be  implied  on  the  part  of  the  corpora- 
tion as  directly  or  incidentally  neces- 
sary to  enable  it  to  fulfil  the  purpose 
of  its  existence  ;  or  whether  the  con- 
tract is  entirely  foreign  to  that  pur- 
pose. Weckler  v.  First  Nat.  Bank,  42 
Md.  581. 


Corporate  Contracts.  359 

contracts  by  their  agents  or  otherwise  that  are  within  the  limits 
of  the  powers  thus  possessed.  And  this  seems  to  have  been  tlie 
American  doctrine.^ 

Thus  it  was  held  that  a  company  incorporated  for  the  purpose 
of  establishing  and  conducting  a  line  or  lines  of  steamboats,  ves- 
sels and  stages,  or  other  carriages  for  the  conveyance  of  passen- 
gers between  certain  places,  could  not  make  a  valid  contract  for 
the  breaking  of  ice  for  the  passage  of  vessels,  and  the  towing  of 
vessels  through  the  track  thus  broken  to  a  place  other  than  desig- 
nated, and  that  an  action  could  not  be  maintained  upon  such  a 
contract  against  such  corporation  if  the  defense  of  a  want  of 
power  to  contract  was  made  f  and  it  has  also  been  held  that  a 
corporation  was  not  estopped  from  making  a  defense  on  the 
ground  of  ultra  vires,  even  though  it  had  received  the  considera- 
tion or  benefits  of  the  contract."  \Yhat  then  is  the  present  doc- 
trine on  the  subject  of  ultra  vires  f  Is  a  contract  entered  into  on 
the  part  of  a  corporation  void  under  all  circumstances  if  it  exceeds 
the  powers  conferred  upon  it  ?  Is  it  void  if  it  exceeds  the  char- 
tered powers  of  the  corporation,  provided  the  corporation  has 
received  the  consideration  of  the  contract,  or  the  benefits  result- 
ing from  it  ?  Is  it  void  if  it  is  a  promissory  note  or  other  nego- 
tiable instrument  in  the  hands  of  a  honajide  holder,  given  as 
the  consideration  of  a  contract,  or  for  property  delivered?  "Would 
it  be  void  if  executed  by  an  agent  in  excess  of  his  authority, 
where  the  corporation  has  received  the  consideration  ?  What 
remedy  exists  in  case  of  the  attempt  to  act  or  contract  on  the 
part  of  a  corporation  or  its  agents  in  excess  of  the  powers  con- 
ferred upon  it  or  them,  and  who  is  entitled  to  it  ?  These  are 
among  the  numerous  questions  presented  by  the  doctrine  of  rdtra 
vires,  in  its  application  to  corporations.  We  will  proceed  to  con- 
sider them  and  the  modem  doctrine  relating  to  that  subject. 

^Earl  of  Shrewsbury  v.  North  Staf-  Agency  Co.,  24  Conn.  159  ;  Berrv  v. 

fordshire    R.   Co.,  85  L.  J.   Ch.   156;  Yates,  24  Barb.  199. 

Taylor  v.  Chichester,  etc.,  R.  Co.,  L.  R.,  *  Gage  v.  New  Market  R.Co.,  18  Q.  B. 

2  Ex.  356.  457  ;  14  Eng.  L.  &  Eq.  57;  Preston  v. 

'  Pennsylvania  Co.  v.  Dandridge,  8  laverpool  R.  Co..   5  H.  L.  C.  605  ;   Al- 

G.  &  J.  24'8.     See,  also,  Abbot  v.  Bal-  bert  v.  Savings  Bank,  1  Md.  Ch.  407  ; 

timore  Steam   Jack.   Co.,    1  Md.    Ch.  Ohio  L.  Ins.  Co.  v.  Merchants' Ins.  Co., 

542;    Mechanics'     Bank  v.  Meriden  11  Humph.  1;  Guest  v.  Poole  R.,  L. 

R.,  5  C.  P.  553. 


360  Private  Corporations. 

Sec.  230.  Different  senses  in  which  the  term  ultra  vires  is  used.  —  In 
a  recent  case  in  California,  the  supreme  court  of  that  state  has 
referred  to  the  different  senses  in  which  the  term  ultra  vires  is 
used.  Sawyer,  C.  J.,  observed:  "An  act  is  said  to  be  ultra 
vires  when  it  is  not  within  the  scope  of  the  powers  of  the  corpo- 
ration to  perform  it  under  any  circumstances  or  for  any  purpose. 
An  act  is  also  sometimes  said  to  be  ultra  vires  with  reference  to  the 
rights  of  certain  parties,  when  the  corporation  is  not  authorized  to 
perform  it  without  their  consent ;  or  with  reference  to  some  specific 
purpose  when  it  is  not  authorized  to  perform  it  for  that  purpose, 
although  fully  within  the  scope  of  the  general  powers  of  the  cor- 
poration, with  the  consent  of  parties  interested,  or  for  some  other 
purpose.  And  the  rights  of  strangers  dealing  with  corporations 
may  vary,  according  as  the  act  is  ult7'a  vires  in  one  or  the  other 
of  these  senses.  All  these  senses  must  be  constantly  borne  in 
mind  in  considering  a  question  arising  out  of  dealings  with  a 
corporation.  When  an  act  is  ultra  vires  in  the  first  sense  men- 
tioned, it  is  generally,  if  not  always,  void  in  toto,  and  the  corpo- 
ration may  avail  itself  of  the  plea.  But  when  it  is  ultra  vires  in 
the  second  sense,  the  right  of  the  corporation  to  avail  itseK  of  the 
plea  will  depend  upon  the  circumstances  of  the  case.' 

We  will  proceed  to  consider  these  two  propositions,  and  to 
determine,  first,  the  effect  of  this  doctrine  of  ultra  vires  in  rela- 
tion to  contracts  made  by  the  corporation,  but  in  so  doing  it 
has  exceeded  the  authority  and  power  which  it  possesses  by  vir- 
tue of  the  powers  conferred  upon  it  by  law ;  and,  secondly,  its 
effect  where  contracts  are  made  by  its  officers  or  agents  in  excess 

'  The  Miners'  Ditch  Co.  v.  Zeller-  them  out.  But  these  bodies  have  no 
bach,  37  Cal.  543.  As  to  the  doctrine  existence  independent  of  the  acts 
of  ultra  vires  see,  also,  the  English  which  create  them,  and  they  are 
cases,  East  Anglian,  etc.,  R.  Co.  v.  created  by  parliament  with  special 
Eastern,  etc.,  R.  Co.,  11  C.  B.  775  ;  and  limited  powers,  and  for  limited 
Brice's  Ultra  Vires,  28  et  seq. ;  Shrews-  purposes.  Whether  parliament  has 
bury,  etc.,  R.  Co.  v.  London,  etc.,  R.  wisely  limited  their  powers  for  pur- 
Co.,  22  L.  J.  Ch.  682.  In  the  latter  poses  of  their  incorporation  is  not  for 
case  it  is  observed  :  "  The  great  un-  us  to  consider.  The  fact  of  their 
dertakings  of  these  (i.  e.,  railway  and  being  endued  with  such  powers  and 
similar)  companies  could  not  be  car-  incorporated  for  such  purposes  only 
ried  out  by  private  enterprises,  and  shows  that  parliament  did  not  think 
parliament  has,  therefore,  with  a  view  fit  to  intrust  them  with  more  extended 
to  public  good,  authorized  the  consti-  powers,  or  to  incorporate  them  for 
tution  of  large  bodies,  acting  by  di-  other  purposes." 
rectors,    for  the  purpose  of   carrying 


Corporate  Contracts.  361 

of  and  beyond  the  authority  confen-ed  upon  them  for  that  pur- 
pose, by  the  creating  acts  or  constating  instruments. 

Sec.  231.  Are  all  contracts  void  that  are  entered  into  by  corporations, 
which  are  ultra  vires?  — In  considering  this  question  it  may  be 
proper  to  state  that  a  distinction  has  been  made  between  contracts 
executed  or  partly  executed,  and  those  that  are  not  either  in 
whole  or  in  part  executed.  We  will  present  the  following  hypo- 
thetical case  for  illustration:  Suppose  a  banking  institution  is 
duly  incorporated  with  the  ordinary  powers  and  privileges  of 
such  a  corporation,  and  it  is  finally  resolved  by  such  bank,  in  the 
usual  and  authorized  mode  of  corporate  action,  that  it  will 
embark  in  the  purchase  of  grain ;  and  that  to  such  a  course  and 
policy,  on  the  part  of  the  corporation,  there  is  not  a  dissenting 
stockholder,  or  other  person  having  any  interest  in  the  same. 
In  carrying  out  this  resolution,  we  will  suppose  that  the  corpora- 
tion purchases,  principally  on  time,  a  large  quantity  of  wheat,  for 
which  it  pays  the  seller  only  a  small  portion  of  the  consideration, 
and  gives  its  obligation  in  the  form  of  a  negotiable  note  or  bill 
for  the  balance.  If  the  corporation  should  be  successful  in  the 
investment,  a  large  sum  may  be  realized  and  the  stockholders 
enriched  thereby  ;  the  obligation  to  pay  for  the  wheat  would  be 
canceled,  and  the  members  of  the  corporation  pocket  the  divi- 
dends thereby  produced,  with  entire  satisfaction.  But  suppose  the 
investment  turns  out  unfortunate,  and  a  large  loss  is  sustained, 
and  that  the  obligation  given  for  the  wheat  is  repudiated,  on  the 
ground  that  the  corporation  had  no  authority  to  make  such  a  con- 
tract and  that  the  excess  of  power  in  this  respect  must  be  presumed 
to  be  known  by  the  other  party  to  the  contract  and  that  the  stat- 
utes and  by-laws  are  public  acts  and  records,  of  which  parties 
dealing  with  it  are  required  to  take  notice ;  and  that  such  acts  or 
instruments  clearly  show  that  the  corporation  was  exceeding  the 
powers  conferred  upon  it.  Can  such  a  defense  be  maintained  in 
an  action  against  the  bank  on  the  obligation  given  ? 

If  maintainable  against  the  payee,  would  it  be  against  a  hona 

fide  holder,  without  notice  of  the  purposes  for  which  the  note  or 

bill  was  given  ?   Against  the  doctrine  of  ultra  vires,  in  such  cases 

as  a  defense,  Comstock,  C.  J.,  observes :  "  If  the  enterprise  is 

46 


362  Private  Corporations. 

successful,  the  corporation  and  its  stockholders  gain  by  the  result. 
If  a  depression  occurs  in  the  market,  and  disaster  is  threatened, 
the  doctrine  that  a  corporation  can  never  act  outside  of  its  charter 
enables  it  to  say,  '  this  is  not  our  dealing,'  and  the  money  used  in 
the  dealing  may  be  unconditionally  reclaimed  from  whatever  par- 
ties have  received  it  for  value  ;  while  the  injured  dealer  must  seek 
his  remedy  against  agents,  perhaps,  irresponsible  or  unknown. 
Corporations  may  thus  (if  the  doctrine  of  ultra  vires  in  such 
cases  is  adopted)  take  all  the  chances  of  gain,  without  incurring 
the  hazard  of  loss.  Familiar  maxims  of  the  law  must  be  reversed. 
In  the  relation  of  private  principal  and  agent,  the  adoption  of  the 
agent's  unauthorized  dealings  is  equivalent  to  an  original  author- 
ity ;  and  the  adoption  is  perfect  when  the  principal  receives  the 
proceeds  of  that  dealing.  Corporations  may  practically  act  in  the 
same  manner.  *  *  *  But  is  it  true  that  all  contracts  for  pur- 
poses not  embraced  in  their  charters  are  illegal,  in  the  appropriate 
sense  of  the  term  ?  This  proposition  I  must  deny.  Undoubtedly, 
such  engagements  may  have  vices,  which  sometimes  infect  the 
contracts  of  individuals.  They  may  involve  a  malum  in  se,  or  a 
malum  prohibitum,  and  may  be  void  for  any  cause  which  would 
avoid  the  contract  of  a  natural  person.  But  where  no  sucli  vices 
exist,  and  the  only  defect  is  one  of  power,  the  contract  cannot 
be  void  because  it  is  illegal  or  immoral.  Such  a  doctrine  may 
have  some  slight  foundation  in  the  earlier  English  railway  cases,' 
but  it  was  never  establisUed,  and  is  not  now  received  in  the  Eng- 
lish courts.' 

"  The  books  are  full  of  cases  upon  the  powers  of  corporations 
and  the  effect  of  dealing  in  a  manner  and  for  objects  not  intended 
in  their  charters  ;  but  with  the  slight  exception  named,  there  is  not 
only  an  entire  absence  of  adjudged  cases,  even  of  judicial  opinion 
or  dicta,  for  the  proposition  that  mere  want  of  authority  renders 
a  contract  illegal.  Such  a  proposition  seems  to  me  absurd.  The 
words  '  ^lltra  vires^  and  '  illegality,'  represent  totally  different 
and  distinct  ideas.  It  is  true  that  a  contract  may  have  both  these 
defects,  but  it  may  have  one  without  the  other.     For  example,  a 

'The   East  Anglian  R.  Co.  v.  The  *  Tj^g   Mayor,  etc.,   v.  The   Norfolk 

Eastern  Counties  R.  Co.,  7  Eng.  L.  &  R.  Co.,  30  Eng.  L.  &  Eq.  120  ;  Eastern 

Eq.  509  ;  Macgregor  v.  Deal,  etc.,  R.  Counties  R.  Co.  v.  Hawkes,  35  id.  8. 
Co.,  16  id.  180. 


Corporate  Contracts. 


363 


bank  has  no  authority  to  engage,  and  usually  does  not  engage,  in 
benevolent  enterprises.  A  subscription  made  by  authority  of  the 
board  of  directors  and  under  the  coi-porate  seal,  for  the  building 
of  a  church  or  college,  or  an  alms-house,  would  be  clearly  ultra 
vires,  but  it  would  not  be  illegal.^     If  every  corporator  should 


'  The  question  as  to  wbetlier  an  act 
done  in  a  different  mode  from  that 
prescribed  by  the  charter  is  legal,  de- 
pends upon  the  circumstance  whether 
by  usage  the  company  had  adopted 
such  mode  of  executing  its  powers, 
and  if  so,  although  the  charter  made 
is  not  pursued,  the  company  is  bound. 
This  rule  was  well  illustrated  in  Buck- 
ley V.  Derby  Fishing  Co.,  2  Conn.  253. 
In  that  case  an  action  was  brought 
upon  a  policy  of  insurance  signed  by 
the  president  of  the  company  and 
countersigned  l>y  the  assistant.  The 
act  authorizing  the  company  to  pursue 
the  business  of  insurance  provided 
that  "  all  policies  of  insurance  made 
by  said  company,  signed  by  the  presi- 
dent, or  in  his  absence  by  the  assistant, 
and  countersigned  by  the  secretary,  shall 
be  binding  on  said  company  according 
to  the  terms  and  tenor  thereof."  The 
defendants  insisted  that  they  were  not 
liable  upon  the  policy,  because  the 
secretary  did  not  countersign  it.  The 
plaintiff  showed  by  the  books  and 
records  of  the  company,  a  practice  on 
its  part  to  issue  policies  in  this  way, 
and  the  court  held  that  by  such  a 
course  of  practice  the  company  ren- 
dered itself  liable,  aWiough  the  policy 
was  not  executed  in  the  mode  required 
by  the  charter.  "  I  consider  it  to  be 
undoubted  law,"  said  Hosmer,  J., 
"that  a  corporation  may  incur  a 
liability  different  from  the  prescrip- 
tions of  its  charter  like  [individuals  ; 
it  is  responsible  for  the  manner  in 
which  it  permits  its  agents  to  hold  it 
out  to  the  world  *  *  *  what  is 
usually  done  by  the  agents  of  a  corpo- 
ration in  the  transaction  of  the  busi- 
ness confided  to  them,  it  is  a  fair  pre- 
sumption that  the  stockholders  are 
cognizant  of.  Although  they  reside 
in  different  places,  they  have  an 
interest  in  acquainting  themselves 
with  the  proceedings  of  the  corpora- 
tion. The  office  where  the  business 
is  done  is  open  ;  the  books  of  the 
company  are  subject  to  their  inspec- 
tion ;  and  it  would  be  absurd  to  sup- 


pose them  ignorant  of  those  public 
facts,  relating  to  the  ordinary  trans- 
action of  the  corporate  concerns,  with 
which  mankind  in  general  are  ac- 
quainted. In  short,  every  transaction 
of  the  company,  established  by  proof 
of  direct  authority  from  the  stock- 
holder, or  implied  from  the  usual 
modes  of  doing  their  business,  which 
is  not  against  law,  or  a  prohibition  con- 
tained in  their  charter,  is  obligatory 
upon  them." 

Gould,  J.,  said  :  "  It  is  observable, 
that  the  company  are  not,  in  this  case, 
claiming  a  right,  through  the  agency 
of  an  individual,  whose  authority  to 
act  for  them  is  denied  by  the  adverse 
party.  It  is,  therefore,  unnecessary 
to  inquire  whether  in  such  a  case  evi- 
dence, like  the  present,  could  be  ad- 
mitted in  their  favor  or  not.  Here  the 
demand  is  against  the  company  upon 
a  contract  executed  in  their  name  by 
Oillet,  as  president,  and  Wheeler,  as 
assistant  ;  and  both  of  whom,  it  is 
claimed,  were  the  company's  agents 
for  that  purpose.  But  to  this  claim  it 
is  replied,  first,  that  by  the  terms  of  the 
act  of  incorporation,  the  company  can- 
not be  bound  by  any  contract  unless  it 
is  signed  by  the  president  and  counter- 
signed by  the  secretary ;  and,  there- 
fore, that  this  policy,  not  being  so 
executed,  does  not  bind  them,  even 
admitting  that  'Wheeler,  as  assistant, 
was,  de  facto,  employed  as  their  agent 
for  the  purpose  of  countersigning. 

A  corporation  certainly  cannot,  by 
its  own  act,  enlarge  its  own  capacities, 
powers  or  rights ;  but  it  would  be 
strange  to  say  that  it  cannot  thus 
voluntarily  incur  liabilities.  If  a  cor- 
poration, by  a  corporate  act,  appoints 
an  agent  under  any  name  or  title  what- 
ever for  the  purpose  of  making,  in  its 
own  behalf,  any  contract  which  it  has 
a  right  to  make,  can  the  corporation 
itself  impeach  such  a  contract  made  in 
its  name  by  that  agent  by  alleging  its 
own  want  of  power  to  make  such  an 
appointment,  or  to  contract  by  such  an 
agent?  The  present  objection  must, to 


364 


Pkivate  Corporations. 


expressly  assent  to  such  an  application  of  the  funds,  it  would  still 
be  ult/ra  vires,  but  no  wrong  would  be  committed  and  no  public 
interest  violated.    So,  a  manufacturing  corporation  may  purchase 


avail  the  defendants,  go  to  this  extent. 
But  such  a  doctrine  is  in  violation  of 
all  principle.  A  corporate  body,  by 
transgressing  the  limits  of  its  charter, 
may,  doubtless,  incur  a  forfeiture  of 
its  privileges  and  powers ;  but  who 
ever  imagined  that  it  could  thus  ac- 
quire an  immumty  to  the  prejudice  of 
third  persons  ?  The  clause  in  which 
the  act  of  incorporation  prescribes  the 
mode  of  signing  contains  no  negative 
words ;  i.  e.  no  provision  that  a  con- 
tract signed  in  any  other  mode  than 
that  prescribed  shall  not  bind  the  com- 
pany. It  would  be  highly  unreason- 
able, therefore,  to  construe  that  mode 
SlS  exclusive  lo  th.Q  injury  of  strangers 
— •  especially  as  the  statute  is  not  in  its 
nature  a  public  one,  and  third  persons 
are,  of  course,  neither  bound  nor  pre- 
sumed to  know  its  provisions.  The 
case  Ex  parte  Meynot,  1  Atk.  196, 
though  not  in  point,  contains  a  doctrine 
which,  I  think,  has  an  important  bear- 
ing upon  the  present  question.  That 
was  an  application  to  the  lord  chancel- 
lor to  supersede  a  commission  of  bank- 
ruptcy which  had  been  taken  out 
against  the  petitioner  —  he  being  a 
clergyman.  The  application  was 
founded  upon  the  statute  21  Hen.  8, 
by  which  clergymen  are  prohibited 
under  heavy  penalties  from  trading  ; 
and  their  contracts,  as  traders,  are  de- 
clared ' '  utterly  void  and  of  no  effect." 
Lord  Hardwicke,  however,  dismissed 
the  petition  ;  and  among  other  things 
observed  :  "  If  a  man  with  his  eyes 
open  will  break  the  law,  that  does  not 
make  void  the  contract.  It  is,  un- 
doubtedly, very  improper  for  a  person 
to  say  I  have  broke  the  law,  and  there- 
fore, I  am  exempt  from  any  remedy  a 
creditor  may  have  against  me."  "I 
am  inclined  to  be  of  opinion  that  the 
contract  shall  be  void  as  to  the  parson 
Jiimself  only  ;  for  it  would  be  a  most 
extraordinary  construction  of  the 
statute  that  the  bargain  shall  be  void 
for  his  own  benefit ;  and  it  would  be 
very  mischievous  to  construe  the  act 
in  such  a  manner."  "  Shall  the  bar- 
gain be  void  for  the  parson's  benefit  ?  " 
"This  part  of  the  act  ought  to  be  so 
construed  as  to  make   it  a  penalty  on 


himself  only."  This  reasoning,  I  re- 
peat, applies  strongly,  by  analogy,  to 
the  question  before  the  court.  And  if 
the  petitioner,  in  that  case,  was  bound 
by  his  contract,  notwithstanding  the 
strong  language  of  the  statute  of  21 
Hen.  8,  a  fortiori,  it  would  seem,  ought 
the  policy,  in  the  present  case,  to  bind 
the  company  if  Wheeler  was  actually 
their  agent  for  the  purpose  of  coun- 
tersigning —  whether  the  contract  was 
executed  in  the  form  prescribed  by  the 
act  of  incorporation  or  not. 

We  come,  then,  to  the  second  ob- 
jection made  by  the  defendants,  to's.  ; 
that  a  corporation  aggregate  cannot 
appoint  an  agent  except  by  deed  ;  and 
that,  therefore,  no  other  evidence  than 
that  of  a  deed  is  admissible  to  prove 
Wheeler's  authority  to  countersign  the 
policy.  The  first  proposition  is  gener- 
ally, though  not  universally  true,  as  to 
express  authorities ;  but  it  applies  to 
no  other.  If,  then,  the  plaintiffs  were 
attempting  to  prove  a  specific  act  of 
the  company,  expressly  conferring 
upon  Wheeler  the  authority,  under 
which  he  is  claimed  to  have  acted, 
the  defendants  might  properly  insist 
that  the  fact  could  be  proved  in  no 
other  way  than  by  proof  of  a  corporate 
act.  But  implied  authorities,  which 
are  almost  as  familiar  in  the  law  as  im- 
l^lied  promises,  and  which  rest  upon 
mere  presumptions  are  always  proved 
by  circumstantial  or  collateral  facts 
and  can  be  proved  in  no  other  way. 
Usual  or  frequent  practice,  in  business, 
is  the  ordinary  evidence  in  such  cases. 
The  general  principle  is  that  one  per- 
son, who  by  permitting  another  to  act 
ostensibly  as  his  agent,  has  given  him  a 
credit  with  the  public  as  such,  shall, 
in  favor  of  third  persons,  be  pre- 
sumed to  have  authorized  the  latter  to 
act  in  that  character,  and  be  precluded 
from  averring  the  contrary.  This  pre- 
sumption is  established  by  proof  of 
usage  or  practice.  As  that  the  one  has 
been  in  the  habit  of  acting  in  the  name 
and  in  behalf  of  the  other,  and  that 
the  latter,  either  by  positive  acts  or  by 
acquiescence,  impliedly  recognized  the 
agency.  And  the  presumption,  to  be 
available  to  any  purpose,   necessarily 


Corporate  Contracts. 


365 


ground  for  a  school-house,  or  a  place  of  worship  for  the  intel- 
lectual, religious  and  moral  improvement  of  its  operatives.  It 
may  buy  tracts  and  books  of  instruction  for  distribution  among 
them.  Such  dealings  are  outside  of  the  charter ;  but  so  far  from 
being  illegal  and  wrong,  they  are,  in  themselves,  benevolent  and 
praiseworthy.  So,  a  church  corporation  may  deal  in  exchange. 
This,  though  itltra  vires,  is  not  illegal,  because  dealing  in  exchange 
is  not,  itself,  an  unlawful  act."  ^  It  is  evident  that  by  the  plainest 
principles  of  justice,  corporations  making  contracts  in  such  cases, 
and  receiving  the  consideration  and  the  full  benefits  of  the  same, 
should  not  be  allowed  to  defeat  the  obligations  made  by  them 
therefor ;  or,  at  least,  should  not  be  permitted  with  impunity  to 
appropriate  the  property  of  another  received  by  virtue  of  such  a 
contract,  and,  under  a  plea  of  ultra  vires,  defeat  any  recovery 
therefor. 


embracea  all  legal  requisites  to  the  crea- 
tion of  a  valid  authority.  Hence,  a 
deed,  a  by-law,  or  a  record,  may  as  well 
be  presumed  as  any  other  fact.  The 
Mayor  of  Kingston-upon-Hull  v.  Hor- 
ner, Cowp.  103. 

It  may  be  objected  that  the  usage  in 
this  case,  not  being  ancient,  can  afford 
no  evidence  of  WJieelefs  authority. 
But  the  rule  requiring  a  usage  to  be 
ancient  to  found  a  presumption  is  not 
in  pari  materia.  When  a  title  or  in- 
terest is  to  be  presumed  from  posses- 
sion, enjoyment  or  user,  lapse  of  time 
is  essential.  But  that  rule  has  a  dif- 
ferent object,  and  is  founded  upon 
different  principles  from  any  involved 
in  the  present  question.  It  is  designed 
to  quiet  long  and  uninterrupted  posses- 
sion, enjoyment  or  xiser,  by  discourag- 
ing stale  and  dormant  claims,  and  can 
have  no  application  at  all  to  questions 
like  the  present. 

But  how,  it  is  asked,  can  the  usage 
of  a  corporation  which  is  an  invisible 
body,  existing  only  in  contemplation 
of  law,  be  proved  or  even  known  ?  I 
answer,  by  the  acts  of  its  officers  or  ac- 
knowledged agents,  in  the  manage- 
ment of  its  ordinary  concerns.  This 
point  was  conceded  by  counsel  and  de- 
cided by  the  court  in  Rex  v.  Bigg,  3 
P.  Wms.  419  ;  and  in  the  case  of  The 


Mayor  of  Kingston-upon-Hull  v.  Hor- 
ner, ante  ;  this  species  of  evidence  was 
admitted  to  establish  a  claim  in  favor 
of  a  corporation.  Now,  the  evidence 
offered  in  the  present  case,  whether 
sufficient  to  prove  the  fact  or  not,  cer- 
tainly conduces  to  prove  that  Wheeler 
was  in  the  habit  of  countersigning  con- 
tracts as  agent  for  the  company  ;  that 
his  acts,  in  that  character,  have  been 
recognized  as  valid  by  the  proper 
officers  of  that  body  ;  and  that  the  cor- 
poration knowing  or  having  in  its  own 
books  and  records  the  means  of  know- 
ing the  fact,  has  acquiesced  in  his 
agency  and  in  the  present  instance 
taken  advantage  of  it  by  retaining  the 
premium  note."  In  White  v.  The 
Derby  Fishing  Co.,  3  Conn.  26,  it  was 
held  that  banks  and  other  corporations 
of  similar  nature,  authorized  by  their 
act  of  incorporation  to  contract  in  a  par- 
ticular mode,  may  by  a  course  of  prac- 
tice render  themselves  liable  on  in- 
struments executed  in  a  different  mode. 
Thus  where  the  statute  provided  that 
all  notes  and  contracts  signed  by  the 
president  and  countersigned  by  the 
secretary  should  be  valid,  it  was  held 
that  an  issue  of  notes  and  bills 
signed  by  the  president,  bound  the 
corporation. 


iBissel   V.    The  Michigan,  etc.,  R.  Co.,  22  N.  Y.  264-269. 


366  Pkivate  Corpokations. 

Seo.  232.  Same  continued.  —  The  right  of  recovery  in  such  cases 
is  sometimes  made  to  rest  upon  the  unanimous  consent  and 
approval  of  the  stockholders.  But  in  case  this  is  not  expressly 
given,  it  would  probably  be  presumed  from  an  acceptance  of  the 
fruits  and  profits  of  an  enterprise  thus  entered  upon  ultima  vires, 
and  of  the  benefits  and  consideration  of  a  contract  made  by  the 
corporation  in  the  prosecution  of  such  enterprise. 

This  would,  undoubtedly,  be  a  ratification  of  the  contract  by 
them.  But  if  such  corporation,  by  itself  or  its  agents,  engages  in 
such  an  enterprise,  and  in  the  usual  way  issues  its  obligations, 
would  the  failure  of  a  member  to  give  his  express  or  implied 
assent  thereto  enable  him  or  the  corporation  to  make  ultra  vires 
a  defense  to  such  an  obligation,  the  consideration  of  which  has 
been  received  and  appropriated  by  the  corporation,  for  a  purpose 
foreign  to  the  original  objects  and  purposes  of  its  creation  ?  If, 
as  has  been  suggested,  the  contract  has-been  executed  and  the 
corporation  has  received  the  consideration  of  the  same,  and  more 
especially  if  the  stockholder  has,  with  a  knowledge  of  the  trans- 
action, acquiesced  therein,  and  received  his  share  of  the  dividends 
and  profits  of  the  enterprise,  this  would,  undoubtedly,  conclude 
him  and  the  corporation  from  a  defense  on  the  ground  of  ultra, 
vires.  But  a  member,  under  other  circumstances,  has  an  unques- 
tioned right  to  restrain  the  execution  of  an  undertaking,  or  a 
contract  clearly  iiltra  vires^ 

Sec.  233.  Distinction  between  executed  and  unexecuted  contracts  in 
relation  to  the  doctrine  of  ultra  vires We  have  noticed  that  corpo- 
rations may  enter  into  contracts  that  will  become  binding,  although 
such  contracts  may  exceed  its  authorized  powers.     Whether  ab- 

'  It  may  be  the  duty  of  tbe  member  well  settled,  but,  in  order  to  warrant 
under  such  circumstances  to  restrain  the  interference,  there  must  be  a  gross 
the  unlawful  act  in  such  cases,  which  abuse  of  its  powers,  or  acts,  clearly  in 
be  may  do  by  injunction  ;  and  in  the  excess  thereof,  wJiich  mil  result  injuri- 
absence  of  such  proceeding,  be  estop-  oxisly  to  the  com,plainant.  Jones  v. 
ped  from  insisting  upon  the  defense  of  Mayor,  etc.,  of  Little  Rock,  25  Ark. 
ultra  vires  as  he  might  be  presumed  301  ;  Lane  v.  Schomp,  30  N.  J.  Eq. 
to  acquiesce  in  the  execution  of  con-  82;  Union  Pacific,  etc.,  R.  R.Co.  v.  Lin- 
tracts  to  which  he  expressed  no  dis-  coin  County,  3  Dill.  (U.  S.  C.  C.)  300  ; 
sent,  if  executed  in  the  usual  manner.  St.  Louis  v.  Weber,  44  Mo.  547  ; 
The  power  of  a  court  of  equity  to  re-  Robinson  v.  Chartered  Bank,  L.  R.,  1 
strain  a  corporation  from  doing  acts  Eq.  32  ;  Bach  v.  Pacific  Mail  Steam- 
which  are  in  excess  of  its  powers  is  ship  Co.,  12  Abb.  Pr.  (N.  S.)  373. 


Corporate  Contracts.  367 

solutely  void  or  not  may  depend  upon  the  question  whether  such 
contract  is  prohibited  by  tlie  positive  provisions  of  the  statute  or 
public  policy.  If  it  exceeds  the  express  or  implied  powers  of  the 
corporation,  it  does  not,  from  the  preponderance  of  authority, 
necessarily  follow  that  it  is  void  or  even  voidable.  A  stockholder 
may,  in  such  a  case,  restrain  the  act.  But  in  the  absence  of  such 
proceeding,  and  especially  where  the  act  has  received  the  unani- 
mous assent  of  the  corporators,  it  would  be  treated  as  valid  and 
binding. 

Again,  if  the  corporation,  by  virtue  of  a  contract,  has  received 
and  appropriated  the  fruits  of  a  contract,  or  appropriated  property 
acquired  thereby,  it  would  not  usually  be  heard  to  object  that  it 
had  not  authority  to  act.  To  allow  such  a  plea  as  a  defense  to  an 
obligation  would  be  to  allow  it  to  take  advantage  of  its  own 
wrong.  It  has  been  replied  to  such  a  conclusion,  that  a  party 
dealing  with  a  corporation  is  supposed  to  know  of  the  extent  of 
its  powers,  and  that,  therefore,  a  contract  entered  into  with  the 
corporation,  in  excess  of  such  powers,  makes  him  equally  a  wrong- 
doer. But  such  acts  in  excess  of  corporate  authority  are  not 
tainted  with  criminality,  nor  are  they  necessarily  illegal,  as  we  have 
seen,  on  that  ground. 

On  the  other  hand  they  may  be  entirely  laudable  and  praise- 
worthy, although  in  excess  of  chartered  powers.  Can  a  corpora- 
tion, then,  receive  the  consideration  of  an  obligation,  or  the 
property  of  another,  even  for  purposes  foreign  to  its  institution, 
and  appropriate  the  same,  and  refuse  payment  therefor?  Or 
can  the  corporation  in  case  of  an  agreement,  made  in  excess  of 
corporate  powers,  but  not  executed,  no  consideration  having  ac- 
tually passed  between  the  parties  (such  as  a  contract  between  a 
railroad  company  and  an  individual,  by  which  the  latter  is  to  con- 
struct steamboats,  to  be  operated  by  the  company  in  a  manner 
not  embraced  within  the  powers  conferred  upon  it),  refuse  to  com- 
ply with  such  agreement  on  its  part,  and  make  a  successful  de- 
fense to  any  claim  for  damages  thereon  by  the  other  party,  by 
reason  of  the  breach  of  such  contract,  on  the  ground  that  such 
contract  is  ultra  vires  f  ^ 

"In  Morgan  V.  Donovan,  58  Ala. 241,  railroad  between  Mobile  and  New 
it  appeared  that  an  act  chartering  a  cor-  Orleans,  empowered  it  to  acquire  and 
poration  to  construct  and  operate  a    hold  such  real  property  as  might  be 


368 


Private  Corporations. 


Sec.  234.  Same  continued.  —  In  answer  to  the  first  question,  and 
to  illustrate  the  law  on  the  subject,  we  will  suppose  that  a  corpora- 
tion is  duly  organized  to  construct  and  operate  a  railroad   from 


necessary  therefor,  and  to  obtain  any 
steamboats,  piers,  "  wharves,"  and 
the  appurtenances  thereunto  belong- 
ing that  the  directors  might  deem 
necessary,  profitable,  and  convenient, 
to  use  and  manage  in  connection  with 
said  railroad.  The  corporation  exe- 
cuted certain  deeds  of  trust  of  "the 
lands  occupied  by  said  railroad,"  etc., 
"  in  connection  with  said  portion  of 
said  railroad  situate  within  the  limits 
of  said  cities,"  etc.,  or  on  the  "line 
thereof ;  "  also  of  "  all  depots,  station- 
houses,  wharves,"  etc.,  "  used  in  con- 
nection with  its  said  railroad,  together 
■with  all  steamboats  and  personal 
property,"  etc.,  "  used  exclusively  for 
constructing,  maintaining,  operating, 
or  conducting  the  business  of  said 
railroad."  It  was  held  (1.)  that,  in 
these  deeds  of  trust,  propei-ty  acquired 
and  owned,  and  not  used  or  to  be  used 
in  connection  with  the  railroad,  and  in 
promotion  of  the  direct  and  proximate 
purposes  of  its  construction  did  not 
pass;  (2.)  that  property  bought  of  an 
opposition  steamship  line,  not  with  a 
mew  of  employing  it  in  connection  with 
the  business  of  the  road,  but  to  vyithdraw 
it  from  business,  thereby  preventing 
competition,  was  not  authorized  to  be 
acquired  by  the  charter,  a7id  not  con- 
veyed by  the  granted  clauses  in  said 
deeds  of  trust.  In  a  California  case, 
Mahouey  v.  Spring  Valley  Water 
Works,  53  Cal.  159,  it  was  held  that 
the  California  water  corporation  act 
does  not  empower  a  water  company, 
after  commencing  proceedings  for  the 
taking  of  private  property,  to  sell  and 
transfer  its  right  to  another  water 
company,  nor  to  prosecute  proceedings 
for  the  taking  of  private  property  in 
the  name  of  another  company.  The 
rule  seems  to  be,  that  parties  dealing 
with  corporations  are  chargeable 
with  notice  of  the  limitations  im- 
posed by  the  charter  upon  their 
powers.  And  that  in  the  United 
States  one  corporation  cannot  hold  or 
deal  in  the  stocks  of  another,  unless 
expressly  authorized  by  law  to  do  so. 
Thus  the  trustees  of  a  savings  institu- 
tion subscribed  for  $50,000  of  the  capi- 
tal atock  of  the  C.  company,  and  the 


trustees  having  no  money  to  pay  for 
it,  the  F.  company  paid  that  amount 
to  the  C,  taking  the  notes  of  the 
savings  institution  therefor,  and  a  cer- 
tificate of  the  stock  in  the  F.'s  own 
name  as  collateral.  Held,  that  the 
subscription  was  ultra  vires  ;  that  the 
F.  was  not  a  bona  fide  holder  of  com- 
mercial paper  ;  and  that  the  savings 
institution,  having  received  no  benefit 
from  the  transaction,  was  not  estopped 
to  set  up  the  defense  of  ultra  vires. 
Franklin  Company  v.  Lewiston  Insti- 
tution for  Savings,  68  Me.  43.  It  seems 
that  a  corporation  may  make  a  valid 
bond  in  a  judicial  proceeding  under 
bond  made  as  to  an  appeal  bond  recit- 
ing that  S.,  "  as  superintendent  of  "  a 
certain  "  railroad  company,"  and  the 
other  persons  whose  names  were 
signed  thereto,  "are  held  and  firmly 
bound,"  etc.,  was  held  valid  and  bind- 
ing upon  the  corporation.  Collins  v. 
Hammock,  59  Ala.  438.  And  even  where 
an  act  is  ultra  vires,  long  acquiescence 
therein  by  the  corporation  estops  it 
from  setting  it  up  to  defeat  rights  ac- 
quired under  it.  Thus  in  Sheldon  Hat, 
etc.,  Co.  v.  Eickmeyer  Hat,  etc.,  Co., 
56  How.  Pr.  (N.  Y.)  70,  the  plaintiflF 
corporation  was  sued  in  the  federal 
courts  for  infringing  the  patents  of 
the  defendant  corporation.  By  flie  de- 
cree the  plaintiff  was  perpetually  en- 
joined from  using  said  patents,  and 
adjudged  to  pay  $97,000  for  the  in- 
fringement. The  plaintifi"  being  un- 
able to  pay  this  sum,  the  trustees  set- 
tled with  the  defendant  by  transfer- 
ring to  the  latter  all  the  plaintiff's 
patent-rights,  which  included  valuable 
patents  apart  from  the  process  which 
had  been  decreed  to  be  an  infringe- 
ment. The  plaintiff  was  engaged  in 
the  business  of  blocking  and  stretch- 
ing hats,  and  the  patent-rights  trans- 
ferred, used  in  combination  with  the 
process  adjudged  to  be  an  infringe- 
ment, were  essential  to  the  processes 
employed  by  the  plaintiff  in  its  busi- 
ness. It  was  held  in  an  action  brought 
five  years  after  the  settlement  in  the 
name  of  the  corporation,  seeking  to  set 
aside  the  transfer  as  fraudulent  and 
ultra  vires,  that  inasmuch  as  the  value 


Corporate  Contkacts.  369 

Chicago  to  Cairo,  in  the  state  of  Illinois,  and  that  having  completed 
said  road  it  proposes  to  connect  the  same  with  a  Hue  of  steamboats, 
to  be  constructed  and  operated  on  tlie  Mississippi  river,  between 
Cairo  and  New  Orleans.  To  cany  ont  this  entei'j)rise  entirely  for- 
eign to  the  purposes  of  its  organization,  we  will  also  suppose  that 
such  corporation,  in  the  usual  way,  enters  into  a  contract  with  an 
individual  to  construct  a  number  of  steamboats,  and  that  pursuant 
to  said  contract  said  steamboats  are  constructed  and  operated  as 
aforesaid  by  said  company  ;  that  the  consideration  for  such  boats, 
given  by  said  company,  in  pursuance  of  the  provisions  of  the 
agreement,  was  its  bonds  executed  and  issued  in  the  usual  way, 
secured  by  a  mortgage  on  its  railroad ;  that  said  boats  were  in- 
sured by  the  company ;  that  subsequently  said  company  received 
the  amount  of  the  cost  of  such  boats  from  insurance  companies, 
on  account  of  a  total  loss  of  the  same  ;  that  the  company  failed  to 
pay  such  bonds  when  due ;  that  a  suit  is  brought  against  the  com- 
pany to  recover  the  same,  and  that  the  company  interpose  an  an- 
swer as  a  defense,  that  such  a  contract  was  ultra  vires,  and,  there- 
fore, absolutely  void.  Would  this  be  a  good  defense  under  the 
circumstances  of  the  case  ?  Would  the  rights  of  the  plaintiff  be 
different  if  he  was  a  honafide  holder  of  the  bonds  by  assignment 
of  the  same  before  due,  having  purchased,  them  of  the  payee,  with- 
out any  actual  notice  of  the  consideration  for  which  they  were 
given,  or  any  knowledge  of  the  corporate  powers  of  the  maker, 
except  such  as  may  be  presumed  from  the  creating  acts  of  the 
corporation  ? 

In  a  recent  case  in  Illinois,  the  questions  we  have  presented 
have  been  ably  considered  by  Chief-Justice  Lawrence.  He  says  : 
"  It  is  said  by  counsel  for  the  complainant  that  a  corporation  is 
not  estopped  to  say  in  its  defense  that  it  had  not  power  to  make 

of  the  property  transferred  did  not  ap-  Penn.   St.  346,   it  was  held  that  the 

.pear  to  exceed  the  amount  of  damages  provision  of  the  Pennsylvania  Const, 

decreed,   and  as  no  offer  had  been  or  of   1874,  art.  16,  ^  7,   prescribing  the 

now  was  made  to  pay  the  damages,  mode   in  which   the   indebtedness  of 

and  in   view  of  all  the  other  circiim-  corporations  is  to  be  incurred,  and  the 

stances  of  the  case,  the  transfer  should  act  of  1874,  carrying  the    same    into 

be  sustained.   The  statutory  provision  effect,,  do  not  preclude  the  collection 

forbidding  the  assignment  by  a  corpo-  of  a  mortgage    debt  of  a  bank   whose 

ration  of  its  property  in  contemplation  charter  of  1871  authorized  such  debt 

of  insolvency  has  no  application  to  and  mortgage, 
such  a  case.    In  Lewis  v,  Jeffries,  86 

47 


370  Pkivate  Corporations. 

a  contract  sought  to  be  enforced  against  it,  for  the  reason  that  if 
thus  estopped  itsipowers  might  be  indefinitely  enlarged.  While 
the  contract  remains  miexecuted  on  both  sides,  this  is  undoubtedly 
true,  but  when,  under  cover  of  this  privilege,  a  corporation  seeks 
to  evade  the  payment  of  borrowed  money  on  the  ground  that  al- 
though it  had  power  to  borrow  money,  it  expended  the  money 
borrowed  in  prosecuting  a  business  which  it  was  not  authorized 
to  prosecute,  it  is  pressing  the  doctrine  of  ultra  vires  to  an  extent 
that  can  never  be  tolerated,  even  though  the  lender  of  the  money 
knew  that  the  corporation  was  transacting  a  business  beyond  its 
chartered  powers,  and  that  his  money  would  be  used  in  such 
business,  provided  the  business  itself  was  free  from  any  intrinsic 
immorality  or  illegality.  Neither  is  it  correct  to  say  that  the  ap- 
plication to  corporations  of  the  doctrine  of  equitable  estoppel, 
where  justice  requires  it  to  be  applied  (^as  when  under  a  claim  of 
corporate  power,  they  have  received  benefits  for  which  they  refuse 
to  pay,  from  a  sudden  discovery  that  they  had  not  the  powers  they 
had  claimed),  can  be  made  the  means  of  enabling  them  indefinitely 
to  extend  their  powers.  If  it  were  true  it  would  be  an  insupera- 
ble objection  to  the  application  of  the  doctrine,  even  for  the  pur- 
pose of  preventing  injustice  in  individual  cases.  But  it  is  not 
true.  This  doctrine  is  applied  only  for  the  purpose  of  compelling 
corporations  to  be  honest,  and  after  whatever  mischief  may  belong 
to  the  performance  of  an  act  ultra  vires  has  been  accomplished. 
But  while  a  contract  remains  executory,  it  is  perfectly  true  that 
the  powers  of  corporations  cannot  be  extended  beyond  their  proper 
limits  for  the  purpose  of  enforcing  a  contract.  Not  only  so,  but 
on  the  application  of  stockholders,  or  any  other  person  authorized 
to  make  the  application,  a  court  of  chancery  would  interfere  and 
forbid  the  execution  of  a  contract  ultra  vires.  So,  too,  if  a  con- 
tract ultra  vires  is  made  between  a  corporation  and  another  per- 
son, and  while  it  is  yet  wholly  unexecuted,  the  corporation  recedes, 
the  other  contracting  party  would  probably  have  no  claim  for 
damages.^     But  if  such  other  party  proceeds  in  the  performance 

•  Such  contracts,  as  are  entirely  for-  enforced  against  it.  Rock'River  Bank 
eign  to  the  objects  and  purposes  for  v.  Sherwood,  10  Wis.  230.  But  where 
which  the  corporation  was  formed  or  a  corporation  contracts  in  reference  to 
which  are  outside  its  express  or  im-  matters  within  its  powers,  but  in  do- 
plied  powers,  are  void  and  cannot  be  ing  so  exceeds  its  powers,  the  contract 


CORPOR  AT  I-:    CV)  N  T  U  ACTS . 


371 


of  tlio  contract,  expciidiiii^  liis  iiKjuey  :iiul  his  l;ilj(jr  in  the  ])ro- 
duction  of  values  which  tlie  corporation  appropriates,  we  can  never 
liold  tliu  corporation  excused  from  paynient  on  tlie  plea  that  the 


is  but  void  and  tlie  person  with  whom 
the  contract  was  made  cannot  set  up 
such  violation  of  its  corporate  powers 
to  defeat  the  contract.  Cannon  v.  Mc- 
Nab,  48  Ala.  This  doctrine  is  well 
stated  and  illustrated  iu  Litllewort  v. 
Davis,  r)0  Miss.  40;j,  which  was  a  suit 
iu  et^uity  to  enforce  an  absolute  deed 
conveyin<^  lands  as  a  mortgage  to  se- 
cure a  loan  to  the  defendant.  The  ob- 
jection urged  to  the  suit  was  that  the 
trustees  were  only  authorized  to  loan 
money  by  statute,  on  promissory  notes 
with  good  personal  securities,  and  con- 
sequently that  a  loan  secured  by  mort- 
gage was  void.  SiMRALL,  J.,  in  pass- 
ing upon  this  question,  said  :  "  A  loan 
of  the  school  fund  upon  mortgage  or 
security  other  than  that  named  in  the 
statute  would  have  been  a  misapplica- 
tion of  the  fund  for  which  the  trustees 
would  have  been  personally  liable. 
Lindsey  v.  Marshall,  13  S.  &  M.  590. 
Whilst  this  is  so,  it  does  not  necessa- 
rily follow  that  the  borrower  can  set 
up,  as  a  ground  to  defeat  his  security, 
that  the  statute  did  not  allow  a  loan 
upon  other  than  personal  security. 

*  *  *  "  If,  "  saidhe,"  acorijoration 
makes  a  contract  outside  of  the  pur- 
poses of  its  creation, it  is  void, because  it 
has  no  power  over  the  subject  in  refer- 
ence to  which  it  acted ;  but  if  it  contracts 
with  reference  to  a  subject  within  its 
powers,  but  iu  so  doing,  exceeds  them, 
the  person  with  whom  it  deals  cannot 
set  up  such  violation  of  the  franchise 
to  avoid  the  contract.  Haynes  v.  Cov- 
ington, 13  S.  &  M.  411  ;  Banks  v. 
Poitaux,  3  Rand.  136  ;  Fleckner  v.  U. 
S.  Bank,  8  Wheat.  853  ;  Com'l  Bank 
V.  Nolan,  7  How.  5C8;  Little  v.  O'Brien, 
9  Mass.  423  ;  Wade  v.  American  Colo- 
nization Society,  7  S.  &  M.  663.  It 
might  be  ground  for  the  resumption 
of  the  franchise  by  the  state  "  In 
The  Bank  of  S.  Carolina  v.  Hammond, 
1  Rich.  (S.  C.)  281,  a  similar  question 
was  raised.  In  that  case  the  charter 
of  the  plaintitf  corporation  directed 
that  loans  upon  a  long  time  should  be 
secured  by  mortsjage  ;  but  the  loan 
sought  to  be  collected,  which  was  for 
a  long  time,  was  not  secured  by  mort- 
gage  but   by  sureties,  and   the  court 


held  that  it  was  enforceable.  In  a 
New  York  case,  Mott  v.  United  States 
Trust  Co.,  19  Barb.  568,  the  charter  of 
a  savings  bank  required  that  its  funds 
should  be  invested  in  or  loaned  on 
public  stocks,  or  other  personal  security 
should  be  taken  from  the  borrower, 
but  a  loan  made  to  the  defendant  wiili- 
out  any  security  was  held  binding. 
See  also  to  the  same  eflFect,  U.  S.  Trust 
Co.  v.  Brady,  20  id.  119.  In  Bank 
of  North  Liberties  v.  Cresson,  12  S. 
&  R.  306,  where  the  charter  of  the 
bank  required  that  a  certain  species  of 
security  should  be  taken  from  its  offi- 
cers for  the  faithful  performance  of 
their  duties,  a  different  kind  of  secu- 
rity taken  for  that  purpose  was  held 
binding.  So,  where  city  bonds  were 
required  to  be  made  payable  at  the 
city  treasury,  yet  bonds  made  payable 
elsewhere  were  held  not  to  be  thereby 
invalidated,  but  only,  that  the  provis- 
ion making  them  payable  elsewhere 
was  void.  Sherlock  v.  Winnetka,  68 
111.  530.  In  Hough  v.  Cook  County 
Land  Co.,  73  111.  23,  a  bill  iu  equity 
was  brought  by  the  plaintiff  against 
the  defendant,  which  claimed  to  be  a 
corporation  established  under  the 
laws  of  Illinois,  with  power  to  borrow 
and  lend  money;  to  take  lands  and 
mortgages  as  security  ;  to  purchase 
lands  and  make  improvements  thereon, 
by  erecting  buildings  for  the  purpose 
of  renting  the  same  ;  to  hold  build- 
ings and  lots  for  the  purpose  of  im- 
proving and  renting  the  same,  and  to 
do  a  general  loan  business  and  take 
lands,  mortgages  and  notes  to  secure 
the  loans.  Appellant,  believing  that 
appellee  was  possessed  of  the  powers 
it  claimed,  and  that  it  was  authorized 
by  its  charter  to  buy  land  and  issue 
its  stock  in  payment  therefor,  to  loan 
money,  etc. ,  on  the  24th  day  of  May, 
1873,  contracted  with  it  to  sell  and 
convey  to  it  certain  lauds  in  Conk 
county,  which  are  particularly  de- 
scribed in  the  bill,  in  consideration 
that  appellee  would  issue  to  him  three 
hundred  and  sixty-five  shares  of  its 
stock  and  would,  also,  loan  him  eighty 
per  cent  in  money  of  tbe  stock  and 
hold  the  stock  as  collateral  security  on 


372 


PlilVATE    CoKPORATIONS. 


contract  was  bejoud  its  power.  Take,  for  example,  the  case  of  a 
corporation  cliartered  to  build  a  railway  from  Chicago  to  Rock 
Island.     Under  such  a  charter  the  company  would  have  no  power 


the  loan ;  the  loan  to  he  for  one  year 
from  that  date,  with  interest  at  ten  per 
cent  per  annum  till  due,  and  twelve  per 
cent  per  month  after  maturity,  with 
power  on  failure  to  pay,  to  sell,  etc. 
The  land  was  conveyed,  the  money 
loaned  and  the  stock  issued  and 
pledged  as  collateral  security,  iu  con- 
formity with  the  terms  of  the  agree- 
ment. Since  the  transaction  occurred, 
appellant  has  been  advised,  by  coun- 
sel, that  appellee  had  no  authority  to 
take  the  laud  and  issue  the  stock  ;  that 
it  professes  to  act  under  authority  of 
"  an  act  to  incorporate  the  Land  Im- 
provement and  Irrigation  Company," 
approved  March  1, 1867,  and  the  change 
of  name  to  the  Cook  County  Land 
Company,  by  vote  of  its  stockholders 
ou  the  "20th  of  July,  1872,  at  which 
time  its  capital  stock  was  increased,  in 
accordance  with  an  act  of  the  legisla- 
ture in  regard  to  changing  names  and 
iiicreasing  stock  of  corporations,  ap- 
1^ roved  March  26, 1872;  that  the  change 
of  name  and  increase  of  stock  was  un- 
authorized and  void,  and  all  the  au- 
thority appellee  had,  by  its  charter, 
was  to  purchase  lands  for  the  purpose 
of  irrigation  and  improvement,  for  the 
raising  of  crops  thereon  and  the  sale 
and  disposal  thereof,  when  so  improved. 
It  is  alleged  that  the  power  vested  in 
appellee  by  its  charter,  which  is  made 
part  of  the  bill  as  an  exhibit,  was  to 
examine,  survey  and  purchase  lands 
and  interests  therein,  water-courses  or 
interests  therein,  for  the  purpose  of 
irrigating  the  lands  that  might  be  so 
purchased,  and  facilitating  crops  in 
dry  seasons  and  to  improve  and  culti- 
vate such  crops,  chiefly  as  require  irri- 
gation to  produce  the  largest  returns, 
and  that  appellee  had  no  power  to 
purchase  and  hold  lands  for  any  other 
purpose ;  that  appellee  has  not  pur- 
chased any  lands  for  the  purpose  of 
irrigation,  or  for  any  object  contem- 
plated by  its  charter,  but  that  apjiellee 
has  purchased  a  large  quantity  of  laud, 
worth  above  $600,000,  holds  improved 
and  unimproved  city  real  estate,  an- 
nounces its  intention  to  erect  buildings 
on  part  of  its  vacant  city  property , 
and  that  it  has  been,  since   its   organi- 


zation, and  was  at  the  time  the  bill 
was  brought,  engaged  in  purchasing 
lands,  city  lots,  the  improvement  of 
said  lots  for  the  purpose  of  sale  and 
rental,  and  in  the  purchase  of  tax  cer- 
tificates, and  in  loaning  money  on  • 
bonds  and  mortgages,  etc.  Appellant 
insists  that  the  purchase  of  the  land 
and  the  loaning  of  the  money  and  tak- 
ing notes  therefor  were  contrary  to 
positive  statutes  and,  therefore,  void. 

The  act  under  which  the  defendant 
first  became  incorporated,  by  its  first 
section,  empowers  — 

The  Land  Improvement  and  Irriga- 
tion Company  to  have,  hold,  possess  and 
enjoy,  by  themselves,  successors  and 
assigns,  forever,  lands  tenements, 
hereditaments,  goods,  chattels,  choses 
in  action  and  effects  of  every  kind,  and 
the  same  to  grant,  sell,  alien,  invest, 
loan  and  dispose  of. 

"  And  the  fourth  section  of  that 
act  is  as  follows  : 

"  The  chief  objects  of  this  association 
shall  be  to  examine,  survey  and  pur- 
chase lands  or  interests  in  lands,  water- 
courses or  interests  therein,  which  are, 
as  near  as  may  be,  adapted  by  nature 
to  the  use  of  water  to  irrigate  the  same, 
to  facilitate  the  growth  of  crops  in  dry 
seasons  and  to  improve  and  cultivate 
the  same  for  such  crops,  chiefly,  as  re- 
quire irrigation  to  produce  the  largest 
returns.  The  statute  under  which 
appellee  changed  its  name  and  in- 
creased its  capital  contains  this  pro- 
viso :  'And  provided,  further,  that  any 
corporation,  other  than  corporations 
for  manufacturing  purposes,  availing 
itself  of,  or  accepting  the  benefit  of,  or 
formed  under  this  act  (except  the  mere 
change  of  name),  shall  be  subject  to 
the  general  laws  of  this  state,  now  in 
force  or  which  may  hereafter  be  passed, 
regulating  corporations  of  like  cliarac- 
ter.'  One  of  the  general  laws  regulat- 
ing the  corporations  provides  that  no 
foreign  or  domestic  corporation  estab-^ 
lished  in  any  way  for  the  pecuniary 
profit  of  its  stockholders  shall 
purchase  or  hold  real  estate  in  this 
state,  except  as  provided  for  in  that 
act.  Section  10  of  that  act  authorizes 
corporations  to  own,  possess  and  enjoy 


CoRi'OKAiE  Contracts. 


373 


to  build  steamboats,  for  tlie  purpose  of  running  a  line  of  such 
vessels  between  Hock  Island  and  St.  Louis,  liut  suppose  the 
company,  notwithstanding  the  want  of  power,  should  make  a  con- 


so  much  real  and  personal  estate  as 
shall  be  necessary  for  the  transac- 
tion of  their  business  [and]  to  sell 
and  dispose  of  the  same  when  not  re- 
quired for  the  uses  of  the  corporation. 
And  it  contains  a  proviso  that  all 
real  estate  go  acquired  in  satisfac- 
tion of  any  liability  or  indebtedness, 
unless  the  same  may  be  necessary  and 
suitable  for  the  business  of  such  cor 
poration,  shall  be  ofiFered  at  public 
auction,  at  least  once  every  year,  etc. 
"  In  case  any  corporation  shall  fail  to 
sell  such  lands,  it  is  made  the  duty  of 
the  state's  attorney,  of  the  proper 
county,  to  proceed  against  the  corpora- 
tion, by  information,  to  the  end  that 
such  lands  may  be  decreed  to  be  sold. 
And  the  first  section  authorizes  corpo- 
rations to  be  formed  in  the  manner  by 
the  act  provided  for  any  lawful  pur- 
pose, except  banking,  insurance,  real 
estate  brokerage,  the  operation  of  rail- 
roads, and  the  business  of  loaning 
money."  "  Conceding  that  in  determin- 
ing the  appellee's  powers,  these  several 
provisions  must  be  construed  together," 
said  Scholfield,  J., "  and  that  appellant's 
construction  that  appellee  has  author- 
ity only  to  examine,  survey  and  pur- 
chase lands,  or  interest  in  lands,  water- 
courses, or  interest  therein,  which  are, 
as  near  as  may  be,  adapted  by  nature 
to  the  use  of  water  to  irrigate  the 
same,  etc.,  is  correct,  does  it  follow 
that  the  title  to  lands  conveyed  to  and 
held  by  it  for  other  and  different  pur- 
poses, is  absolutely  void  and  maybe  so 
declared  at  the  instance  of  the  grantee 
seeking,  for  that  cause,  to  repossess 
himself  of  the  property  ?  The  authori- 
ties cited  in  the  brief  for  appellant. 
Bank  United  States  v.  Owen,  2  Pet. 
(U.  S.)  538;  Munsell  v.  Temple,  S 
Gilm.  9o  ;  Cin.  Mut.,  etc.,  v.  Rosenthal, 
55  111.  91  ;  Green  v.  Sevmour,  3  Sandf. 
Ch.  292  ;  Smith  v.  Bromley,  Doug.  69G; 
Browning  v.  Morris,  Cowp.  790,  recog- 
nize the  general  doctrine  that  a  contract 
prohibited  by  statute,  or  against  the 
manifest  policy  of  the  law,  is  void  ; 
and  in  Carroll  v.  East  St.  Louis,  G7  111. 
5G8,  also  cited  by  appellant,  the  ques- 
tion before  us  now,  whether  a  corpora- 
tion  created  in  another  state   for   the 


sole  purpose  of  buying  and  selling 
lands  has  power  to  purchase  and  hold 
title  to  lands  in  this  state,  and  we  lield 
that  it  has  not,  because  it  would  lend 
to  create  perpetuities  and  is  against 
the  general  policy  of  our  legislation. 
In  a  more  recent  case.  Starkweather  v. 
The  Bible  Society,  72  111.  59.  the  same 
doctrine  was  reasserted." 

There  seems  to  us,  however,  to  be 
this  important  distinction  between  the 
principle  recognized  in  these  authori- 
ties and  that  applicable  here.  There, 
by  reason  of  the  express  or  implied 
prohibition  of  the  law,  the  party  is 
absolutely  denied  the  power  to  acquire 
any  rights  through  "the  particular  con- 
tract. Here-  there  is  power  to  ])ur- 
chase,  receive  conveyances  and  hold 
title  to  lands,  but  it  is  prohibited  that 
they  shall  be  purchased  and  held  for 
other  than  a  prescribed  purpose.  In 
the  one  case,  the  principle  affects 
the  power  of  acquisition  ;  in  the  other, 
it  affects  simply  the  use  to  which 
the  acquisition  shall  be  applied. 
There  can  be  no  question  of  the  right 
of  a  stockholder  to  the  aid  of  a  court 
of  equity  against  a  corporation,  to  pre- 
vent it  from  misapplying  its  capital, 
or  from  doing  acts  which  would 
amount  to  a  violation  of  its  charter  ; 
but  the  frame  and  prayer  of  the  bill, 
in  the  present  case,  do  not  contemplate 
such  relief,  and  we  do  not  conceive  it 
could  be  granted  without  material 
amendment,  to  make  which,  leave 
should  have  been  asked  in  the  court 
below.  But  the  appellee  being  author- 
ized to  purchase  and  hold  lauds,  and 
the  appellant  having  sufficient  capacity 
to  convey,  the  title  was  obviously 
vested  in  the  aj>pellee  by  the  delivery 
of  the  deed,  and  the  question  whether 
the  appellee  has  by  its  purchase  and 
use  of  lands  exceeded  the  powers  con- 
ferred by  its  charter,  is  one  between 
the  state  and  the  appellee  with  which 
the  appellant,  as  a  grantor  gimply,  has 
no  concern.  Banks  v.  Poiteaux,  3*Kand. 
(Va.)  141  ;  Barrow  v.  N.  &  C.  T.  Co.,  9 
llumph.  304  ;  Chambers  v.  St.  Louis, 
29  Mo.  576  ;  Att'y-Qen'l  v.  Tudor  Ice 
Co.,  lot  Mass.  239  :  Whitman  Mining 
Co.  V.  Baker,  3  Xev.  291  ;  Hay  ward  v. 


374  Private  Corporations. 

tract  for  the  building  of  a  vessel,  and  it  is  built  by  the  contractor  and 
accepted  and  used  by  the  railway,  would  any  court  permit  the  corpo- 
ration, when  sued  for  the  value  of  the  vessel,  to  excuse  itself  from 
payment,  on  the  ground  that,  althougli  it  has  and  uses  tlie  steamer, 
it  had  no  authority  to  do  so  by  its  charter  ?  Or,  suppose  that,  in- 
stead of  having  a  vessel  built  by  a  contractor,  it  employs  a  super- 
intendent to  build  it,  and  hires  mechanics  by  the  day,  could  it 
escape  the  payment  of  their  wages  on  the  ground  that  it  had  em- 
ployed them  in  a  work  ultra  vires  f  In  cases  of  'such  character, 
courts  simply  say  to  corporations,  you  cannot,  in  this  case,  raise 
the  question  of  your  power  to  make  the  contract.  It  is  sufiicient 
that  you  have  made  it,  and  by  so  doing  have  placed  in  your  corpo- 
rate treasury  the  fruits  of  others'  labor,  and  every  principle  of  jus- 
tice forbids  that  you  be  permitted  to  evade  payment  by  an  ap- 
peal to  the  limitations  of  your  character.  We  are  aware  that  cases 
may  be  cited  in  apparent  conflict  with  the  principles  here  an- 
nounced, but  the  tendency  of  recent  decisions  are  in  harmony  with 
them.  While  courts  are  inclined  to  maintain  with  vigor  the  lim- 
itations of  corporate  action  whenever  it  is  a  question  of  restraining 
corporations  in  advance  from  passing  beyond  the  boundaries  of 
their  charters,  they  are  equally  inclined,  on  the  other  hand,  to 
enforce  against  those  contracts,  though  ultra  vires,  of  which  they 
have  received  the  benefits."^ 

Sec.  235.  when  neither  party  can  avoid  the  contract,  though  ultra 
vires.  —  If  contracts  between  corporations  and  individuals  are  ab- 
solutely void  because  ultra  vires,  then  this  defense  could  be  set 
up  by  the  individual  as  well  as  the  corporation  ;  and  where  it 
would  be  greatly  to  the  interest  of  the  individual  so  to  do,  the 
corporation,  though  suffering  great  pecuniary  loss  thereby,  could 
not  avoid  such  a  defense  on  the  part  of  the  other  contracting 
party.     But  it  is  settled,  by  the  preponderance  of  authority,  that 

Davidson,  41  Ind.  212;  Natoma  W.  &  the  possession  of  their  property,  in- 
M.  Co.  V.  Clarkin,  14  Cal.  544.  It  is  quiries  were  permitted  as  to  the  neces- 
well  observed  by  Field,  J.,  in  Natoma  sity  of  such  property  for  tlie  purposes 
W.  &M.  Co.  V.  Clarkin,  a?iie,  that  "it  of  their  incorporation  and  the  title 
would  lead  to  infinite  embarrasssments  made  to  rest  upon  the  existence  of  that 
if  in  suits   by  corporations   to    recover   necessity." 

'Bradley  v.  Ballard,  55  111.  417.  See,  also,  Gas  Co.  v,  San  Francisco, 
9  Cal.  453. 


CoRroEATE  Contracts.  375 

neither  the  corporation  nor  an  individual,  entering  into  a  contract 
with  it,  can  avoid  a  contract  of  sale  and  purchase  of  property 
where  the  property  is  delivered,  nor  can  the  individual  reclaim  the 
property  sold,  or  the  corporation  avoid  the  payment  of  the  price 
of  the  same,  on  tlie  ground  that  it  had  no  authority  to  make  the 
contract  so  long,  at  least,  as  it  retains  it  and  enjoys  the  benefit  of 
the  contract.' 

Seo.  236.  Same  continued  —  Common  principles  of  justice  would 
require  a  corporation  to  pay  for  property  actually  received  and 
appropriated,  to  repay  money  borrowed  and  expended,  and  to])ay 
for  labor  and  services  actually  received.  If  tlie  agents  or  officers, 
make  xiltra  vires  contracts,  they  may  be  personally  responsible  to 
the  stockholders  for  damages  sustained,  by  reason  of  such  con- 
tracts, and  they  may  be  restrained  from  entering  into  or  exe- 
cuting such  contracts  by  the  stockholders,  or  perhaps  creditors 
interested  in  the  matter.  But  when  such  a  contract  is  once  exe- 
cuted, it  would  appear  consonant  with  principles  of  justice  and 
equity  to  sustain  the  contract,  where  the  corporation  has  received 
the  consideration,  though  executed  on  the  part  of  the  corporation 
in  excess  of  authority  of  either  the  agents  executing  the  same,  or 
the  corporation.^ 

This  doctrine  seems  well  sustained  by  the  current  of  modern 
decisions.     In  many  cases  it  has,  it  is  true,  been  held  that  on 

'  Parish  V.  Wheeler, 23  N.  Y.   494;  Kansas   City  Hotel  Co.  v.  Harris,  51 

Bissel  V.  The  Michigan,  etc.,  R.  Co.,  Mo.  464;  Williamette  Freighting  Co. 

id.  258;  Wiiite  v.  Franklin  Bank,  32  v.   Stannus,  4  Oregon,  261.     And  a  cor- 

Pick.    181;  Tracy   v.  Talmage,  14  N.  poration,  which  has  borrowed  money 

Y.  163  ;  De  Groff  v.  American  Linen,  and  used  it  for  a  purpose   beyond  its 

etc.,  Co.,  31  id.  124  ;  Fester  v.  La  Rue,  corporate  powers,  is  estopped  from  set- 

15    Barb.     323;    Gould    v.    Town  of  ting  up  in  defense  to  an  action  to  re- 

Oneonta,  3  Hun,  401  ;  Hazelhurst  v.  cover  the  loan,  that  the   lender  knew 

Savannah,  etc.,   R.    Co.,   43  Ga.    54;  that  the  money  was  to  be   used  for «^- 

Southern  L.  Ins.  Co.  v.  Lanier,  5  Fla.  tra  vires  purposes,  unless  the  use  was 

110.       A   stockholder    who    has   ac-  of    an    immoral   or  illegal   character, 

quiesced  in  an  act  done  by  the  corpo-  Bradley  v.  Ballard,  55  III.  413. 
T&\.\on  w\\\c\\  \s  ultra  vires   simply  be-         -  Zabriskie  v.  C.  C,  etc.,  R.  Co.,  23 

cause  in  excess  of  its  powers  is  estop-  How.  (U.  S.)  381  ;  Cary  v.  Cleveland, 

ped   from  afterward   denying  the  va-  etc.,  R.  Co.,  39  Barb.  35;  Argenti  v. 

lidity  of   the    acts   as,  where   he  has  San  Francisco,  16  Cal.   255  ;  McCluer 

voted  for  an  assessment  which  is  ultra  v.  Manchester,  etc.,   R.   Co.,  13  ^^ray, 

vires,  or  with    knowledge  of  the  facts  124;  Chapman  v.  M.  R.,  etc. ,R    Co., 

made  payments  upon  it.    Ossipee  Mf'g  6  Ohio   St.  137  ;  Hale  v.  Mutual  Fire 

Co.  V.  Cannev,  54  N.  H.  29."i  ;  Macon,  Ins.   Co.,  32  N.  H.   297  ;    Railroad  v. 

etc.,  R.  R.  Co.   V.  Vason,  57  Ga.   314  ;  Howard,  7  Wall.  413. 


376  Private  Cokpoeations. 

technical  grounds  a  recovery  could  not  be  had  on  the  contract  it- 
self, where  it  was  ultra  vires  of  the  corporation,  but  tliat  a  re- 
covery might  be  had  for  the  consideration  of  the  contract  thus 
entered  into.  In  other  cases  it  has  been  maintained  tliat  where 
corporations  have  received  the  beneht  of  such  contracts,  they 
should  be  required  to  perforin  them,  if  tliey  are  not  against  positive 
law  or  public  policy,  ^ 

It  was  observed  by  Bacon,  J.,  in  the  ISTew  York  court  of  appeals, 
on  this  subject,  as  follows :  "  If  it  be  conceded  that  the  defend- 
ants had  no  power  to  enter  into  the  contract  of  sale  in  this  case, 
and  bind  the  company  to  perform  the  obligations  assumed,  viewed 
as  a  mere  question  of  corporate  power,  yet,  having  undertaken  to 
do  so,  and  having  received  the  full  consideration  agreed  to  be  paid 
by  the  plaintiff,  and  he  having  fulfilled  his  entire  contract,  they 
cannot  now  be  permitted  to  set  up  that  excess  of  authority  to 
excuse  them  from  that  part  of  the  contract  which  imposes  an  obli- 
gation upon  them.  This  principle  lias  been  repeatedly  held  as 
applicable  to  an  individual  attempting  to  screen  himself  from 
liability  when  contracting  with  a  corporation,  as  in  the  case  of  a 
corporation  when  seeking  to  escape  responsibility  on  the  plea  of 
ultra  vires  for  acts  deliberately  done  witli  all  the  usual  and  need- 
ful formalities,  and  where  they  have  received  the  entire  benefit 
they  contracted  for,  such  a  defense  should  no  longer  be  tolerated 
in  our  courts.  Where  the  question  is  merely  as  to  the  power  to 
contract,  a  party  w^ho  has  had  the  benefit  of  the  contract  should 
not  be  permitted,  especially  where  there  is  no  unlawful  intent 
charged  upon  the  other  party,  and  he  is  in  no  sense  vo-jpari  delicto^ 
to  question  its  validity.  To  deny  relief  to  a  plaintiff  thus  situated, 
wouhl  bo  substantially  to  secure  to  the  party  deliberately  violat- 
ing one  of  tlie  laws  of  its  existence,  and  when  no  guilty  complicity 
can  be  charged  upon  the  other  party,  the  fruits  of  an  illegal  trans- 
action, and  operate  as  a  premium  upon  repudiation  and  fraud."  ^ 

1  Chicago  Building  Soc'y  v.  Crowell,  legal  turpitude.  It  may  be  aa  excess 
65  111.  458.  of  power  or  a  private   breach   of  trust 

2  DeGrafF  V.  American,  etc.,  Co.,  21  in  respect  to  its  stockholders.  The 
N.  Y.  137.  In  Parish  v.  Wheeler,  23  latter  may  complain  or  the  state  may 
id.  503,  COMSTOCK,  C.  J.,  observes,  interpose,  but  corporations  themselves, 
in  relation  to  this  question  :  "  There  like  individuals,  in  dealing  with  other 
is  certainly  no  moral  turpitude  if  a  parties,  must  live  up  to  the  rules  of 
railroad  corporation  buys  a  steamboat  common  honesty  *  *  *.  Contracts 
or  builds  a  church,  nor   is   there   any  with  corporations,  mado  in    excess   of 


Corporate  Contracts. 


377 


Seo.  237.   Form  of  the  action  in  case  of  ultra  vires  contracts.  —  It    has 
in  some  cases  been  held    that   where   the   eoiiti-act   is  ultra  vires 


tbeir  powers,  which  are  purely  execu- 
tory on  both  sides,  aud  where  uo 
wrong  will  be  done  if  the  parties  are 
left  in  their  previous  situation,  I  am 
willing  to  agree,  should  not  bo  en- 
forced, because  such  contracts  con- 
template an  unauthorized  diversion  of 
corporate  funds,  and  therefore  a  breach 
of  private  trust. 

"  Executed  dealings  of  corporations 
must  be  allowed  to  stand  for  and 
against  both  parties,  when  the  plainest 
rules  of  good  faith  so  require  *  *  *. 
The  most  favorable  statement  of  the 
particular  matter  now  in  question  is, 
that  the  railroad  corporation,  in  excess 
of  the  powers  conferred  upon  it  by  its 
charter,  purchased  and  paid  for  a 
steamboat  and  several  canal  boats  ; 
that  being  in  possession  and  use  of 
the  property,  in  connection  with  its 
regular  business,  it  mortgaged  the 
same  property  to  its  creditors,  the 
plaintiff,  taking  back  charter-parties 
for  a  limited  period,  and  also  a  stipu- 
lation for  a  reconveyance,  if  the  debt 
should  not  be  paid  at  the  time  agreed 
on  ;  that  the  plaintiff,  taking  the  usual 
course  in  such  cases,  caused  a  part  of 
the  property  to  be  sold  after  a  default 
had  occurred,  and  received  the  pro- 
cpeds  of  that  sale,  which  nearly  or 
quite  satisfied  the  debt.  In  all  this  I 
can  see  nothing  unlawful  except  the 
want  of  legal  power  or  right  to  buy 
the  property. 

"  But  it  was  actually  bought,  paid  for 
and  delivered,  and,  therefore,  become 
a  part  of  the  estate  and  assets  of  the 
company.  The  company  could  sell  or 
pledge  it  to  a  creditor,  and  could  re- 
deem the  pledge  by  paying  the  debt. 
In  acquiring  the  ownership  of  such 
property,  the  corporation  may  have 
usurped  a  right  not  granted  by  its 
charter.  But  the  acquisition  was, 
nevertheless,  a  fact  which  no  legal 
refinement  can  deny.  It  was  a  fact  too, 
having  all  the  legal  relations  and  in- 
cidents of  any  other  fact  of  ownership. 
I  think  it  wiU  not  be  questioned,  that 
an  execution  creditor  of  the  company 
could  levy  on  this  property  and  sell  it 
for  the  satisfaction  of  its  debt,  and 
having  thus  obtained  a  satisfaction, 
I  do  not  think  that  he  could  deny  that 
he  was    paid,  upon   any  theory  of   ex- 

48 


ce.ss  of    corporate     power,   and     levy 
again  upon  other  property. 

"  So,  if  the  creditor,  instead  of  pro- 
ceeding to  judgment  and  execution  for 
his  debt,  takes  a  pledge  or  mortgage, 
and,  by  the  exercise  of  the  power  of 
sale,  obtains  tlie  cash  for  his  demand, 
I  do  not  see  how  he  can  raise  the  in- 
quiry whether  the  corporation  debtor 
violated  the  trust  duty,  which  it 
owed  to  its  shareholders  in  the  pur- 
chase of  the  chattels  pledged  or  mort- 
gaged. 

"  So  long  as  no  one  else  questions  the 
title  thus  acquired,  and  the  property 
is  made  productive  in  the  satisfaction 
of  the  debts,  it  would  be  strange  if 
the  creditor  can,  upon  such  ground, 
claim  that  the  debt  still  exists.  And 
such  is,  in  effect,  this  case.  The 
security  of  the  plaintiff,  as  I  have  said, 
was  in  the  nature  of  a  mortgage.  The 
stipulation  to  reconvey  on  payment  of 
his  claims  provided  for  nothing  beyond 
the  legal  result  of  the  transaction. 
The  reconveyance,  it  is  true,  was  to  be 
made  to  the  appointee  of  the  corpora- 
tion ;  but  that  clause  considered  by 
itself  involved  nothing  illegal,  or  even 
^dtra  mres.  The  plaiutitl  actually  sold 
a  part  of  the  property  for  the  payment 
of  his  debt,  and  he  received  the 
money.  No  one  but  himself  questions, 
or  can  question,  his  right  to  make  the 
security  available  in  that  manner.  Ho 
does  not  pretend  or  suggest  that  he 
cannot  hold  the  money  thus  obtained. 
On  the  contrary,  he  insists  ujyon  re- 
taining it  against  all  the  world  ;  but 
at  the  same  time  claims  that  his  debt 
is  neither  paid  nor  reduced.  Jluch  has 
been  said  in  the  books  (sometimes  I 
think  without  reflection),  about  the 
])owers  of  corporations  and  the  conse- 
quences of  exceeding  those  powers. 
But  no  authority  can  be  found  to 
justify  the  position  of  the  plaintiff  in 
respect  to  the  matter  here  considered." 
See,  also,  Bissel  v.  Michigan,  etc.,  R. 
Co.,  23  N.  Y.  258  ;  Haaelhurst  v.  Savan- 
nah, etc.,  R  Co.,  43  Ga.  54  ;  Bradley  v. 
Ballard,  55  111.  413.  In  Bissel  v.  The 
Michigan,  etc.,  R.  Co  ,  22  N.  Y.  258, 
Selden,  J.,  in  discussing  the  question, 
makes  a  distinction  based  upon  knowl- 
edge, or  want  of  knowledge,  of  tiie 
party   dealing    with    the   corporation 


378 


Private  Corporations, 


but  the  corporation  has  received  property,  or  the  consideration  of 
a  contract,  and  refuses  to  fulfill  its  contract,  or   to  pay  its  obli- 


He  observes:  "There  are,  no  doubt, 
cases  in  which  a  corporation  would  be 
estopped  from  setting  up  the  defense, 
allhough  its  contract  might  have  been 
really  unauthorized.  It  would  not  be 
available  in  a  suit  brought  by  a  bona 
fide  indorsee  of  a  negotiable  promissory 
note,  provided  the  corporation  was 
authorized  to  give  notes  for  any  pur- 
pose ;  and  the  reason  is,  that  the  cor- 
poration, by  giving  the  note,  has  vir- 
tually represented  that  it  was  given 
for  some  legitimate  purpose,  and  the 
indorsee  could  not  be  presumed  to 
know  the  contrary.  The  note,  how- 
ever, if  given  by  a  corporation  abso- 
lutely prohibited  by  its  charter  from 
giving  notes  at  all,  would  be  voidable 
not  only  in  the  hands  of  the  original 
payee,  but  in  those  of  any  subsequent 
liolder,  because  all  persons  dealing 
with  a  corporation  are  bound  to  take 
notice  of  the  extent  of  its  chartered 
powers. 

"  The  same  principle  is  applicable 
to  contracts  not  negotiable.  Where 
the  want  of  power  is  apparent  upon 
comparing  the  act  done  with  the  terms 
of  the  charter,  the  party  dealing  with 
the  corporation  is  presumed  to  have 
knowledge  of  the  defect,  and  the  de- 
fense of  ultra  vires  is  available  against 
him.  But  such  a  defense  would  not 
be  permitted  to  prevail  against  a  party 
who  cannot  be  presumed  to  have  had 
any  knowledge  of  the  want  of  authority 
to  make  the  contract.  Hence,  if  the 
question  of  power  depends  not  merely 
upon  the  law  under  which  the  corpora- 
tion acts,  but  upon  the  existence  of 
certain  extrinsic  facts,  resting  pecu- 
liarly within  the  knowledge  of  the  cor- 
porate officers,  then  the  corporation 
would,  I  apprehend,  be  estopped  from 
denying  that  which,  by  assuming  to 
make  the  contract,  it  had  virtually 
affirmed. 

"  A.  question  analogous  to  this  arises, 
where  public  officers  who  have  done 
something  in  contravention  of  the 
statute  under  which  they  act  are 
afterward  sought  to  be  estopped  from 
setting  up  that  their  act  was  unauthor- 
ized. It  was  insisted  by  counsel  in  the 
case  of  Regina  v.  White,  4  Ad.  &  El. 
(N.  S.)  101,   that   for   public  reasons, 


officers  so  situated  were  not  estopped  ; 
but  Lord  Denman  said  :  '  We  liave 
held  that  this  is  true  only  of  a  statute 
the  contents  of  which  are  publicly 
known  ;  such  a  statute  is  to  have 
effect  whatever  dealings  may  take 
place  ;  but  when  the  persons  acting, 
whether  trustees  for  public  purposes 
or  not,  have  done  any  act  which  was 
not  known  to  the  parties  with  whom 
they  were  afterward  dealing,  such  an 
act  cannot  prevent  the  estoppel  aris- 
ing from  that  subsequent  dealing, ' 
This  doctrine,  which  was  also  held  in 
the  case  of  Doe,  ex  clem.  Levy,  v.  Home, 
3  Ad.  &  El.  (N.  S.)  757,  will  be  found, 
when  carefully  examined,  to  sustain 
the  exception  which  I  have  suggested 
in  the  case  of  corporations.  But  aside 
from  these  exceptional  cases,  it  is,  in 
my  judgment,  not  only  entirely  clear 
upon  principle,  but  abundantly  settled 
by  authority,  that  the  contract  of  a 
corporation,  if  unauthorized  by  its 
charter,  is  an  illegal  contract,  and  that 
the  corporation  is  not  estopped  from 
setting  up  this  illegality  in  defense  to 
an  action  brought  upon  it. 

"  In  referring  to  the  cases  which 
support  these  views,  I  will  notice  the 
English  cases  first.  There  are  three 
classes  of  cases  in  England  in  which 
the  question  of  ultra  vires  arises,  viz.  : 
first,  cases  in  which  one  or  more  of  the 
shareholders  seeks  to  restrain  the  offi- 
cers of  the  corporation  from  engaging 
in  transactions  unauthorized  by  the 
charter ;  second,  actions  brought  by 
third  persons  against  corporations  to 
enforce  their  contracts,  in  which  tlie 
defense  relied  upon  is,  that  in  making 
the  contract  the  corporation  exceeded 
its  corporate  powers  ;  and  third,  simi- 
lar actions,  in  which  the  defense  is 
that  the  directors  had  exceeded,  not 
the  powers  conferred  upon  the  entire 
corporation  by  law,  but  those  conferred 
by  the  shareholders  upon  the  directors 
or  managing  officers  by  deed. 

"  These  three  classes  of  cases  differ 
materially  in  their  nature  and  princi- 
ples, and  if  we  would  avoid  confusion 
must  be  kept  entirely  distinct  in  inves- 
tigating the  subject.  Those  of  the 
third  class  have  no  bearing  upon  the 
question   we   are    discussing.      There 


CORT'ORATE    CoXTR.VCTS. 


379 


gations,  given  as  the  consideration,  no  recovery  can  be  had  upon 
such  contract;  but  that  the  party  thus  contracting  with  tlic  cor- 
poration, and  delivering  such  property  or  paying  such  considera- 
tion, is  entitled  to  recover  tlie  vahie  of  tlie  ])roperty  thus  deliv- 
ered or  the  consideration  paid,  on  an  implied  undertaking  on  the 
part  of  the  corporation  to  pay  for  the  value  or  amount  of  the 
same,  though  the  contract  itself  is  void  as  being  ultra  vires.  This 
doctrine  is  entirely  technical   and   can  hardly  be  considered  as 


are  in  England  a  class  of  corporations 
organized  under  general  laws,  which 
do  not  specify  the  manner  in  which 
the  objects  and  purposes  of  the  incor- 
poration are  to  be  effected,  but  leave 
this  to  be  arranged  by  a  '  deed  of  set- 
tlement '  between  the  corporators 
themselves.  By  this  deed  the  com- 
panies prescribe  and  limit  the  powers 
and  functions  of  their  various  officers, 
so  far  as  they  are  left  uncontrolled  by 
the  statute  and  the  general  laws  of 
the  kingdom.  Now  it  is  plain  that 
there  is  no  analogy  between  an  act 
which  merely  transcends  the  limits  of 
this  deed  of  settlement  and  one  which 
violates  the  provisions  of  the  organic 
act.  The  deed  of  settlement  is  the 
private  act  of  the  shareholders,  and  its 
provisions  have  respect  solely  to  their 
private  interests.  It  is  a  mere  power 
of  attorney,  and  bears  no  resemijlance 
to  a  law  enacted  with  a  view  to  the 
interests  of  the  public.  There  is  evi- 
dently no  question  of  public  policy  in- 
volved, when  the  question  is,  whether 
the  officers  have  exceeded  the  authority 
conferred  by  this  deed.  The  case  of 
the  Royal  British  Bank  v.  Turquand, 
5  El.  «&  Bl.  248.  is  one  of  this  class  of 
cases.  By  comparing  the  language  of 
Lord  Campbell  in  tlais  case  with  tliat 
used  by  him  upon  another  occasion, 
we  shall  obtain  a  clear  view  of  the 
distinction  here  adverted  to.  In  the 
case  cited,  the  action  was  upon  a  bond 
signed  by  two  of  the  directors,  and  the 
question  was,  not  whether  the  giving 
of  the  bond  exceeded  the  powers  which 
the  corporation  itself  had  a  right  to  as- 
sume, but  whether  it  was  authorized 
as  between  the  shareholders  and  the 
directors  by  the  deed  of  settlement. 
Lord  Campbell,  in  delivering  his 
opinion,  said:  'A  mere  excess  of 
authority  by  the  directors,  we  think, 
would  not  amount  to  a  defense.'  Of 
course,  by  this    was    meant    merely  an 


excess  of  authority  by  the  directors  as 
the  agents  of  the  stockholders,  and  not 
an  unauthorized  assumption  of  power 
as  between  the  corporation  and  the 
public. 

"  In  the  Mayor  of  Norwich  v.  The 
Norfolk  Railroad  Company,  30  Eng. 
Law  &  Eq.  120,  the  .same  learned  judge 
fully  recognizes  the  distinction  I  take, 
and  shows  that  by  the  remark  just 
quoted  he  by  no  means  meant  to  say 
that  corporations  were  bound  by  con- 
tracts which  &.xfiultra  vires,  as  between 
them  and  the  public.  He  then  said: 
'The  mere  circumstance  of  a  covenant 
by  the  directors  in  the  name  of  the 
company  being  idtra  viren  as  between 
them  and  the  shareholders  does  not 
necessarily  disentitle  the  covenantee  to 
sue  upon  it  *  *  *.  But  suppose 
that  the  directors  of  a  railway  company 
should  purchase  a  thousand  gross  of 
green  spectacles  as  a  speculation,  and 
should  put  the  seal  of  tlie  company  to 
a  deed  covenanting  to  pay  for  these 
goods,  here  would  be  a  ch-ar  excess  of 
authority  on  the  part  of  the  directors 
*  *  *  ;  this  would.be  an  iller;t/l  con- 
tract to  misapply  the  funds  of  the  com- 
pany, and  the  illegality  might  be  set 
up  as  a  defense.' 

"  The  phrase  ' vltra  vires'  is  applied 
in  the  English  cases  both  to  acts  which 
simply  exceed  the  powers  conferred 
by  the  deed  of  settlement  upon  the 
officers  as  the  agents  of  the  share- 
holders, and  acts  which  transcend  the 
powers  conferred  by  law  upon  the  en- 
tire corporation.  This  indiscriminate 
use  of  the  phrase  is  calculated  to  mis- 
lead, unless  the  distinction  referred  to 
is  observed.  It  is  evident  that  the 
class  of  cases  to  which  that  of  Royal 
British  Bank  v.  Turquand  belongs 
have  no  bearing  upon  the  question 
under  consideration,  and  hence  they 
will  be  no  further  noticed." 


380  Private  Corporations. 

sound  in  principle.  Such  a  doctrine  only  changes  tlie  form  of 
the  remedy  and  does  not  affect  the  substantial  rights  of  the 
parties.  In  fact  a  claim  in  such  a  case,  on  a  quantum  meruit^ 
or  quantum  'valehat,  might  give  the  individual  even  more  than  on 
the  contract ;  and  if  the  same  amount  might  be  recovered 
in  eitlier  form  of  action,  no  practical  benefits  would  be 
secured  by  tlie  adoption  of  the  doctrine,  that  the  contract,  being 
in  excess  of  authority,  is  void.^  But  the  distinction  has,  how- 
ever, been  frequently  made,  both  in  this  country  and  in  England. 

Mr.  Brice  observes  :  "  To  say  that  a  corporation  cannot  sue  or 
be  sued  upon  an  ultra  vires  agreement  is  one  thing.  To  say  that 
it  may  retain  the  proceeds  thereof  which  have  come  into  its 
possession,  without  making  any  compensation  whatever  to  the 
person  from  whom  it  has  obtained  them,  is  something  very 
different." ' 

In  an  action  by  a  corporation  in  New  York,  for  money  loaned, 
where  the  defense  was,  the  want  of  power  in  the  company  to 
make  loans,  the  supreme  court  of  that  state  uses  the  following 
language :  "  It  ill  becomes  the  defendants  to  borrow  from  the 
plaintiff  one  thousand  dollars  for  a  single  day,  to  relieve  their 
immediate  necessities,  and  then  to  turn  around  and  say,  '  I  will 
not  return  3'ou  this  money,  because  you  had  no  power  in  your 
charter  to  lend  it.'  Let  them  first  restore  the  money,  and  then 
it  will  be  time  enough  for  them  to  discuss  with  the  sovereign 
power  of  the  state  of  Connecticut  [where  the  corporation  was 
created]  the  extent  of  the  plaintiff's  chartered  privileges.  We  shall 

'  It  is  affirmed  by  Mr.  Brice  that,  Ultra  Vires,  371  ;  East  London  W. 
"  tbough  no  action  will  lie  against  a  Co.  v.  Bailey,  4  Bing.  283 ,  Mayoi-, 
corporation  merely  on  the  ground  that  etc.,  v.  Charlton, 6  M.  &  W.  815  ;  Paine 
it  has  received  and  adopted  the  benefit  v.  Strand  Union,  8  Q.  B.  326.  See,  also, 
of  a  contract  entered  into  without  due  Moss  v.  Rossie  Min.  Co.,  5  Hill,  137  ; 
formalities  on  its  part,  yet  under  cer-  Peterson  v.  Mayor,  etc.,  17  N.  Y.  44'J  ; 
tain  exceptional  circumstances  it  may  Hooker  v.  Eagle  Bank,  30  id.  83  ; 
be  used  on  the  consideration  so  re-  McCutcheon  v.  Steamboat  Co.,  13  Penn. 
ceived,  and,  e  cont7'ario,  it  seems  that  St.  13  ;  Hague  v.  City  of  Philadelphia, 
it  may  always  maintain  assumpsit  or  48  id.  527  ;  City  of  Baltimore  v.  Key- 
debt  against  a  person  who  has  received  nolds,  20  Md.  1;  Richard  v.  Warren 
from  it  the  benefit  of  such  a  contract.  Co.,  31  id.  ;'>81  ;  Zottman  v.  San  Fran- 
*  *  *  It  was  at  one  time  thought  cisco,  20  Cal.96;  Thomas  v.  Dickenson, 
that,  though  a  corporation  could  not  be  12  N.  Y.  304  ;  C-urtis  v.  Leavitt,  15  id. 
sued  on  a  contract  whilst  it  remained  47;  Bonesteel  v.  Mayor,  etc.,  23  iii. 
executory,  they  might    be    so  on  one  1(52. 

which   had    been   executed  ;   but   the  '■'  Brice's  Ultra  Vires,  618, 
distinction  does  not  now  exist."  Brice's 


Corporate  Contracts.  381 

lose  our  respect  for  the  law  when  it  so  far  loses  its  character  for 
justice  as  to  sanction  the  defense  here  attempted."  ^ 

Sec.  238.  But  the  doctrine  we  have  been  considering  would 
not  be  applicable  where  the  power  assumed  by  the  corporation  is 
expressly  prohibited  by  law  or  is  against  public  policy.' 

Thus,  in  an  action  on  a  note  issued  by  a  corporation,  where  such 
act  was  expressly  prohibited,  it  was  said  by  Bronson,  J.,  that, 
"as  the  issuing  of  notes  was  expressly  prohibited  bylaw,  it  is 
impossible  to  maintain  that  they  are  valid  securities.  To  hold 
that  they  can  be  enforced  against  the  bank  would  be  going  very 
far  toward  defeating  the  end  which  the  legislature  had  in  view. 
*  *  *  The  legal  liability  on  account  of  which  the  notes  were 
issued  still  remains  ;  but  the  notes  themselves  are  void."  ' 

Sec.  239.  The  doctrine  of  ultra  vires  applied  to  agents. — It  will 
be  evident,  from  what  has  been  said  in  reference  to  the  doctrine 
of  ultra  vires,  that  the  general  principles  of  this  docti-ine  would 
be  applicable  to  all  agents  of  corporations.  Their  authority  to  act, 
as  we  have  seen,  cannot  exceed  the  corporate  powers,  and  may  be 
less ;  but  "where  they  are  less,  and  where  the  agent  exceeds  the 
authority  conferred  by  law,  the  corporation,  like  any  other  prin- 
cipal, may  expressly  or  by  its  acts  ratif}^  the  acts  of  the  agent.* 

'  Steam  Nav.  Co.  v.  Weed,  17  Barb.  How  381,  where  the  facts  were  as  fol- 
378.  See,  also,  Argenti  V.  City  of  San  lows:  By  the  general  railway  law  in 
Francisco,  16  Cal.  255;  Bank  v.  Ham-  Ohio,  one  railway  company  was  al- 
mond, 1  Rich.  L.  281  ;  Southern,  etc.,  lowed  to  aid  in  the  construction  of 
Co.  V.  Lanier,  5  Fla.  110;  Silver  Lake  other  lines,  by  subscriptions  to  the 
Bank  v.  North,  4  Johns.  Ch.  370  ;  Pot-  capital  stock  of  the  companies,  pro- 
ter  V.  Bank  of  Ithaca,  5  Hill,  490;  vided  that  in  a  meeting  of  the  stock- 
Suydam  v.  Morris  Canal,  etc.,  id.  holders,  called  for  that  purpose,  two- 
491 ;  Sacketts  Harbor  Bank  v.  Lewis  thirds  of  the  stock  represented  should 
Co.  Bank,  11  Barb.  213  ;  Tracy  v.  Tal-  assent  thereto.  And  by  a  subsequent 
mage,  14  N.  Y.  162.  act,  it  was  provided  that  any  existing 

'^  Curtis  V.  Leavitt,  15  N.  Y.  94.  company  might  accept  this  provision  ; 

2  Leavitt  v.  Palmer,  3  N.  Y.  19.  But  and  by  filing  a  certificate  of  such  ac- 

see  posi,  §  270  ;  State  Board  of  Agri-  ceptance    with   the   secretary  of  state 

culture    v.  Citizens'    Street   R.  Co. ,47  make  it  a  part  of  its  charter.     In  this 

Ind.  407;    Kneeland    v.    Gilman,    24  case  the   defendants,  without   having 

Wis.  39.  complied  with  either  of  the  foregoing 

■*  The  presumption  against  corpora-  conditions, made  a  guarantee  of  $400,- 

tions,  on  the  ground  of  acquiescence  000,  of  the   bonds   of  the   Columbus, 

or  implied  ratification,  is  illustrated  by  Piqua  and  Indiana  Railway, 

the    case   of   Zabriskie    v.  Cleveland,  A  bill  was  brought  by  the  plaintiff, 

Columbus  and  Cincinnati  Railway,  23  a  member  of  defendants'  company,  to 


382 


Private  Cokpokatioks. 


S  EO.  240.  The  doctrine  of  ultra  vires  in  cases  of  negotiable  instruments. — 
We  have  already  indicated  the  effect  of  acts  ultra  vires, 
on  contracts  made  by  private  corporations,  with  otlier  parties. 
Would  hona  fide  assignees  of  negotiable  instruments,  such  as 
bonds,  coupons  or  notes,  stand  in  any  better  position  than  the 
payee  or  original  holder  of  these  instruments?  If  the  corpora- 
tion had  authority  to  issue  these  instruments  for  any  purpose, 
although  in  respect  to  the  particular  issue  it  may  have  been  in 
excess  of  authority,  the  purchaser  would  be  protected  if  he  pur- 
chased the  same  in  good  faith,  for  a  valuable  consideration  and 
without  notice,  actual  or  constructive,  of  the  particular  informaliry 
or  excess  of  authority  on  the  part  of  the  corporation  or  its  agents. 
If  the  corporation  or  its  agents,  having  authority  to  issue  its 
notes  or  bonds,  either  by  the  express  provisions  of  law  or  its  con- 
stating acts  or  implied  authority  derived  therefrom,  such  notes  or 
bonds  may  still  be  issued  for  some  unlawful  purpose,  and  in  that 
respect  be  considered  ultra  vires.     But  in  the  hands  of  an  inno- 


restraiu  tlieiu  from  paying  the  inter- 
est on  the  bonds  so  guaranteed  by 
thein,  upon  the  ground  that  the  de- 
fendants' directors  had  exceeded  their 
autliority  in  making  the  guaranty. 
Some  of  the  other  stockholders  by 
permission  of  the  court  below  became 
defendants  in  the  suit.  The  court 
held,  that,  as  between  the  parties  to 
the  present  suit,  the  acceptance  of  the 
provisions  of  tiie  general  railway  law 
and  of  the  subsequent  statute  might  be 
presumed  from  the  conduct  of  the 
corporators,  in  not  sooner  taking  steps 
to  nullify  the  action  of  the  directors 
in  making  the  guaranty  ;  and  that  it 
was  not  competent  for  the  corporation, 
after  having  made  such  guaranty,  re- 
ceived the  benefits  of  it,  and  allowed 
the  bonds  to  go  into  general  circula- 
tion on  thrt  faith  of  its  responsibility, 
now  to  repudiate  them  upon  the 
ground  of  their  own  omission  to  com- 
ply with  the  requirements  of  the 
statute.  And  especially  were  the 
bonds  binding  upon  the  defendants 
since  the  guaranty  by  the  directors 
had  been  expressly  ratified  by  a  reso- 
lution of  tlie  stockholders  at  a  meet- 
ing held  subsequently,  and  at  this 
meeting  the  plaintiff's  stock  was  repre- 
sented. 


In  Bargate  v.  Shortridge,  5  11.  L.  C. 
297,  Lord  St.  Leonards  said  :  "It 
does  appear  to  me  that  if,  by  a  course 
of  action,  the  directors  of  a  company 
neglect  precautions  which  they  ought 
to  attend  to,  and  thereby  lead  third 
persons  to  deal  together  as  upon  real 
transactions,  and  to  embark  money  or 
credit  in  a  concern  of  this  sort,  these 
directors  cannot,  after  five  or  six  years 
have  elapsed,  turn  round,  and  them- 
selves raise  the  objection  that  they 
have  not  taken  these  precautions,  and 
that  the  shareholders  ought  to  have 
inquired  and  ascertained  the  matter. 
*  *  *  The  way,  therefore,  in  which 
I  propose  to  put  it  to  your  lordships, 
in  point  of  law,  is  this  :  the  question 
is  not  whether  that  irregularity  can 
be  considered  as  unimportant,  or  as 
being  diff"erent  in  equity  from  what  it 
is  in  law,  but  the  question  simply  is, 
whether,  by  that  continued  course  of 
dealing,  the  directors  have  not  bound 
themselves  to  such  an  extent  that  they 
cannot  be  heard  in  a  court  of  justice 
to  set  up,  with  a  view  to  defeat  the 
rights  of  the  parties  with  whom  they 
have  been  dealing,  that  particular 
clause  enjoining  them  to  do  an  act 
which  they  themselves  have  neglected 
to  do." 


CoRPOKATE  Contracts. 


383 


cent  holder,  and  especially  as  we  have  seen,  where  the  corpora- 
tion lias  received  the  consideration  therel'ur,  they  could  not  defeat 
the  claims  of  the  holder,  on  the  ground  that  they  exceeded  their 
authority  in  executing  it.  If  there  is  nothing  on  the  face  of  ne- 
gotiable instruments  executed  by  a  corporation  to  indicate  that 
they  are  ultra  vires,  and  it  had  power  to  issue  such  instnnnents 
in  the  conducting  of  its  legitimate  business,  a  defense  ou  that 
ground  could  not  be  set  up  to  defeat  a  recovery  thereon  hy  'Ahona 
fide  holder  for  value,  without  notice  of  the  excess  of  authority  in 
issuing  them  for  the  particular  purpose  for  which  they  were  issued.' 
But  where  two  distinct  railroad  companies  consolidated  without 
authority,  and  they  were  placed  under  the  same  management,  it 
was  held  that  the  indorsee  of  a  note  given  by  the  managers  of 
the  consolidated  company  for  the  purchase  of  a  steamboat  could 
not  recover  on  it." 


'  Monument  Bank  v.  Globe  Works, 
101  Mass.  57;  Attorney-General  v.  In- 
surance Co.,  9  Paige,  470  ;  Bissell  v. 
Michigan,  etc.,  R.  Co.,  2a  N.  Y.  258; 
Mechanics'  Banking  Association  v. 
White  Lead  Co.,  85  id.  505;  Lexing- 
ton V.  Butler,  14  Wall.  282  ;  Morford 
V.  Farmers'  Bank,  26  Barb.  568  ;  Bridge- 
port City  Bank  v.  Empire,  etc.,  Co., 30 
id.  421  ;  Central  Bank  v.  Same,  26  id. 
23  ;  Bank  of  Genesee  v.  Patcbin,  13 
N.  Y.  309.  ,As  a  general  rule, a  corpora- 
tion, unless  constrained  by  law  or  the 
constating  instruments,  may,  as  inci- 
dent to  its  business,  receive  and  trans- 
fer notes  and  bills.  Buckley  v.  Briggs, 
30  Mo.  452  ;  Frye  v.  Tucker,  24  111. 
180;  Hardy  V.  Merri weather,  14  lud. 
203;  Lucas  v.  Pitney.  27  N.  J.  L. 
221. 

^  Pearce  v.  Madison,  etc.,  R.  Co.,  21 
How.  441 . 

In  this  case  Justice  Campbkll  ob- 
served :  "  Now,  persons  dealing  with 
the  managers  of  a  corporation  must 
take  notice  of  the  limitations  imposed 
upon  their  authority  by  the  act  of  in- 
corporation. Their  powers  are  ccm- 
ceded  in  consideration  of  the  advan- 
tage the  public  is  to  receive  from  their 
discreet  and  intelligent  employment, 
and  the  public  have  an  interest  that 
neither  tlie  managers  nor  stockholders 
of    the    corporation    shall    transcend 


their  authority.  In  McGregor  v.  The 
Official  Manager  of  the  Deal  and  Dover 
Railway  Co.,  IG  L.  &  Eq.  180,  it  was 
considered  tliat  u  railway  company  in- 
corporated by  act  of  parliament  was 
bound  to  apply  all  the  funds  of  the 
company  for  the  purposes  directed  and 
provided  for  by  the  act,  and  for  no 
other  purpose  whatever,  and  that  a 
contract  to  do  something  beyond  these 
was  a  contract  to  do  an  illegal  act,  the 
illegality  of  which,  appearing  by  the 
provisions  of  a  public  act  of  parlia- 
ment, must  be  taken  to  be  known  to 
the  whole  world.  In  Coleman  v.  The 
Eastern  Counties  Railway  Co.,  10 
Beav.  1,  Lord  L.\ngdale,  at  the  suit  of 
a  shareholder,  restrained  the  corpora- 
tion from  using  its  funds  to  establish 
a  steam  communication  between  the 
terminus  of  the  road  (Harwich)  and 
the  northern  ports  of  Europe.  The 
directors  of  the  company  vindicated 
the  appropriation  as  beneficial  to  the 
company,  and  that  similar  arrange- 
ments were  not  unusual  among  rail- 
way companies.  Lord  Laxgdale 
said  :  '  Ample  powers  are  given  for 
the  purpose  of  constructing  and  main- 
taining the  railway,  and  for  doing  all 
those  things  required  for  its  proper 
use  when  made.  But  I  apprehend 
that  it  has  nowhere  been  stated  that  a 
railway  company,  as  such,  has  power 


384 


Private  Corporations. 


Sec.  241 .  Necessary  or  implied  powders  not  ultra  vires.  —  It  lias 
been  affirmed  tliat  a  power  to  make  notes  or  bills,  or  to 
accept  bills,  is  not  one  of  the  incidents  of  a  corporation ;  that  the 

ment  of  the  owner's  interest.  His 
suit  is  instituted  on  the  notes,  as  an 
indorsee  ;  and  tlie  only  question  is, 
had  the  corporation  the  capacity  to 
make  the  contract,  in  the  fulfillment 
of  which  they  were  executed  ?  The 
opinion  of  the  court  is,  that  it  was  a 
departure  from  the  business  of  the 
corporation,  and  that  their  officers  ex- 
ceeded their  authority. 

"  In  Rutland  and  Burlington  Rail- 
way Company  v.  Proctor.  29  Vt.  93, 
where  the  plaiutiflfs,  a  railway  com- 
pany, chartered  with  the  usual  privi- 
leges and  limitations,  in  order  to  com- 
pete in  business  and  improve  the 
profits  of  their  road,  in  all  probability 
in  good  faith,  purchased  the  boats  and 
appurtenances  of  a  corporation  formed 
for  carrying  freight  and  passengers  on 
Lake  Champlain,  and  suljsequently 
sold  one  of  these  boats  and  furniture 
to  the  defendants,  and  after  the  sale 
repaired  the  boat  and  furniture  at  a 
machine  shop  purchased  of  the  trant^- 
portation  company,  and  brought  an 
action  for  such  furniture  and  repairs, 
it  was  held  that  they  could  recover. 
The  court,  Redfield,  C.  J.,  said  ; 
'  The  defense  is,  that  the  contract  of 
purchase  by  which  the  plaintiffs'  com- 
pany acquired  the  title  of  this  boat 
and  furniture,  sold  the  defendants, 
and  of  the  shop  at  which  the  repairs 
were  done,  was  beyond  their  powers, 
or  as  denominated  in  the  books,  ultra 
vires.  It  does  not  appear  that  the 
stockholders  of  the  plaintiffs'  company 
have  ever  objected  to  their  making 
the  purchase,  or  running  the  boats  in 
connection  with  their  road. 

"  '  If  we  regarded  the  question  prop- 
erly befere  the  court  for  determina- 
tion, we  should  not  at  lirst  view,  cer- 
tainly, be  inclined  to  question  that 
such  a  purchase  is  beyond  the  powers 
of  the  company.  And  if  the  stock- 
holders had  applied  to  a  court  of 
equity  at  the  time,  to  have  the  direct- 
ors enjoined  from  making  the  pur- 
chase, the  current  of  English  decis- 
ions would  probably  have  justified  the 
injunction.  And  possibly  had  the 
state  interfered  by  w'ay  of  scire  facias 
or  quo  icarranto,  the  excess  of  power 
thus  exercised  by  the  company  might 


to  enter  into  all  sorts  of  other  transac- 
tions. Indeed,  it  has  been  very  prop- 
erly admitted  that  railway  companies 
have  no  right  to  enter  into  new  trades 
or  businesses  not  pointed  out  by  the 
acts.  Bui  it  has  been  contended  that 
they  have  a  right  to  pledge,  without 
limit,  the  funds  of  the  company  for 
the  encouragement  of  other  transac- 
tions, however  various  and  exten- 
sive, provided  that  the  object  of  that 
liability  is  to  increase  the  traffic  upon 
the  railway,  and  thereby  to  increase 
the  profit  to  the  shareholders. 

"  '  There  is,  however,  no  authority 
for  any  thing  of  that  kind.  It  has 
been  stated  that  these  things,  to  a 
small  extent,  have  been  frequently 
done  since  the  establishment  of  rail- 
w-ays  ;  but  unless  the  acts  so  done  can 
be  proved  to  be  in  conformity  with 
the  powers  given  by  the  special  acts 
of  parliament,  under  which  those  acts 
were  done,  they  furnish  no  authority 
whatever.  In  the  East  Anglian  Rail- 
way Company  v.  The  Eastern  Counties 
Railway  Company,  11  C.  B.  803,  the 
court  say  the  statute  incorporating  the 
defendants'  company  gives  no  author- 
ity respecting  the  bills  in  parliament 
promoted  by  the  plaintifi's,  and  we  are 
therefore  bound  to  say  that  any  con- 
tract relating  to  such  bills  is  not  justi- 
fied by  the  act  of  parliament,  and  not 
within  the  scope  of  the  authority  of 
the  company  as  a  corporation,  and  is 
therefore  void.' 

"  We  have  selected  these  cases  to 
illustrate  the  principle  upon  which 
the  decision  of  this  case  has  been 
made.  It  is  not  a  new  principle  in  the 
jurisprudence  of  this  court.  It  was 
declared  in  the  early  case  of  Head  v. 
Providence  Insurance  Company,  2  Cr. 
127,  and  has  been  reaffirmed  in  a 
number  of  others  that  followed  it. 
Bank  of  Augusta  v.  Earle,  18  Pet. 
519;  PerrineV.  Ches.  &  Del.  R.  Co. 
9  How.  172. 

"  It  is  contended,  that  because  the 
steamboat  was  delivered  to  the  defend- 
ants, and  has  been  converted  to  their 
use,  they  are  responsible.  It  is  enough 
to  say,  in  reply  to  this,  that  the  plaint- 
iff was  not  the  owner  of  the  boat, 
nor   does  he  claim    under  an  assign- 


Corporate  Contracts. 


385 


right  to  do  so  must  be  given  eitlicr  by  the  provisions  of  the  law 
or  b}''  the  constating  instruments,  although  it  may  be  conferred 
either  by  express  provisions  or  by  implication ;'  and  this  power 


be  regarded  as  sufficient  reason  for  re- 
voking their  cnarter.  We  say  this 
may  possibly  be  so  regarded,  but  it  is 
not  common  in  practice  for  the  courts 
to  declare  the  forfeiture  of  a  railway 
charter  when  the  directors  have  pro- 
ceeded in  good  faith,  and  the  property 
of  the  company  is  not  brought  in 
peril,  but  no  such  step  has  been  taken, 
nor  is  this  an  action  by  which  the 
company  are  sought  to  be  charged  for 
a  contract  beyond  the  fair  scope  of 
their  charter. 

"  '  The  defendants  seek  to  make  this 
defense  upon  the  ground  that  the 
excess  of  power  thus  assumed  by  the 
company  is  illegal,  and  renders  all 
contracts  connected  with  the  transac- 
tion Inoperative  by  reason  of  such 
illegality. 

"  '  If  there  had  been  a  positive  pro- 
hibition of  entering  into  a  particular 
class  of  contracts,  and  especially  if 
such  contracts  had  been  declared  void 
by  the  charter  of  the  company,  or  the 
general  laws  of  the  state,  most  un- 
questionably no  action  would  lie  upon, 
the  prohibited  contract. 

"  '  But  when  no  such  prohibition 
exists,  and  it  is  only  by  construction  of 
the  charter  that  a  class  of  contracts 
are  declared  to  be  beyond  the  powers 
of  the  company,  and  when  upon  this 
point  there  is  such  reasonable  ground 
of  doubt  as  to  induce  a  court  to  sup- 
pose the  directors  may  have  acted  in 
good  faith,  and  where  the  question  is 
raised  by  one  having  no  interest  in  it, 
except  for  purposes  of  unjust  advant- 
age, courts  have  never  been  inclined 
to  listen  to  the  objections. 

" '  In  the  present  case,  the  most 
favorable  view  for  the  defendants,  as 
it  seems  to  us,  is  that  the  directors  of 
the  plaintiffs'  company  exceeded  their 
powers  in  nuiking  the  purchase,  and 
that,  therefore,  the  title  of  the  boats 
and  apparatus  did  not  vest  in  the  com- 
pany, and  consequently,  that  the  funds 
which  the  directors  appropriated  for 

'  Halford  v.  Cameron,  etc.,  R.  Co., 
16  Q.  B.  442  ;  20  L.  J.  Q.  B.  160  ;  Agges 
V.  Nicholson,  1  H.  &  N.  165  ;  25  L.  J. 

49 


the  purpose  were  misappropriated, 
and  the  directors  may  be  compelled  to 
account  for  them  to  the  company,  for 
the  benefit  of  the  stockholders.  And 
possibly  the  funds  so  misapplied 
might  have  been  ])urflued  into  the 
hands  of  the  transportation  com- 
pany by  showing  the  insolvency  of 
the  directors  ;  but  this  must  have 
been  done  at  once,  and  any  consider- 
able acquiescence  in  the  transaction 
will  prevent  the  stockholders  or  the 
company  from  pursuing  the  funds. 
And  in  that  case  the  title  to  the  prop- 
erty will  have  passed  from  the  trans- 
portation company,  prima  facie,  into 
the  directors  as  natural  persons.  In 
such  a  state  of  the  title  the  directors 
might  most  undoubtedly  dispose  of  the 
property,  and  collect  the  avails  as  a 
legitimate  mode  of  restoring  the  funds 
misapplied  to  the  company.  And  for 
this  purpose  they  might  most  unques- 
tionably take  the  securities  upon  sale 
of  the  property,  payable  to  the  com- 
pany, or  stipulate  that  the  purchaser 
should  pay  the  company.  And  this, 
so  far  from  being  a  continuance  of  the 
perversion  of  the  charter  powers,  is 
the  surest  and  only  obvious  mode  of 
restoring  the  funds  to  their  proper 
channel. 

"  '  The  only  wrong  in  the  directors 
is  in  having  exceeded  their  powers, 
and  the  transaction  with  the  defend- 
ants, so  far  as  it  goes,  will  tend  to 
restore  a  portion  of  the  money  to  its 
rightful  proprietor  ;  and  of  this  the 
defendants  ought  not  to  complain,  as 
they  are  confessedly  solicitous  to 
bring  the  directors  of  the  plaintifEs' 
company  back  to  their  legitimate 
functions.  And  if  they  should  dis- 
pose of  all  the  property  purchased  in 
this  mode,  in  the  mauiu'r  this  is  sold 
to  the  defendants,  it  will  go  far  tore- 
store  them  to  their  appropriate  place, 
—  the  treasury  of  the  plaintiffs,  — for 
the  benefit  of  the  company  and  its 
stockholders.'  " 

Ex.  348.  See,  also,  Peruvian  R.  Co. 
V.  Thames,  etc.,  Co. ,  L.  R.,  2  Ch.  617 ; 
Brice's  Ultra  Vires,  loo. 


386  Pkivate  Corporations. 

will  always  be  imposed  where  the  corporation  is  established  for 
the  prosecution  of  any  business  which  in  any  measure  confers 
upon  it  the  qualities  of  a  trading  corporation,  or  contemplates  the 
contracting  of  debts  by  it  in  the  prosecution  of  the  business  for 
which  it  was  established. 

But  in  this  country  at  least  no  question  is  better  settled  upon 
authority  than  that  a  corporation  not  j^rohibited  by  law  from  do- 
ing so,  and  without  any  express  power  in  its  charter  for  that  pur- 
pose, may  make  a  negotiable  promissory  note,  payable  either  at  a 
future  time  or  on  demand,  when  such  note  is  given  for  any  of  the 
legitimate  purposes  for  which  the  company  was  incorporated.* 

And  it  is  also  now  well  settled,  that  a  power  granted  to  a  cor- 
poration, to  engage  in  a  certain  business,  carries  with  it  the  au- 
thority to  act,  precisely  as  an  individual  would  act,  in  carrying 
on  such  business,  and  that  it  would  possess  for  this  purpose  the 
usual  and  ordinary  means  of  accomplishing  the  objects  of  its 
creation  in  the  same  manner  as  though  it  were  a  natural  person. 
Thus,  if  incorporated  for  the  purpose  of  building  a  bridge,  it 
may  contract  a  debt  for  labor  or  materials  to  be  used  thereon,  or 
for  the  land  on  which  it  is  to  be  built.  And  it  may  give  as  evi- 
dence of  its  indebtedness  therefor  its  note,  bond  or  mortgage.  Or 
it  may  borrow  money  for  this  purpose,  and  execute  a  valid  note 
or  bond  and  mortgage  to  secure  the  same.^ 

But  a  corporation  would  ordinarily  have  no  authority  to  assume 

1  Police  Jury  v.  Britton,  15  Wall.  566;  Bills  of  Exch.,  §  79  ;  Edwards  on  Bills, 
Moss  V.  Averell,  10  N.  Y.  449  ;  Rich-  77.  See,  also,  Munn  v.  Commission 
mond,  etc.,  R.  Co.  v.  Snead,  19  Gralt.  Co.,  15  Johns.  44;  Moss  v.  Oakley,  3 
354;  Story  on  Bills  of  Exch.,  ^  79;  Hill,  365  ;  Mott  v.  Hicks,  1  Cow.  513  ; 
Edwards  on  Bills,  77  ;  Barry  v.  Mer-  Mead  v.  Keeler,  34  Barb.  30;  Par- 
chants' Ex.  Co.,1  Sandf.  Ch.  380;  Fay  tridge  v.  Badger,  35  id.  146  ;  Olcott  v. 
V.  Noble,  13  Cash.  1  ;  Munn  v.  Com-  Tioga,  etc.,  R.  Co.,  40  id.  179  ;  Barker 
mission  Co.,  15  Johns.  44;  Olcott  v.  v.  Mechanics'  Ins.  Co.,  3  Wend.  94; 
Tioga,  etc.,  R.,  40  Barb.  179  ;  Mechan-  Mechanics',  etc.,  v.  White  Lead  Co., 
ics'  Association  v.  White  Lead  Co.,  35  35  N.  Y.  505 ;  Ketchum  v.  Buffalo,  14 
N.  Y.  505  ;  Lucas  v.  Pitney,  3  Dutch,  id.  356;  Barnes  v.  Ontario  Bank,  19 
231  ;  Oxford  Iron  Co.  v.  Spradley,  46  id.  153  ;  Hardy  v.  Merriweather,  14 
Ala.  98;  Bradley  v.  Ballard,  55  111.  Ind.  303;  Union  Bank  v.  Jacobs,  6 
413  ;  Union  Bank  v.  Jacobs,  6  Humph.  Humph.  515  ;  Lucas  v.  Pitney,  37  N. 
515.  J.  L.  331;  Oxford  Iron  Co.  v.  Sprad- 

2  Barry  v  Merchants'  Ex.  Co.,  1  Sandf.  ley,  46  Ala.  98  ;  Commercial  Bank,  etc., 
Ch.  380,  It  may  also,  without  any  v.  Newport  Manuf.  Co.,  1  B.  Monr.  14; 
special  authority,  make  a  note  or  draft.  Bank  of  Chillicothe  v.  Chillicothe,  7 
or  accept  a  draft,  for  such  a  purpose,  Ohio,  31  ;  Hamilton  v.  New  Castle  R. 
the  indebtedness  therefor  being  con-  Co.,  9  Ind.  359;  Bradley  v.  Bullard, 
tracted  in  the  pursuit  of  the  legitimate  55  111.  413;  Rockwell  v.  Elkhoru  Bank, 
business  of  the  corporation.     Story  on  13  Wis.  653. 


Corporate  Contracts. 


387 


the  debt  of  another,  and  issue  a  note  therefor,  nor  to  make  or 
indorse  notes  or  bills  merely  for  the  accoMunodution  of  another.' 
Nor  can  an  insurance  company  issue  bonds  in  order  to  lend  its 
credit.' 

But  the  j)Ower  to  borrow  money  carries  with  it  by  implication 
authority  to  mortgage  the  corporate  property,  except  its  franchises, 
unless  expressly  restrained  therefrom  by  the  provisions  of  the 
constating  instruments.^  The  power  either  to  sell  or  mortgage 
the  franchises  of  the  corporation  is  never,  it  has  been  held,  to  be 
implied,  but  must  be  conierred  by  some  express  provision.'  The 
power  to  purchase  lands  has  also  been  held  to  carry  with  it  by 
implication  the  power  to  mortgage  the  same  to  secure  the  pur- 
chase-money.^ 


'  Stark  Bank  v.  U.  S.  Pottery  Co., 34 
Vt.  144  ;  Smead  v.  ludianapolia,  etc., 
K.  Co.,  11  Ind.  104  ;  Bank  of  Genesee 
V.  Patcliiu  Bank,  13  N.  Y.  309;  Cen- 
tral Hank  v.  Empire  Stone  Dressing 
Co.,  3(3  Barb.  23  ;  Bridgeport  City  Bank 
V.  Empire  Sione  Dressing  Co  ,  30  id. 
421 ;  Farmers'  Bank  v.  Empire  Stone 
Dressing  Co.,  5  Bosw.  275. 

'  Alabama  L.  Ins.  Co.  v.  Smith,  4 
Ala.  (N.  S.)  338.  See,  al.so,  Attorney- 
Gen.  V.  Insurance  Co.,  9  Paige,  470; 
Saiford  v.  Wyckoff,  4  Hill,  442  ;  Lex- 
ington V.  Butler,  14  Wall.  282  ;  Sum- 
mer V.  Marcv,  3  Woodb.  &  M.  105. 

3  Parish  v."  Wheeler.  22  X.  Y.  494  ; 
Nelson  v.  Eaton,  26  id.  410  ;  Curtis  v. 
Leavitt,  15  id.  9  ;  Barry  v.  Merchants' 
Ex.  Co.,  1  Sandf.  Ch.  3^0  ;  Farmers' 
Loan  and  Trust  Co.  v.  Hendricksou,  25 
Barb.  484;  Holbrook  v.  Basset,  5  Bosvv. 
147  ;  Kiugv.  Merchants'  Ex.  Co.,  5  N. 
Y.  547  ,  Miller  v.  Chance,  3  Edw.  399  ; 
Peunock  v.  Coe,  23  How.  117;  Rich- 
ards V.  Merrimack,  etc.,  R.  Co.,  44  X. 
H.  127  ;  Burr  v.  McDonald,  3  Gratt. 
206;  Susquehanna  Bridge  Co.  v.  Gen- 
era! Ins. Co.. 3  Md.  303;  Bardstown.etc, 
R.  Co.  V.  Metcalf.  4  Mete.  (Ky.)  199; 
Coe  V.  Johnson,  18  Ind.  218. 

"•  Susquehanna  Canal  Co.  v.  Bonham, 
9  W.  &  S.  27  ;  Steiuers'  Appeal,  27 
Penn.  St.  313  ,  Lauman  v  Lebanon 
Valley,  etc.,  R.  Co.,  30  id.  42  ;  York 
&  Md.  R.  Co.  V.  Winans,  17  How.  39  ; 
Pullan  V.  Cincinnati,  etc.,  R.  Co.,  4 
Biss.  35;  Pierce  v.  Emery,  32  X^.  H. 
484 ;  Commonwealth  v.  Smith,  10  Al- 
len, 448  ;  Richardson  v.  Sibley,  11 
id.  65;  Hendee  v.    Pinkerton,  14  id. 


381  ;  Troy,  etc.,  R.  Co.  v.  Kerr,  17  Barb. 
601  ;  Black  v.  Delaware,  etc..  Canal 
Co.,  22  X.  J.  Eq.  130  ;  Winchester.etc, 
Turnp.  Co.  v.  Vimout,  5  B.  Monr.  1; 
Arthur  v.  Commercial  Bank,  9  S.  &M. 
394;  Coe  v.  Columbus,  etc.,  R.  Co.,  10 
Ohio  St.  372.  See,  however,  Hall  v. 
Sullivan,  etc.,  R.  Co.,  2  Redf.  Ano.  R. 
Cas.  621  ,  Shepley  v.  A.&  St.  L.  R.  Co., 
55  Me.  295 ;  Kennebec,  etc.,  R.  C^o  v. 
Portland,  etc.,  K.  Co.,  59  id.  9  ;  Miller 
V.  Rutland,  etc.,  R.  Co.,  36  Vt.  452. 
If  tlie  mortgage  is  of  the  franchises  as 
well  as  the  property,  it  will  be  void  aa 
to  the  former,  but  good  as  to  the  lat- 
ter, unless  otherwise  provided  by  law. 
Pullman  v.  Cincinnati,  etc.,  R.  Co.,  4 
Biss.  35.  But  see,  under  Massachu- 
setts statutes,  Richardson  v.  Siblev, 
11  Allen,  65. 

As  to  the  power  under  statutes  of 
various  states  to  form  new  corporations 
by  the  purchasers  on  a  foreclosure  of 
mortgages  against  old  ones,  with  all 
the  powers  of  the  old  ones, but  exempt 
from  its  debts  and  liabilities,  see 
Wilcox's  Ohio  R.  L.  209  ;  X.  Y.  R.  S. 
(Edmuuds")  016,  912,  Xixon's  X.  J. 
Dig.  (4lh  ed.)  791  ;  Purdon's  Penn.  Dig. 
(9th  ed.)  200;  R.S.Wisi-on.,chap.79, 5^33; 
Virginia  Code, chap.  61.^  27;  Gen.  Stat. 
Xeb.  (1873),  204,  Swan  &  Sengluis' 
Ohio  Stat.  125.  See,  also.  Green's 
Brice's  Ultra  Vires,  123,  et  seq. 

^  Gordon  v.  Preston,  1  Watts,  385  ; 
Taber  v.  Cincinnati,  etc.,  R.  Co.,  15 
Ind.  459  ;  Jackson  v.  Brown,  5  Wend. 
590. 

And  power  expressly  conferred  to 
mortgage  for  some  particular  purpose 


388 


Private  Cokporatioks. 


Skc.  242.  Right  to  mortgage.—  And,  as  a  general  rule,  corpora- 
tions may  mortgage  or  assign  their  property  to  secure  or  pay 
their  debts ;  ^  and  such  mortgage  may  not  only  create  a  lien  on 
the  existing  propei'ty  of  the  corporation,  but  by  its  terms  be 
made  to  cover  subsequently  acquired  property,  which  it  may  be 
necessary  for  it  to  acquire,  in  the  prosecution  of  its  legitimate 
business."  But  frequently  this  right  is  expressly  provided  for  by 
statutes.' 

Sec.  243.  Conclusions  as  to  ultra  vires  contracts.  —  From  the  fore- 
going it  is  apparent  that  a  contract  may  be  ultra  vires : 

1st.  When  it  is  made  by  the  corporation  or  its  agents,  but  is 
wholly  beyond  the  power  of  such  corporation,  or  is  not  within  the 
scope  of  the  powers  conferred  upon  the  agent  making  it ;  or  2d. 


will  not,  it  has  been  held,  prevent 
mortgaging  the  property  to  secure 
creditors.  Allen  v.  Montgomery,  etc., 
11. Co.,  11  Ala.  (N.  S.)437;  Mobile, etc., 

» Pierce  v.  Emery,  33  N.  H.  484; 
Commissioners,  etc.,  v.  Troy,  etc.,  R. 
Co.,  1  Redf.  Am.  R.  Cas.  575  ;  Com- 
monwealth V.  Smith,  10  Allen,  448  ; 
Sljaw  V.  Norfolk,  etc.,  R.  Co.,  5  Gray. 
162  ;  Lenox  v.  Roberts,  2  Wheat.  373  ; 
Dana  v.  Bank  U.  S.,  5  W.  &  S.  323  ; 
State  V.  Bank  of  Md.,  6  G.  &  J.  205  ; 
Hopkins  v.  Gallatin  Turnp.  Co.,  4 
Humph.  403  ;  Ex  parte  Con  vvay,  4  Ark. 
304  ;  Haxtun  v.  Bishop,  3  Wend.  13 ; 
De  Ruyter  v.  St.  Peter's  Church,  3 
Barb.  Ch.  119  ;  S.  C,  3  Comst.  238  ; 
Flint  V.  Clinton  Co.,  12  N.  H.  431 ; 
Warner  v.  Mower,  11  Vt.  385. 

It  is  immaterial  whether  the  instru- 
ment is  a  mortgage  or  trust  deed. 
Whitewater  &  C.  Co.  v.  Vallette,  21 
How.  414;  Pullan  v.  Cincinnati,  etc., 
R.  Co.,  4  Biss.  35;  Coe  v.  McBrown, 
22  Ind.  252  ;  Coe  v.  Johnson,  18  id. 
218.  But  see  In  re  York,  etc.,  R.  Co., 
50  Me.  552. 

^  Dunham  v.  Cincinnati,  etc.,  R.  Co., 
1  Wall.  254  ;  Galveston,  etc.,  R.  Co.  v. 
Cowdrey,  11  id.  483;  United  States  v. 
New  Orleans,  etc.,  R.  Co.,  12  id.  362  ; 
Railroad  Co.  v.  Soutter,  13  id.  517 ; 
Pennock  v.  Coe,  23  How.  117;  Wil- 
liamson V.  New  Albany,  etc.,  R.  Co.,1 
Biss.  198  ;  Morrill  v.  'Noyes,  56  Me. 
458;  Haven  v.  Emery,  33  N.  H.  66; 


R.  Co.  V.  Talman,  15  id.  472.  See, 
also,  Phillips  v.  Winslow,18  B.  Monr. 
431. 


Seymour  v.  Canada,  etc.,  R.  Co.,  25 
Barb.  284;  Stevens  v.  Buffalo,  etc.,  R. 
Co.,  31  id.  590  ;  Buffalo,  etc.,  R.  Co.  v. 
Lampson,  47  id .  533  ;  Benjamin  v.  El- 
mi  ra,  etc.,  R.  Co.,  49  id.  446  ;  Fish  v. 
Potter,  2  Abb.  Ct.  App.  Dec  (N.  Y.) 
138  ;  Stevens  v. Watson,  4  id.  302  ;  Phil- 
adelphia, etc.,  R.  Co.  V.  Woelpper,  64 
Penn.  St.  366  ;  State  v.  Northern  Cent. 
R.  Co..  18  Md.  193  ;  Ludlow  v.  Hunt, 

I  Disb.  552;  Coe  v.  McBrown,  22  Ind. 
252  ;  Pierce  v.  Milwaukee,  etc.,  R.  Co., 
24  Wis.  551.  But  compare  Howe  v. 
Freeman,  14  Allen,  566;  Moody  v. 
Wright,  13  xMetc.  17  ;  Coe  v.  Columbus, 
etc.,  R.  Co.,  10  Ohio  St.  372  ;  Brainerd 
V.  Peck,  34  Vt.  490  ;  Bath  v.  Miller, 
53  Me.  368  ;  Williamson  v.  New  Jer- 
sey, etc.,  R.  Co.,  10  C.  E.  Green,  13  ; 
Pierce  V.  Emery,  32  N.  H.  484;  Far- 
mers', etc.,  Co.  V.  Commercial  Bank, 

II  Wis.  207;  Jesaup  v.  Trustees,  14 
Iowa,  572  ;  Phillips  v.  Winslow,  18  B. 
Monr.  430. 

3  Iowa  Code  (1873),  §  1284. 

If  a  railroad  has  authority  to  borrow 
money  and  execute  such  securities  as 
it  may  deem  expedient,  it  may  mort- 
gage its  road  and  franchises,  and  all  of 
its  property  of  every  kind,  including 
future  acquisitions  and  earnings. 
Pierce  v.  St.  Paul,  etc.,  R.  Co.,  24  Wis. 


Corporate  Contracts.  '  389 

When  it  is  contrary  to  the  positive  provisions  of  law  or  against 
public  policy.  The  same  rules  apply  to  a  corporation  that  apply 
to  individuals,  and  if  a  contract  is  made  by  it  which  is  jjrohibited 
by  law,  it  cannot  enforce  it,  because  the  act  is  illegal  and  it  is  in 
pari  delicto  with  the  otlier  party.  Thus  in  a  New  York  case* 
the  plaintiff,  a  corporation  created  under  a  special  act  by  %vlnch  it 
was  authorized,  among  other  things,  "  to  grant,  bargain,  sell,  buy 
or  receive  all  kinds  of  property,  real,  personal,  or  mixed,  or  to 
hold  the  same  in  trust  or  otherwise  *  *  *  and  to  advance 
moneys  *  *  *  upon  any  property,  real  or  personal,  on  such 
terms  or  commissions  as  may  be  established  or  approved  by  the 
directors."  The  action  was  brought  for  the  collection  of  two 
notes  for  $8,000  each,  executed  by  the  defendants,  and  payable  to 
their  own  order,  and  indorsed  by  them  to  the  plaintiff  before  they 
became  due.  The  answer  alleged,  substantially,  that  the  ]  laintiff 
was  a  corporation,  created  by  special  act  of  the  New  York  legis- 
lature, and  that  it  had  engaged  in  the  business  of  banking  in  vio- 
lation of  the  laws  of  the  state,  and  discounted  the  notes  in  suit  in 
the  course  of  that  business,  and  that  the  notes  were  made  for  the 
purpose  of  raising  money  upon  them,  and  that  they  were  dis- 
counted by  the  plaintiff  and  passed  to  the  defendant's  credit  upon 
the  plaintiff's  books.  The  general  statutes  of  New  York  pro- 
hibited any  corporation,  not  expressly  incorporated  for  that  pur- 
pose, from  carrying  on  that  business,  and  the  constitution  of  the 
state,  section  4,  article  8  of  the  state  constitution,  prohibited  the 
state  legislature  from  passing  any  act  granting  a  special  charter 
for  hanking  business.  The  court  held  that  the  transactions 
between  the  plaintiff  and  defendants  constituted  hanMnghiisiness, 
within  the  meaning  of  the  statute,  and  that  the  defendant  was  not 
estopped  from  setting  up  the  invalidity  of  the  notes,  as  the  transac- 
tion was  one  expressly  forbidden  by  the  laws  of  the  state.  Daniels, 
J.,  in  a  very  able  opinion,  among  other  things,  says:  "If  the 

551.  And  a  mortgage  given  to  the  state,  cliises,  including  all  right  to  exist  as  a 
by  virtue  of  a  provision  of  the  statutes,  corporation.  St.  Paul  R.  Co.  v.  Parcher, 
and  expressed  to  be  on  "  roads,  lands,  14  Minn.  297  ;  Farmers'  L.  &  T.  Co. 
and  franchises,"  has  been  held  on  fore-  v  Commercial  Bank,  15  Wis.  424  ;  Par- 
closure  and  sale  to  convey  all  the  fran-  ish  v.  Wheeler,  22  N.  Y.  494. 

*  N.  Y.  Trust  and  Loan  Co.  v.  Helmer,  12  Hun,  35. 


390  Pkivatk  Corporations. 

position  urj^ed  upon  the  consideration  of  the  court  (by  the  plaintiff) 
should  receive  its  sanction,  the  statute,  whose  restraint  has  been 
violated,  would  be  practically  repealed.  For  it  woidd  be  held  that 
what  the  legislature  have  declared  that  the  plaintiff  should  not  do 
might  safely  be  carried  on  under  the  sanction  of  the  courts.  That 
would  render  the  statute  nugatory,  which  would  violate  the  duty 
and  authority  vested  in  the  court,  and  rendered  obligatory  upon 
it.  The  notes  could  not  be  discounted,  and  received  in  plain  vio- 
lation of  the  terras  of  the  statute  of  the  state."  ^  In  a  late  Pennsyl- 
vania case''  the  same  rule  was  adopted  in  a  case  where  a  national 
bank,  contrary  to  the  prohibition  of  the  national  banking  act, 
took  a  mortgage  of  real  estate,  partly  to  secure  ?^  future  loan,  and 
partly  to  secure  the  payment  of  pre-existing  notes.  The  court 
had  previously  held  that  a  mortgage  given  to  secure  the  payment 
of  future  loans  was  ultra  mres^  and  in  the  case  first  cited  they 
held  that  as  to  the  future  loans,  the  mor-tgage  was  void,  but  was 
good  as  to  those  existing  when  the  mortgage  was  made.  The  doc- 
trine of  estoppel  in  jpais  does  not  extend  so  far  as  to  enable  a  coi^ 
poration  to  do,  in  effect,  what  is  forbidden  by  law,  or  what  it  is, 
other mise,  wholly  incapable  of  doing,  and,  when  a  contract  is 
wholly  ultra  vires,  it  cannot  acquire  validity  from  the  circum- 
stance that  it  has  been  treated  and  acted  upon  by  the  parties  as  a 
valid  transaction."  Thus,  where  a  lease,  made  by  a  railroad  com- 
pany, of  its  property  and  franchises  was  made,  which  it  had  no 
'power  to  make,  it  was  held  that  it  had  no  power  to  ratify  it,  by 
accepting  rent  upon  it.* 

If  a  contract,  which  is  ultra  vires,  is  executed  by  a  corporation 
or  by  an  agent  on  its  behalf,  and  by  virtue  thereof  it  receives  the 
consideration  and  fruits  of  the  same,  and  appropriates  it,  and  all 
the  members  receive  the  benefit  of  it  and  acquiesce  therein,  the 
plea  of  ultra  vires  cannot  be  maintained  by  such  corporation  as  a 
defense  to  an  action  on  the  contract. 

'Firemen's  Ins.  Co.  v.  Ely,  2  Cow.  '^  Woods  v.  People's  National  Bank, 

678;  N.  Y.  Life  Ins.  and  Trust  Co.  v.  83  Penn.  St  57. 

Beebe,  7  N.   Y.  364;    Seneca  County  spo^iery,  Scully,  72  Penn.  St. 456. 

Bank  v.  Lamb,  26  Barb.  595;  Barton  '^  In  re  Comstock,  3  Saw.  (U.  S.  C. 

V.  Port  Jackson  Plankroad  Co.,  17  id.  C.)  218. 

397;    De Witt  v.  Brisbane,   16  N.   Y.  ^  Ogdensburgli,    etc.,   R.  R.    Co.    v. 

508  ;  Richie   v.   Aslabury  Co.,  7  Irish  Vermont,  etc.,  R.  R.  Co.,  4  Hun,  268. 
App.  653. 


Corporate  Contracts.  391 

If  a  contract  is  entered  into  by  a  corporation  or  its  agents,  wliich 
is  ultra  vires  so  long  as  it  remains  wholly  unexecuted,  any  stock- 
holder, or,  under  certain  circumstances,  a  creditor,  may,  by  a  proper 
proceeding,  restrain  the  execution  of  the  same. 

If  a  contract  is  ultra  vires,  because  it  is  in  violation  of  positive 
law  or  against  public  policy,  the  execution  of  it  may  be  restrained 
upon  proper  proceedings  in  equity  to  that  end,  and  instituted  by 
a  stockholder   or  other  interested  party. 

If  a  contract  is  ultra  vires,  it  is  held  by  some  of  the  authorities 
that  this  may  be  set  up  as  a  defense  to  an  action  on  the  contract ; 
but  in  such  a  case  the  other  party  to  such  contract,  or  his  assigns, 
may,  in  all  cases,  recover  the  consideration  of  the  contract,  viz.  : 
the  money  advanced  or  the  value  of  the  property  delivered 
thereon. 

That  in  all  cases  where  money  or  property  has  been  received 
by  a  corporation,  by  virtue  of  a  contract,  and  the  act  has  received 
the  universal  assent,  either  express  or  implied,  of  the  corporators, 
such  contract  will  be  binding,  notwithstanding  it  may  be  ultra 
vires :  and  if  a  defense  by  the  corporation,  of  ultra  vires,  can  be 
successfully  interposed  to  a  recovery  on  such  contract,  it  can- 
not defeat  the  right  of  the  other  party  to  recover  the  amount  of 
money  advanced  or  the  value  of  property  actually  delivered  by 
him,  and  received  and  appropriated  by  such  corporation. 

The  better  doctrine  would  seem  to  be  that  where  a  contract  in 
excess  or  outside  the  corporate  powers  has  been  made  by  a  corpo- 
ration, and  it  has  received  the  full  consideration  and  appropriated 
the  same,  so  that  it  cannot  be  restored  and  the  other  party  placed 
in  statu  quo,  and  especially  where  no  objection  is  interposed  upon 
the  part  of  those  who  might  have  made  it,  the  corporation  will 
generally  be  bound  by  the  contract,  the  same  as  a  natural  person. 

And  it  may  also  be  said  that,  although  a  contract  loholly  out- 
side the  purposes  of  its  creation  is  entered  into,  is  void,  yet,  if 
a  corporation  contracts  with  reference  to  matters  within  its 
powers,  but  in  doing  so,  exceeds  them,  the  person  with  whom  it 
deals  cannot  set  up  such  excessive  exercise  of  its  corporate  pow- 
ers to  avoid  the  contract.- 

1  Little-worth  v.  Davis,  50  Miss.  463  ;  WhitDey  Arms  Co.  v.  Barlow,  63  N. 
Y.  02 ;  Ciinnou  v.  McNab,  48  Ala.   99. 


392  Private  Corporations. 


CHAPTER  X. 

THE   CORPORATE    SEAL. 

Sec.  244.  Definition  ;  history. 

Sec.  245.  History  of  private  seals. 

Sec.  240.  How  seals  came  into  use. 

Sec.  247.  Incident  of  a  corporation. 

Sec.  248.  Former  doctrine  as  to  corporate  seals. 

Sec.  249.  Origin  of  the  law  relating  to  corporate  seals. 

Sec.  251.  Corporate  seals  ;  present  doctrine  in  reference  to. 

Sec.  254,  255.  What  is  a  common  seal. 

Sec.  256.  By  whom  the  seal  should  be  affixed. 

Sec.  257.  Whei-e  an  acknowledgment  is  required. 

Sec.  258.  Doctrine  in  relation  to  agents. 

Sec.  260.  The  seal  as  evidence. 

§244.  Definition;  history.  —  A  seal  lias  been  defined  as  an  im- 
pression upon  wax,  wafer,  clay,  or  some  other  tenacious  substance 
capable  of  being  impressed.'  Lord  Coke  defined  it  as  wax  with 
an  impression ;  sigillum  est  cera  impressa,  quia  cera  sine  iin- 
jpressione  non  est  sigillum.'^  But  the  former  practice  of  using 
wax  or  wafers  has  grown  into  disuse  with  corporations,  as  well 
as  for  private  seals ;  and  with  the  former,  at  least,  an  impression 

*  3  Inst.  169;  Warren   v.  Lynch,  5  225.     And  in  Vermont  it  has  been  held 

Johns.  239.  that  a   corporation   might  convey   by 

^  3  Inst.  169.     See,   also,  Mill  Dam  the    deed   of    their   president,  sealed 

Foundry    v.  Hovey,    ^1    Pick.  417  ;  4  with   his   private  seal.       Warner    v. 

Kent's  Com.  452.     But  a  distinct  im-  Mower,  11  Vt.  385.     See,  also,  Lunney 

pression  of  the  seal  upon  paper  i.s  gen-  v.  East  Warren   Co.,   43   N.    H.  343; 

erally  held  a  sufficient  seal,  without  Goddard's  Case,  2   Coke,    5  ;  Sutton's 

wax  or  wafer.     Carter  v.  Burley,  9  N.  Hospital     Case,     10     id.    30  5.        But 

H.  558.     See,  also.  Mill  Dam  Foundry  see  Baxter  v.  State,  15  Wis.  488,  where 

V.  Hovey,   21    Pick.    417;  Hendee   v.  a  seal  composed   of  a   piece   of  paper 

Pinkerton,  14  Allen,  381.     Ifthepresi-  affixed  to  a  contract  made   by   a  com- 

deut   of    a    corporation,     which     has  mi.ssioner  on  behalf  of  the  state  was 

adopted  no  corporate  seal,  executes  a  held  to  be  simply  the  seal  of  the  coni- 

mortgage  deed,  and  the  trustees  adopt  missioner.     Also,  Regents  of  Uuiver- 

a   seal   that   he   affixes   opposite    his  sity  v.  Detroit,  etc.,  Society,  12   Mich, 

name  as  the   seal   of  the   corporation  138,  where  the  individual  seal   of  an 

for  the  time  being,  such   seal   is   suf-  agent  of  a  corporation  to  a    corporate 

ficieut.     South  Baptist    Soc.  v.  Clapp,  contract   was   held   simply   nugatory 

18  Barb.  36.     And  a   corporation  may  But  in  Porter   v.    Androscoggin,   etc., 

adopt  the  seal    of  another,   or  an  ink  R.  R.  Co.,  37  Me.  349,  a  seal   attached 

impression  as  a   seal.      Crossman   v.  by  an  agent  to  a  corporate  contract   is 

Hilltown,  etc.,  Co.,   3   Grant   (Penn.),  treated  as  the  seal  of  the  corporation. 


The  Corporate  Seal.  393 

on  parchment  or  paper  is  generally  considered  as  suflicient  and 
equivalent  to  an  impression  on  wax  or  wafer. 

§  245.  History  of  private  seals — The  use  of  scals  may  be  traced 
to  a  very  remote  antiquity,  and  private  signets  and  rings  were 
at  an  early  period  nsed  for  sealing  in  the  place  of  signatures, 
and  as  insignia  of  authority.  Thus,  w^e  iind  King  Darius  sealing, 
"  with  his  own  signet  and  with  the  signet  of  his  lords."'  And 
Ahasuerus  said  to  Esther,  the  queen,  "  write  ye  also  for  the  Jews 
as  it  liketli  you,  in  the  king's  naine,  and  seal  it  with  the  king's 
ring ;  for  the  writing  which  is  written  in  the  king's  name  and 
sealed  with  the  king's  ring  may  no  man  reverse." ' 

It  seems,  also,  that  private  seals  were  in  common  use  among 
the  Romans,  and  especially  in  attestation  of  testaments. ' 

In  the  times  of  the  early  English  Saxons,  it  does  not  appear 
that  seals  were  much  in  use  in  England.  According  to  Black- 
stone,  it  was  the  practice  of  the  illiterate  to  affix  to  instruments  a 
cross  instead  of  a  signature ;  and  the  French  Normans  used  only 
a  seal.  He  says :  "  The  method  of  the  Saxons  was  for  such  as 
could  write  to  subscribe  their  name,  and  whether  they  could  write 
or  not,  to  affix  the  sign  of  the  cross,  which  custom  our  illiterate  vul- 
gar do,  for  the  most  part,  to  this  day  keep  up,  by  signing  their  mark 
when  unable  to  write  their  names.  And,  indeed,  this  inabilitv  to 
write,  and  therefore  making  a  cross  in  its  stead,  is  honestly 
avowed  by  Caedwalla,  a  Saxon  king,  at  the  end  of  one  of  his 
charters.  In  like  manner,  and  for  the  same  insurmountable  rea- 
son, the  Normans,  a  brave,  but  illiterate  nation,  at  their  first 
settlement  of  France,  used  the  practice  of  sealing  only  without 
writing  their  names,  which  custom  continued  when  learning  made 
its  way  among  them,  though  the  reason  for  doing  so  ceased ;  and 
hence  the  charter  of  Edward  the  Confessor  to  Westminster  Abbey 
himself  being  brought  up  in  Normandy,  was  witnessed  only  by 
his  seal,  and  is  generally  thought  to  be  the  oldest  sealed  charter, 
of  any  authenticity,  in  England.     At  the  conquest,  the  Norman 

'  Bible,  Daniel  G,  v.  17.     And   it   is  esis,  chap.  33,  v.  18  ;  Jeremiah,  chap, 

recorded  that  Jezebel,  wife  of  Ahab,  23,   v.  10,  11. 

king  of   Samaria,  "  wrote  letters  and  '■'  Bible,    Esther,  chap.  8,  v.  8.     See, 

sealed  them  with  his  seal."     Bible,  1  also,  Jeremiah,  chap.  '62. 

Kings,  chap.  21,  v.  8.     See,  also,  Gen-  ^  2  Bl.  Com.  305  ;  4  Kent's  Com.  453. 

50 


394  Private  Cokpokations. 

lords  brought  over  into  this  kingdom  their  own  fasliions,  and  in- 
troduced waxen  seals  only,  instead  of  the  English  method  of  writ- 
ing their  names  and  signing  with  the  sign  of  the  cross.  And  in 
tlie  reign  of  Edward  I,  every  freeman,  and  even  such  of  the 
more  substantial  villeins  as  were  fit  to  be  put  upon  juries,  had  their 
distinct  particular  seals.  *  *  *  This  neglect  of  signing,  and 
resting  only  upon  the  authenticity  of  seals,  remained  very  long 
among  us  ;  for  it  was  held,  in  all  our  books,  that  sealing  alone  was 
sufficient  to  authenticate  a  deed  ;  and  so  the  common  form  of 
attesting  deeds,  sealed  and  delivered,  continues  to  this  day." 

Sec.  246.  How  seals  came  into  use.— From  what  has  been  said 
it  is  evident  that  private  seals  came  into  use  from  the  inability  of 
parties  to  write ;  and  that  the  practice  is  continued  both  with 
natural  persons  as  well  as  corporations,  from  a  custom  that  would 
perhaps  be  "  more  honored  in  the  breach  than  the  observance." 

Sec.  247.  incident  of  a  corporation.  —  A  right  to  have  and  use  a 
common  seal  is  said  to  be  incident  to  all  corporations.^  The  use 
of  the  common  or  corporate  seal  by  corporate  bodies  is  supposed 
to  have  originated  like  private  seals,  from  the  general  inability  of 
persons  to  write,  although  Sir  Wm.  Blackstone  attributes  the  use 
of  a  common  seal  to  the  fact  that  "  a  corporation  being  an  invis- 
ible body  cannot  manifest  its  intentions  by  any  personal  act  or 
oral  discourse,  it,  therefore,  acts  and  speaks  only  by  its  common 
seal."^ 

This  is  not,  however,  literally  correct,  as  the  will  of  the  corpo- 
rate body  can  only  be  expressed  by  a  vote  or  voice  of  the  majority 
of  its  members ;  *  and  the   common  seal  affixed  to  a  corporate 

1  3  Bl.  Com.  305.  26  id.  438;  Savings  Bank   v.  Davis,  8 

'^  Bac.  Abr.,  title  Corp.  3.  Conn.  191  ;  Poultney  v.  Wells,  1  Aik. 

^  1  Bl.  Com.  475.  180;  Milledge  v.    Boston    Iron    Co.,  5 

4  Tlie    ancient    doctrine    has    been  Cush.    158  ;    Dan  forth    v.    Schoharie 

departed  from,  in  the   modern   decis-  Turnpike  Co.,  13  Johns.  337  ;  Dunn  v. 

ions.     Chesapeake,  etc.,  Co.  v.  Kuapp,  Rectorof  St.  Andrew's,  14  id.  118;  Mott 

0  Pet.  541;  Fleckner  v.  Bank  of  United  v.  Hicks,  1  Cow.  513  ;  Brady  v.  Mayor, 

States,  8  Wheat.   338,    where   it    was  etc.,   of  Brooklyn,    1    Barb.    584;  St. 

held  that    the    acts   of    a  corporation  Mary's  Church    v.  Cagger,  6    id.   576  ; 

may  be  evidenced  by  a  written  vote  as  Peter.son  v.  Mayor,  etc.,  of  New  York, 

well  as    by    the    corporate   seal.     See  17  N.    Y.    449  ;  North    Whitehall    v. 

Maine   Stage    Co.  v.  Langley,  14    Me.  South  Whitehall,  3  S.  &  R.  117  ;  '-hest- 

444;  Badger  v.  Bank  of  Cumberland,  nut  Hill  Turnpike  Company  v.  Rutter, 


The  Corporate  Seal,  395 

instnimcnt  is  only  authenticated  evidence  of  such  corporate  will. 
If  authority  is  by  the  corporators  or  by  the  fundamental  law 
of  the  corporation  conferred  upon  a  certain  number  of  its  mem- 
bers, as  a  board  of  directors,  they  nuiy  undoubtedly  represent  the 
members  and  are  supposed  in  their  vote  or  acts  to  represent  the 
body  of  the  corporators.  And  the  annexation  of  a  common  or  cor- 
porate seal  to  any  corporate  conveyance  or  contract  is  evidence  only 
that  the  majority  of  the  corporators  have  assented  to  such  con- 
veyance or  contract ;  and  when  it  is  used  it  is  in  attestation 
of  this  will,  although  Blackstone  observes  in  reference  to  the 
corporate  seal,  that  "  it  is  the  fixing  of  the  seal,  and  that  only, 
which  unites  the  several  assents  of  the  individuals  who  compose 
the  community  and  makes  one  joint  assent  of  the  whole."  ^  But 
it  is  evident  that  this  idea  of  the  corporate  seal  is  imaginary  and 
rests  upon  no  real  foundation.  It  is  a  mere  sign  of  the  corporate 
will — a  mere  evidence  of  corporate  action  ;  and  in  this  respect 
possesses  no  higher  qualities  or  virtue  than  the  private  seal  of  an 
individual.  The  practice  of  using  a  corporate  seal  properly  origi- 
nated, as  we  have  suggested,  in  an  age  of  general  ignorance  of  the 
art  of  writing  ;  and  like  the  private  seal  it  has  continued  in  use, 
althouii'h  the  orio;inal  reason  for  its  use  has  ceased  to  exist. 

Sec.  24:8.   Former  doctrine  as  to  corporate  seals.  —  It  was   formerly 

held  that  the  corporate  assent,  as  we  have  stated,  could  only  be 
expressed  by  the  corporate  seal.  But  there  has  been  a  great  re- 
laxation of  this  rule,  if  it  is  not  entirely  discarded."  And  the  gen- 

4  id.  IG  ;  Hamilton  v.  Lycoming  Mu-  Ind.  359;  Smith  v.  Congregational 
tual  Insurance  Company, JJPenn.  St.  o44;  Meeting  House,  8  Pick.  178  ;  Abbott  v. 
Union  Bank  of  Maryland  v.  Kidgelv,  Hermon,  7  Me.  118;  Watson  v.  Bennett, 
1  H.  &  U.  329,  413 ;  Elysville  Man"u-  13  Barb.  196  ;  American  Ins.  Co.  v. 
facturing  Co.  v.  Okisko'Co.,  1  Md.  Ch.  Oakley,  9  Paige,  496;  Stone  v.  Berk- 
Dec.  393  ;  Petrie  v.  Wright,  6  S.  &  M.  shire  Congregational  Society,  14  Vt. 
647 ;  Baptist  Church  v.  Mulford,  3  86 ;  Gasset  v.  Andover,  21  id.  342 ; 
Halst.  182  ;  Conmiercial  Bank  v.  Xew-  Sheldon  v.  Fairfax,  id.  102;  State  v. 
port  Manufacturing  Co.,  1  B.  I\Ionr.  13;  Morris  it  Essex  R.  R.  Co.,  23  N.  J.  L. 
Garvey  v.  Colcoke,  1  Nott  &  McC.  231;  360  ;  Palm  v.  Medina  Ins. Co.,  20  Ohio, 
Union  Bank  V.  Jacobs,  6  Humph.  515  ;  529  ;  Muir  v.  Louisville  &  Portland 
Hamilton    v.  Newcastle   R.   R.    Co.,  9  Canal  Co.,  8  Dana,  161. 

1  1  Bl.  Com.  475.  •  Copper  Mines  v.  Fox,  16  Q.   B.   229  ; 

^Henderson    v.     Australian    Royal  Diggle  v.  Jjondon,  etc.,  R.  Co.,  5Exch. 

Mail,  etc.,  Co.,  5  E.  &  B.  40!> ;  Same  v.  442  ;  Mayor  of  Ludow   v.  Charlton,  6 

Marzetti,  11  Esch.  228  ;  Fishmongers'  M.    &    W.    815;  Arnold    v.    Mavor   of 

Co.  V.  Robertson,  5  M.  &Q.  131  ;  Clark  Poole,    4   M.    &   G.    860;     Paine    v. 

V.  Cucktield,  11   Eng.    L.  &  E.    443;  Strand  Union,  8  Q.  B.  226  ;    Church  v. 


396  PrIVATK    CoKl'OliATIONS. 

eral  doctrine  now  recognized  is,  that  the  corporation  may  make  con- 
tracts, by  the  will  of  the  majority  of  the  corporators,  or,  which  is  the 
same  thing,  by  the  action  and  will  of  the  majority  of  those  author- 
ized to  act  for  the  body  ;  the  corporate  seal  being  only  essential, 
if  at  all,  in  case  of  the  conveyance  of  lands  or  the  more  important 
contracts.  It  has  been  truly  said  that  "  as  the  art  of  writing  became 
more  common  in  England,  tlie  practice  of  concurring  with  the  tenor 
of  every  written  instrument  hy  seal,  an  account  of  its  inconven- 
ience, grew  into  disuse  with  individuals,  and  was  confined  to  those 
writings  of  a  peculiarly  high  and  solemn  kind,  which  were  em- 
ployed in  the  transfer  of  lands  and  acts  of  the  like  nature.  The 
practice,  however,  still  continued  with  the  old  corporations  of  the 
common  law,  perhaps  from  the  natural  inflexibility  of  bodies  of 
men,  where  many  wills  must  concur  to  a  change,  and  because 
owing  to  the  comparative  paucity  of  their  contracts  and  the  num- 
ber of  their  agents,  the  inconvenience  of  this  mode  of  contracting 
would  be  less  sensibly  felt  by  them  than  by  individuals.  It  is 
probable  that  in  this  way  grew  up  the  old  rule,  so  long  and  so 
well  established  in  England,  that  except  in  the  administration  of 
its  internal  affairs,  as  the  election  of  officers  and  the  like,  cor- 
porations aggregate  could  signify  their  assent  only  by  their 
common  seal,  and  of  course  could  act  and  contract  only  by  deed."  ^ 

Imperial,  etc.,  R.  Co.,  6  A.  &  E.    840  ;  Columbia  v.  Patterson,  7  Crancli,  399  ; 

Smart  v.  West  Ham.  Union,  10  Exch.  Mott  v.  Hicks,  1  Cow.  513 ;  Union  B'k 

867  ;  Renter  v.   Elec.  Tel.  Co.,  6  E.  &  v.   Ridgely,    1  Harr.    &   G.    324  ;  The 

B.  341  ;  37  E.  L.    &  E.   189  ;  liow   v.  Banks  v.   Poitiaus,  3  Rand.  (Va.)  136  ; 

London,    etc.,    R.    Co.,   18   Q.    B.    633.  Fleckner  v.  Bank  of   U.  S.,  8   Wheat. 

The    former    doctrine     seems    to    be  338  ;    Danforth   v.    Schoharie   Turnp. 

entirely   discarded    in    this    country.  Co.,  12  Johns.  227. 

Bank    of    Columbia   v.    Patterson,   7  If  the  common  seal  is  affixed  to  an 

Cranch,  299  ;  Chestnut  Hill  Turnp.  Co.  instrument,  and  the  signatures  of  the 

V.  Rutter,  4  S.  &  R.  16  ;  School  District  proper  officers,  the  courts  will  presume 

V.  Wood,  13  Mass.  199  ;  Bank  of  U.  S.  that  they  did  not  exceed  their  author- 

V.  Dandridge,  12  Wheat.  64  ;  Bank  of  ity.     Morris  v.  Keil,  20  Minn.  531 . 

'  An  interesting  article  on  the  sub-  in  the  bark  '  or  was,  but  recognized  a 

ject   of   seals   may    be    found   in    the  substantial   and  intelligible  principle 

American  Law  Review,  vol.  1,  p.  638.  and  distinction,   viz.,  that  the  distinct- 

The  author  among  other  things  refers  ive  element  of  sealing  is  the   solemn 

to  the  antiquity  of  seals  and  observes  :  and  formal  authentication  of  an  instru- 

"  It  seems  to  us,  moreover,  that  a  ment  by  the  impression  of  some    per- 

])hilological  and  historical  examination  manent  symbol  or  token   besides  the 

of  the  question  leads  to  the  gratifying  signature,  and  has   never  selected  or 

conclusion,  that  the  common  law,  in  prescribed    any    single    material     on 

this  as  in  other  matters,  did  not  '  stick  which  that  symbol  must  be  impressed. 


The  Cokpokate  Seal. 


397 


Sec.  249.  Origin  of  the  law  relating  to  corporate  seals.  —  Wc  have 
referred  to  the  origin  of  the  use  of  ])rivate  as  well  as  corporate 
seals,  and  the  doctrine  of  the  common  law  that  the  corporate  body 


"  It  may  not  be  uninteresting,  witli- 
out  attempting  to  pursue  the  subject 
through  all  history,  to  recur  to  some 
of  the  most  ancient  illustrations  of  a 
similar  custom.  Lord  Coke  and  the 
writers  of  his  age  would  liardiy  have 
rejected  the  authority  of  Job(xxxviii, 
14),  where  we  find  the  words,  '  It  is 
turned  as  clay  to  the  seal.' 

"  Impressions  of  seals  upon  clay 
have  been  discovered,  which  are 
thought  to  be  of  great  antiquity. 
Smith's  Diet,  of  tlie  Bible,  verb.  Clay 
and  Seal.  Mr.  Layard,  in  his  '  Dis- 
coveries in  the  Ruins  of  Nineveh  and 
Babylon '  (Part  1),  refers  to  such  in- 
stances. '  Other  corroborative  evi- 
dence,' he  says  (p.  153),  'as  to  the 
identity  of  the  king  who  built  the  pal- 
ace of  Kouyunjik  with  Sennacherib  is 
scarcely  less  remarkable.  In  a  chamber 
or  passage  in  the  south-west  corner  of 
this  edifice  were  found  a  large  number 
of  pieces  of  fine  clay,  bearing  the  im- 
pressions of  seals  (resembling  the 
YV  ^^/-tocvrpii  [the  sealing  earth]  of 
the  Greeks),  which  there  is  no  doubt 
had  been  affixed,  like  modern  official 
seals  of  wax  to  documents  written  on 
leather,  papyrus  or  parchment.  Such 
documents,  with  seals  in  clay  still 
attached,  have  been  discovered  in 
Egypt,  and  specimens  are  preserved 
in  the  British  Museum.  The  writings 
themselves  had  been  consumed  by  the 
fire  which  destroyed  the  building,  or 
had  perished  from  decay.  In  the 
stamped  clay,  however,  may  still  be 
seen  the  holes  for  the  string,  or  strips 
of  skin,  by  which  the  seal  was  fast- 
ened ;  in  some  instances,  the  ashes  of 
the  string  itself  remain  (M.  Botta  also 
found  at  Khorsabad  the  ashes  of  string 
in  lumpsof  clay  impressed  with  a  seal, 
without  being  aware  of  their  origin), 
with  the  marks  of  the  fingers  and 
thumb.'  And  again  (p.  156  n.)  :  '  Not  to 
instance  the  clay  seals  found  attached 
to  the  rolls  of  papyrus,  containing  let- 
ters written  in  the  time  of  the  Ptole- 
mies and  Romans,  there  are  in  the 
British  Museum  seals  bearing  the 
name  of  Shashank  or  Shishak  (No. 
558"i),  of  Amasis  II,  of  the  twenty- 
sixth  dynasty  (No.  5584),  and  of  Naf  u- 


arut  or  Nepherophia,  of  the  twenty- 
ninth  dynasty  (No.  5585).  Such  seals 
were,  therefore,  affixed  by  the  Egyp- 
tians to  public  documents  ;  and  it  was 
in  accordance  with  this  principle,  com. 
mon  to  the  two  monarchies,  that  the 
seal  of  the  Egyptian  king  has  been 
found  in  Assyria.'  So  (p.  159),  'It 
would  seem,  that,  a  peace  having  l)een 
concluded  between  the  pjgyptiatis  and 
one  of  the  Assyrian  monarchs,  prol)- 
ably  Sennacherib,  the  royal  signets  of 
the  two  kings,  thus  found  together, 
were  attached  to  the  treaty,  which  was 
deposited  amongst  the  archives  of  the 
kingdom.  Whilst  the  document  itself, 
written  upon  parchment  or  papyrus, 
has  completely  j)erished,  this  singular 
proof  of  the  alliance,  if  not  actual 
meeting,  of  the  two  mouarchs,  is  still 
preserved  amidst  the  remains  of  the 
state  papers  of  the  Assyrian  Empire.* 
The  reader  who  has  seen  an  English 
patent,  with  its  pendent  seal,  or  the 
cumbrous  attachments  of  treaties,  will 
be  struck  with  this  evidence  of  the 
antiquity  of  the  custom  thus  pre- 
served ;  and  the  citations  which  fol- 
low furnish  evidence  of  its  connection, 
by  a  chain  of  legal  and  political  usage, 
with  the  present  time.  Sigillum  is 
the  original  word  now  translated  into 
seal,  and  the  word  used  by  ancient 
writers,  among  them  Lord  Coke, 
whose  authority  is  ofteii  cited  and 
relied  upon  in  reference  to  this  point. 
Sigillum, signuin and  sigmvculum  mean 
a  mark,  figure,  or  impression,  on  what- 
ever material  or  substance.  Leverett's 
Latin  Lexicon  defines  dgillum,  the 
diminutive  of  sigimm,  as  'a  little 
image  or  figure,'  while  sigiium  is  said 
to  mean  '  a  mark  or  sign,"  and  as  a 
derivative  or  secondary  meaning, '  the 
impression  of  a  seal,  seal.'  And,  in 
the  large  Lexicon  Totius  Latinitatis  of 
Facciolatus  and  Forcellinus,  the  fol- 
lowing definition  is  given  :  '  De  imag- 
ine, qute  annulo  signatorio  in  cera 
aliave  matcrin  impriiuitur,obsignandis 
litteris,  amphoris,  scriniis,'  etc.  It 
does  not  seem  necessary  to  inquire 
when  traces  of  a  custom  of  such  early 
origin  can  first  be  found  in  the  Middle 
Ages.     The    pendent     seals    already 


398  Private  Cokpokations. 

could  only  act  or  express  its  action  or  assent  by  its  common  seal. 
The  early  English  doctrine  on  this  subject  was  peculiar  to  the 
common  law,  and  not  borrowed  from  the  civil  law,  from  whence 
came  most  of  the  princij^les  and  doctrines  relating  to  corporations. 
For,  according  to  Ayliffe,  corporations  might  contract  directly  by 
vote  without  the  intervention  of  officers  or  agents,  and  of  course 
without  the  use  of  a  seal.' 

In  relation  to  seals,  it  may  with  propriety  be  observed,  that 
their  use  having  originated  in  the  ignorance  of  people  of  the  art 
of  writing,  and  this  reason  for  the  use  of  them  having  now  been 
generally  removed  by  the  general  intelligence  and  ability  of  people 
to  write,  there  would  seem  to  be  no  good  reason  for  a  continuance 
of  it,  either  as  a  private  or  corporate  practice.  And,  accordingly, 
we  find  it  rapidly  going  into  disuse ;  and  much  of  the  former 
technical  doctrines  relating  to  seals  and  sealed  instruments  prac- 
tically disregarded,  or  at  least  greatly  changed.  .  And  although 
JBlackstone  affirmed  that  "  a  corporation  being  an  invisible 
body  cannot  manifest  its  intentions  by  any  personal  act  or  oral 
discourse,  it,  therefore,  acts  and  speaks  only  by  its  common  seal. 
For  although  the  particular  members  may  express  their  private 
consents  to  any  act  by  words  or  signing  their  names,  yet  this  does 
not  bind  the  corporation ;  it  is  the  fixing  of  the  seal,  and  that  only, 
which  unites  the  assents  of  the  individuals  who  compose  the  com- 
munity, and  makes  one  joint  assent  of  the  whole;  "  Mt  is  evident 

mentioned  were  then  used;  and  in  the  says  they  were  used  in  France  about 

Glossary    of    Du    Cange   (Didot's    ed.  the  ninth  or  tenth  ;  while   it  is  stated 

1846,  with  rtdditions  by  different  hands,  that  the  use  of  seals  of  any   kind  was 

here  referred  to  without  distinction),  entirely  unknown  in    England  in  the 

we  find  it  stated  in  reference  to  these  :  beginning    of    the    eleventh    century. 

'  Peusilium  sigillorum,  non  nuperum  (verb.  SigiUum,  p.  241.)     On  the  con- 

sed    jierantiquum    usum    fuisse,    licet  tinent,    gold,    silver,    and    lead    were 

colligere  et  iis  quae  de  Bullis  observa-  used.     Sometimes  lead  was  used  '  loco 

vimus,  ubi  'plaiabens  et  aurens  Bullas  cer^e,' or  with  wax,  and  wax  with  gold, 

primitus,  filo  aut  serico  tabulis  appen-  '  ut  si  aureum  subriperetur  remaneret 

sas,    docuimus.'     '  Sed.'   it   is   added,  alter um.'" 

'  quando  cerea  istiusmodi    sigilla   pe-  (Du  Cange, )         ,     ^  „     SiniLlum 

rinde    Uteris    appendi    cceperint   non  Cowel,         \  ^^^'^-  ^""*'  ^^9Utum. 

plane  constat.'  '  Dubius  hseret  ipsemet.  Tomlin's    Jacob's   verb.    Bull    and 

Cangius.'     In  one  place  he  speaks  of  Seal.) 
the   twelfth   century ;   in   another  he 

e 

'  Ayliffe'a  Civ.  Law,  B.  2,  tit.  35,  p.  Wood's  Civ.  L.  136  ;  Browne's  Civ. 
198.     See,   also,   2    Bl.    Com.    805  ;   2     Law,  B.  1,  104. 

5 1  Bl.  Com.  475. 


The  Corporate  Seal.  399 

that  the  corporate  seal  did  not  unite,  in  fact,  the  wills  of  tlie 
many  members  of  a  corporation  aggregate,  but  that  that  will  at  all 
times  could  only  be  expressed  by  the  vote  cast  by  its  members,  or 
a  majority  of  them  ;  and  the  common  seal  only  furnished  evidence 
of  that  will,  as  thus  expressed. 

The  seal  did  not  make  "  one  joint  assent  of  the  whole,"  but 
was  high,  if  not  conclusive,  evidence,  of  the  corporate  assent. 
And  it  was  never  true  that  this  assent  could  only  be  shown  by 
the  common  seal.  The  records  of  corporate  action  were  always 
evidence  to  show  that  by  the  votes  of  its  members  by-laws  had 
been  adopted,  certain  officers  elected,  and  agents  appointed  for 
general  or  special  purposes.  And  the  agents  thus  appointed  can 
bind  the  corporation  to  any  contract  within  the  scope  of  tlie  au- 
thority thus  conferred  upon  them  by  a  mere  corporate  vote,  with- 
out the  use  of  the  common  seal,  and  without  any  authority  con- 
ferred by  a  common  seal.  But  where,  by  law,  a  valid  contract 
can  only  be  executed  by  a  seal  of  the  parties,  the  seal  of  the  cor- 
poration may  be  required  to  constitute  a  valid  contract.' 

Sec,  250,  Instead  of  affirming  that  "a  corporation  being  an 
invisible  body  cannot  manifest  its  intentions  by  any  personal  act 
or  oral  discourse,"  and  that  "  it  therefore  acts  and  speaks  only  by 
its  common  seal,"  it  seems  to  me  it  would  be  more  correct  to  say, 
that  as  it  is  a  mere  ideal  body,  composed  of  members,  a  majority 
of  whose  wills  constitute  the  will  of  the  corporate  person, 
this  corporate  will  can  only  be  evidenced  by  a  fair  expression 
of  the  wills  of  this  majority,  of  which  the  records  of  the  corpora- 
tion in  this  respect  are  the  best  evidence,  and  that  the  signatures 
of  officers  or  agents  properly  made,  and  the  annexation  of  the  cor- 
porate seal,  is  but  evidence  and  authentication  of  the  corporate 
will  and  action,  expressed  in  some  manner  at  a  meeting  of  its 
members,''     The  truth  is,  that  though  in  its  decay,  the  Roman 

'  The  civil  law,  in  the  shape  in  wliicli  tiona  aggreojate  at  the  common  law  ; 

we  have  it,  was  instituted  amongst  a  yet,  we  find  that   not   only    did    they 

])eople  more  literate  than  that  which  appoint  officers,  capable  of  contracting 

gave  origin  to  the  common  law.     From  without    seal,    but    themselves    con- 

the   nature    of   the    corporations   and  traded  directly  by  vote,  without  the 

communities    existing    under    it,    the  intervention  of  any  officers  whatever, 

same  incapability,  literally  speaking,  Aylitfe's  Civ.  L.,  B.  2,  tit.  35,  p.  118, 
of   personal  act  or  of   oral  discourse,        ^  See  1  Redf.  on  Kail.,  §  143. 
wag  attached  to  them  as  to  corpora- 


400  Private  Cokpokations. 

empire  was  won  back  to  ignorance  by  barbarous  invaders;^  in 
its  better  days,  neither  individuals  nor  corporations  existing  within 
it  were  in  general  compelled  to  use  seals  by  way  of  signature 
from  an  ignorance  of  the  art  of  writing,  A  common  seal  was 
not,  therefore,  necessary  to  a  corporation  at  the  civil  law  to  enable 
it  to  make  a  written  contract,  and  accordingly  Wood  tells  us  of 
such  a  corporation,  that  '  it  may  have  a  common  chest,  and  some- 
times a  common  seal.'  "  * 

Sec.  251.      Corporate  seal  ;  present  doctrine  in  reference  to. —  it  was 

essential  at  common  law,  as  we  have  seen,  that  the  seal  not  only 
of  private  persons,  but  of  corporations,  should  be  impressed  upon 
wax,  wafer  or  other  impressible  and  tenacious  substance;  but 
this  doctrine  has  been  in  modern  times  much  relaxed.  For  in- 
stance, it  has  been  recently  held  that  it  was  sufficient  to  impress 
either  private  or  corporate  seals  directly  upon  the  paper  or  parch- 
ment •  upon  which  the  instrument  is  written,  and  this  mode  of 
impressing  seals  has  in  some  of  the  states  been  authorized  by 
statutory  provisions.'  And,  on  general  principles,  any  mode  of 
impression  which  would  answer  for  private  seals,  in  the  absence 
of  other  statutory  regulations,  would  be  good  in  case  of  corporate 
seals. 

The  early  doctrine  required  all  important  contracts  and  the  ap- 
pointment of  agents  of  the  corporation  to  be  made  in  writing 
under  the  corporate  seal."  But  the  tendency  of  the  decisions  of 
our  courts  is  to  allow  the  same  latitude  in  this  respect  as  with 
respect  to  the  seals  of  private  persons,  and  in  all  the  more  common 

'Wood's    Civ.  L.,    chap.    2,  p.   136;  persons,  can  regularly  do  no  act  with- 

Browne'a  Civ.  L.  b.  1,  104.  out  writing  ;  therefore,  gifts  by  them 

*  Wood's   Civ.  L.,   chap.  2,  p.  136  ;  must  be   by  deed.     2  Bac.  Abr.  (Am. 

Browne's  Civ.  L.,  B.  1,  104.  ed  )  tit.  Corp.  E.  3,  p. 452.     So  it  was 

^Corrigan  V.  Trenton,  etc.,  Co.,  5  Eng.  formerly  held  that  such  a  corporation 

Eq  52  ;  4  Kent's  Com.  445  ;  1  Dill,  on  could  not,  without  a  deed,  command  a 

Mun.  Corp.,  §  130;  Woodman  v.  York,  bailiff  to  enter  into  lands  of  a  lessee 

etc.,  R.  Co.,  50   Me.  549  ;    Haven   v.  for  years,  for  a  condition   broken.      1 

Grand  Junction  R.  Co.,  12  Allen,  337.  Roll.    Abr.    514-699;    Cro.    Eliz.   815; 

See,  also,  argument  in  this  case,  1  Am.  Cro.    Jac.   411.     Neither    could    they 

L.  Re\  .  638;  Hendee  v.  Pinkerton,  14  without  a  deed  properly  sealed  with 

Allen,  381  ;  Royal  Bank  of  Liverpool  the  corporate  seal  appoint  one  to  seize 

V.  Grand  Junction  R.,  100  Mass.  444  ;  goods  as  forfeited    to  the    use  of  the 

In  re  Sandilands,  L.  R.,  6  C.  P.  411.  corporation.     2    Bac.    Abr.   (Am.    ed.; 

■*  Aggregate  corporations,  consisting  453.     See,  also,  2  Bac.  Abr.  (Am.  ed.), 

of  a   constant   succession   of   various  tit.  Corp.  E.  3,  p.  453. 


The  Corporate  Seal. 


401 


transactions  of  tlie  corporation  it  may  act  and  contract  by  the  will 
of  the  body,  as  expressed  by  a  vote  of  the  majority  or  by  a  major- 
ity of  those  that  represent  the  body,  as  by  the  directors,  and  that 
the  corporate  will  as  thus  expressed  may  be  executed  by  the  ])roper 
agents  of  the  corporation,  even  without  an  appointment  under  the 
common  seal.  And  it  is  now  well  settled,  that  acts  of  a  corpora- 
tion evidenced  by  a  vote  are  as  binding  upon  it  and  are  as  com- 
plete authority  to  its  agents  in  the  execution  of  the  will  of  the 
corporation,  thus  expressed,  as  if  such  will  and  authority  was 
authenticated  by  the  corporate  seal ;  that  it  may  be  as  well  bound 
by  the  acts  of  its  agents  thus  authorized  as  by  the  corporate  seal, 
and  that  promises  may  as  well  be  implied  from  its  acts  and  the 
lawful  acts  of  its  agents  as  if  the  principal  was  a  natural  person.^ 
And  the  corporate  will  is  now  seldom  expressed  or  authenticated  by 
the  corporate  seal,  except  in  those  cases  where,  under  similar  cir- 
cumstances, it  would  be  necessary  to  execute  the  instrument  with 
a  seal  if  a  natural  person  was  the  party  executing  it.^ 


'  Board  of  Education  v.  Greenebaum, 
39  111.  609  ;  Ross  v.  Madison,  1  Ind. 
381;  Merrick  v.Burliugton,  11  Iowa,  74  ; 
Petrie  v.  Wright,  14  Miss.  647  ;  Buck- 
ley V.  Briggs,  30  Mo.  453. 

^  Kyd  on  Corp.  3G3 ;  Harper  v.  Char- 
lesworth,  4  B.  &  C.  575;  Union  Bank 
V.  Ridgelv,  1  H.  &  G.  419  ;  Bank  of  U. 
S.  V.  Daudridge,  13  Wheat.  105;  Wood 
V.  Tate,  5  B.  &  P.  347  ;  Dillon  on  Mun. 
Corp.,  §  133. 

Mr,  Kent  observes;  "It  was  the 
ancient  and  technical  rule  of  tlie  com- 
mon law  that  a  corporation  could  not 
manifest  its  intentions  by  any  personal 
act  or  discourse,  and  that  it  spoke  and 
acted  only  by  its  common  seal.  After- 
ward the  rule  was  relaxed,  and,  for 
the  sake  of  convenience,  corporations 
were  permitted  to  act,  in  ordinary  mat- 
ters, without  deed,  as  to  retain  a  cook, 
or  a  servant,  or  butler.  ■*  *  *  In 
Eex  v.  Bibb,  P.  Wms.  419,  the  old 
rule  was  further  relaxed,  and  it  seems 
to  have  been  established,  that  though 
a  corporation  could  not  contract  di- 
rectly except  under  their  corporate 
seal,  yet  they  might  by  mere  vote  or 
corporate  act,  not  under  their  corporate 
seal,  appoint  an  agent  whose  acts  and 
contracts,  within  the  limits  of  his 
authority,  would    be  binding   on  the 

51 


corporation.  In  a  case  as  late  as  1783, 
it  was  held,  that  the  agreement  of  the 
major  part  of  a  corporation,  entered  in 
the  corporation  books,  though  not  un- 
der the  corporate  seal,  should  be  de- 
creed in  equity.  Maxwell  v.  Dulwich 
College,  1  Fonb.  Tr.  396  note.  But 
see,  in  Carter  v.  Dean  of  Ely,  7  Sim- 
ons, 311,  where  it  was  held  that  the 
agreement  of  the  major  part  of  a  cor- 
poration, entered  in  the  corporation 
books,  though  not  under  the  corporate 
seal,  would  be  decreed  in  equity.  In 
Yarborough  v.  The  Bank  of  England, 
16  East,  6,  it  was  admitted  that  the 
corporation  might  be  bound  by  the 
acts  of  their  servants,  though  not  au- 
thorized under  their  seal,  if  done 
within  the  scope  of  their  employment. 
At  last,  after  a  full  review  of  all  the 
authorities,  the  old  technical  rule  was 
condemned  in  this  country,  as  impoli- 
tic and  essentially  discarded,  for  it 
was  decided  by  the  supreme  court  of 
the  United  States,  in  the  case  of  The 
Bank  of  Columbia  v.  Patterson,  7 
Crauch,  299,  that  whenever  a  corpora- 
tion aggregate  was  acting  within  the 
range  of  the  legitimate  purposes  of 
its  institution,  all  parol  contracts 
made  by  its  authorized  agents  were 
express  and  binding  promises  of  the 


402  Pkivate  Coepokations. 

Seo.  252.  Rule  as  to  use  of  seaL  —  Wherever  the  law  requires  a 
natural  person  to  attach  a  seal  to  the  instrument  executed  by  him, 
in  like  cases  only,  would  it  be  necessary  for  a  corporation  to  exe- 
cute a  like  instrument  by  a  corporate  seal.  If  in  the  former  case 
the  instrument  must  be  by  deed,  that  is,  executed  or  authenticated 
by  a  seal,  so,  in  the  latter  case,  should  it  also  be  executed  or  au- 
thenticated by  the  common  seal  of  the  corporation. 

Sec.  253.  Seal  makes  instriunent  a  specialty,  when. —  The  execu- 
tion of  the  corporate  deed  must,  of  course,  he  by  an  agent. 
The  'corporation  being  but  an  incorporeal  or  ideal  person, 
it  could  not  be  supposed  cajDable,  as  such,  of  performing  a 
physical  act,  but  must  in  such  matters  act  by  its  duly  consti- 
tuted agents  in  the  corporate  name,  and,  when  so  required,  must 
authenticate .  the  same  by  the  common  seal,  the  usual  form  of 
authentication  being :  "  In  testimony  whereof  the  common  seal  of 
the  corporation  is  hereby  affixed,"  the  name  of  the  corporation 
being  signed  by  the  agent,  with  his  name  as  such  agent,  and  the 
common  seal  of  the  corporation  attached  or  affixed  thereto. 

The  common  seal  of  a  cor23oration  affixed  to  an  instrument  pur- 
porting to  be  executed  by  the  proper  agent,  makes  it  a  specialty 
where  such  an  instrument  is  required,  and  has  the  same  eflEect  as 
if  executed  in  a  like  case  by  a  natural  person.' 

In  the  case  of  The  City  of  Davenjjort  v.  The  Peoria  Marine 

corporation,  and  all  duties  imposed  form  of  contract  is  requisite  to  bind 
upon  them  by  law,  and  all  benefits  the  company,  unless  where  the  charter 
conferred  at  their  request,  raised  im-  expressly  requires  it.  And  although 
plied  promises,  for  the  enforcement  of  there  seems  to  be  a  failing  effort  in 
which  an  action  lay."  2  Kent's  Com.  the  English  courts  to  maintain  the 
288.  necessity  of  the  contracts  of  corpora- 
Mr.  Kent  lurther  observes:  "  The  tions  being  under  seal,  it  is  certain 
adjudged  cases  in  England  and  in  that  the  important  business  transac- 
Massachusetts  were  considered  as  tions  of  daily  occurrence,  in  both  that 
fully  supporting  this  reasonable  doc-  country  and  here,  where  no  such  for- 
trine,  and  that  the  technical  rule  that  mality  is  resorted  to  by  business  cor- 
a  corporation  could  not  make  a  promise  porations,  in  matters  of  contract,  and 
except  under  seal  would  be  productive  where  to  look  for  any  such  solemnity 
of  great  mischief.  As  soon  as  it  was  would  be  little  less  than  absurd,  al- 
established  that  the  regularly  ap-  most  of  necessity  drive  the  courts  of 
pointed  agent  of  the  corporation  could  England  to  disregard  the  old  rule  of 
contract  in  their  name  without  seal,  it  requiring  the  contracts  of  corporations 
was  impossible  to  support  the  other  to  be  made  under  the  corporate  seal." 
position."  2  Kent's  Com.  288  et  seq.  1  Redf.  on  Railw.  409. 
Mr.  Redfield   says :  "  No  particular 

•Clark  V.  Farmers',  etc.,  Co..  15  Benoist  v.  Carondelet,  8  Mo.  250;  Stur- 
Wend.  256;  Steele  v.  Oswego,  id.  265;     tevants  v.  Alton,  3  McLean,  350. 


The  Corporate  Seal.  403» 

and  Fire  Insurance  Company^  the  supreme  court  of  Iowa,  by 
Cole,  J.,  say  :  "  The  English  rule  that  a  corporation  cannot  ex- 
pressly bind  itself  except  by  deed,  unless  the  act  establishing  it 
authorizing  it  to  contract  in  another  mode  has  been  broken  in 
upon,  and  indeed  entirely  overturned,  as  a  general  proposition, 
throughout  the  United  States  ;  and  it  is  here  well  settled  that  the 
acts  of  a  corporation,  evidenced  by  vote,  written  or  unwritten, 
are  as  completely  binding  upon  it,  and  are  as  complete  authority 
to  its  agents  as  the  most  solemn  acts  done  under  the  corporate 
seal ;  that  it  may  as  well  be  bound  by  exj^ress  promises  through 
its  authorized  agents  as  by  deed  ;  and  that  promises  may  as  well 
be  implied  from  the  acts  of  its  agents  as  if  it  had  been  an  indi- 
vidual." ' 

And  in  England  it  has  also  been  recently  held  that  contracts 
executed  in  pursuance  of  an  oral  agreement  by  a  party  with  a  cor- 
poration, to  do  work  or  furnish  supplies  that  are  required  in  the 
accomplishment  of  the  purposes  and  objects  of  the  corporation, 
the  party  thus  performing  will  be  entitled  to  recover  therefor, 
either  upon  the  common  counts  or  the  special  contract.  Wight- 
man,  J.,  observed :  "  I  am  disposed  to  think  that  wherever  the 
purposes  for  which  a  corporation  is  created  render  it  necessary 
that  the  work  should  be  done,  or  goods  supplied  to  carry  such  pur- 
poses into  effect,  as  in  case  of  the  guardians  of  a  poor-law  union, 
and  orders  are  given  at  a  board  regularly  constituted,  and  having 
general  authority  to  make  contracts  for  works  or  goods  necessary 
for  the  purposes  for  which  the  corporation  was  created,  and  the 
work  is  done,  or  goods  supplied  and  accejDted  by  the  corporation, 
and  the  whole  consideration  for  payment  executed,  the  corporation 
cannot  keep  the  goods  or  the  benefit,  and  refuse  to  pay,  on  the 

'  17  Iowa,  276.  See,  also,  Bank  of  Co-  10  Mass.  401  ;  White  r.  The  Westport 

lumbia  v.  Patterson's  Administrators,  Cotton  Man.  Co.,  1   Pick.  215;  Bulkley 

7  Cranch,  305;  Fleckner  v.  The  United  v.  The  Derby  Fishing  Co.,  2  Conn.  256; 

States  Bank.  8  Wheat.  357;  The  Bank  Garvey  v.  Colcock.l  N.  &  McC.  221;  Pe- 

of  the  United  States  v.  Dandridge,  12  trie    v.  Wright,  6  S.  &  M.  647;  Baptist 

id.  68;  Dunn  v.  The  Rector  of  St.  An-  Church  v.  Mulford,  8  N.  J.  L.  182 ;  Ab- 

drew's  Church,    14  Johns.  118  ;    The  bott  v.  Hermon,   7   Me.   118  ;  Walker 

American   Insurance  Co.  v.  Oakley,  9  v.  Bank   of    Kentucky,  3  J.  J.  Marsh. 

Paige,  496  ;  Overseers,  etc.,  v.  Over-  201  ;  Lee  v.  The  Trustees,  etc.,  7  Dana, 

seer,  3  S.  &R.  117;  Hamilton  V.  Lycom-  28;  Eastman  v.  Coos   Bank,  i   N.  H. 

ing  Ins.  Co.,  5  Barr.  344 ;  Legrand  v.  26  ;  Sheldon  v.  Fairfax,   21   Vt.    102  ; 

Hampden  Sidney  College,  5  Munf.  824;  Palmer  v.  Medina  Ins.  Co.,  20  Ohio, 

Union  Bank  v.  Ridgely,  1  H.  &  G.  413;  537. 
Hayden  v.  Middlesex  Turnpike  Corp., 


404  Private  Coepoeations. 

ground  that  though  the  members  of  the  corporation  who  ordered 
the  goods  or  the  work  were  competent  to  make  a  contract  and 
bind  the  rest,  the  formality  of  a  deed  or  of  affixing  the  seal  was 
wanting,  and  then  say  :  no  action  lies ;  we  are  not  competent  to 
make  a  parol  contract,  and  we  avail  ourselves  of  our  disability."  ^ 
But  in  England  it  has  also  been  held  that  where  work  was  done 
or  materials  furnished  by  virtue  of  a  contract  not  under  seal, 
which  were  not  necessary  nor  incidental  to  the  purposes  for 
which  the  corporation  was  created,  no  recovery  thereon  could  be 
had.^ 

§  254.  What  is  a  common  seal.  —  The  Common  seal  of  a  corpora- 
tion is  the  instrument  or  stamp  adopted  by  it  for  the  ^^urpose 
of  stamping  or  making  an  impression  upon  wax  or  wafer,  or  other 
impressible  substance  annexed  to  instruments  made  by  it,  or  upon 
the  paper  or  parchment  upon  which  such  instruments  are  written. 
The  impression  thus  made  is  also,  in  one  sense,  the  corporate  seal. 

Like  a  private  seal,  it  was  formerly  required  that  the  impression 
be  made  upon  wax,  wafer,  or  other  impressible  and  tenacious  sub- 
stance attached  to  the  paper  or  parchment  upon  which  the  instru- 
ment was  written."*  But  according  to  the  current  of  modern  au- 
thorities, even  in  the  absence  of  statutory  regulations,  the  impres- 
sion of  the  seal,  when  required  at  all,  may  be  made  directly  upon 
tlie  paper  or  j^archment.* 

§  255.  Form  of,  not  material.  —  It  is  ev'ident  that  the  seal,  either  pri- 
vate or  corporate,  has  ceased  to  serve  its  original  purpose  as  a  sub- 
stitute for  a  signature,  and  as  an  authentication  of  a  corporate  or 
other  instrument  it  possesses  but  little  intrinsic  value.     The  form 

'  Clark  V.  Cuckfield  Union,  21  L.  J.  ^  See    Paine     v.     Guardians',    etc., 

Q.    B.    349.     See,    also,    Sanders     v.  Union,  8  Q.  B.  326  ;  15  L.  J.   M.  C.  89: 

Guardians  of  St.  Neat's  Union,  8  Q.  B.  Lamprell  v.  Billericay   Union,  3    Ex- 

810,  which  was  an  oral  order  for  iron  ;  283  ;  18  L.  J.  Ex.  283  ;  Homersham  v. 

De  Grave  v.  Mayor,  etc.,  4  C.  P.  Ill,  Wolverhampton,  etc.,  Co.,  6  Ex.  137  ; 

which  was  for  weights  and  measures  20  L.  J.  Ex.  193. 

sent  at  the  request   of  the   defendant,  ^  Bank  of  Rochester  v.  Gray,  2  Hill, 

and  accepted  bv  them  ;  Beverly  v.  Lin-  228;  Farmers' Bank  v.    Haight,  3  id. 

coin,  etc.,  Co.,  6  A.  &  E.  829,  which  was  493. 

an  action  for  gas   meters   supplied  to  ■*  Hendee  v.  Pinkerton,  14  Allen,  381 ; 

the  defendants  ;    Nicholson  v.  Brad-  Corrigan  v.  Trenton,  etc.,  Co.,  6  N.  J. 

ford  Union,  L.  R.,  1  Q.  B.  620,    which  L.  53  ;  Reg.  v.  St.  Paul,  etc.,  7  Q.   B. 

was  an   action   for  coals  supplied  by  231  ;  Davidson  v.  Cooper,  11  M.  &  W. 

a  contract  not  under  seal.  778  :  S.  C,  13  id.  342. 


The  Coepokate  Seal.  405 

of  the  instrument  with  which  the  impression  is  made,  or  the  en- 
graving or  device  on  the  seal,  if  any,  would  seem  to  be  immaterial. 
In  fiict,  where  a  seal  is  required,  any  thing  which  may  be  accepted 
or  adopted  by  a  corporation  with  which  to  iin2)ress  wax,  wafer,  or 
even  the  paper  itself,  would  seem  to  be  sufficient. 

Where  a  seal  or  some  impression  is  required  on  wax,  wafer,  or 
paper,  it  would  appear  quite  immaterial  as  to  the  instrument  used 
to  make  the  impression,  provided  it  is  something  adopted  by  the 
corporation  or  by  the  authorized  agent,  and  is  placed  upon  the 
instrument  by  the  proper  agent,  or  even  by  his  direction  or  au- 
thority. Thus,  it  has  been  held  that  the  corporate  seal  miglit  be 
stamped  or  printed  by  the  printer  of  the  blank  instruments  of  a 
corporation  if  done  by  the  direction  of  the  proper  officers,  and 
that  the  seal  thus  made  and  placed  upon  the  paper  on  which  an 
instrument  was  executed  would  be  valid  as  a  corporate  seal.' 

On  this  question  the  Supreme  Court  of  Massachusetts  say : 
"  The  corporate  seal  having  been  affixed  by  the  printer  by  direc- 
tion of  the  officers  of  the  corporation,  and  they  having  adopted 
his  act  and  subsequently  signed  and  issued  the  bond,  the  sealing 
was  duly  made,  and  the  instruments  became  obligatory  upon  the 
corporation.  This  is  no  more  nor  less  than  constantly  takes  place 
when  a  scrivener  prepares  and  affixes  a  seal  to  a  deed,  which  the 
grantor  thereupon  signs  and  delivers.  The  practice  is  of  unques- 
tionable validity,  and  the  authorities  for  it  are  abundant.  If  a 
stranger  seal  an  instrument  by  the  allowance  or  commandment, 
precedent,  or  agreement  subsequent,  of  the  person  who  is  to  seal 
it,  that  is  sufficient.' '  '^ 

'  Royal  Bank,  etc.,  v.  Gr.   Junction,  It  is  not  necessary  for  an  agent  in 

etc.,  R.  Co.,  100  Mags.  444  ;  Woodman  executing  a   deed  in  behalf  of  a  cor- 

V.  York,  etc.,  R.  Co.,  50  Me.  549 ;  Hen-  poration,  to   use   the   corporate    seal, 

dee  V.  Pinkerton,  14  Allen,  381.  Porter  v  Androscoggin,  etc.,    R.   Co., 

It  may  be  done  with  some  perma-  37  Me  349.  See,  also,  Clark  v.  Pratt, 
nent  instrument  prepared  for  that  pur-  47  id.  55  ;  Reynolds  v.  Glasgow 
pose,  or  it  may  be  done  by  some  tern-  Academy,  6  Dana,  37.  It  has  been 
porary  one,  authorized  or  adopted  by  observed:  "At  common  law,  the  cor- 
the  corporation.  Bank  of  Middlebury  porate  seal  cannot  be  impressed  di- 
V.  R.  &  W.  R.  Co.,  30  Vt.  159;  Tenny  rectly  upon  the  paper,  but  must  be 
V.  Lumber  Co.,  43  N.  H-  343;  Mill  upon  wax  or  wafer,  or  some  other  ten- 
Dam  Foundry  v.  Hovey,  21  Pick.  417 ;  acious  substance,  or  the  instrument  to 
Porter  v.  Railroad,  37  Me.  349.  which  it  is  attached  will  not   operate 

^  Royal  Bank,  etc.,  v.  Grand  Junction,  as  a  sealed  instrument, 
etc. ,  R.  Co.,  100  Mass.  444  ;  Bates  v.  In  a  recent  case  in  New  Jersey,  how- 
Boston,  etc.,  R.  Co.,  10  Allen,  251.  ever,  a  distinctive  impression  of  the 


406  Private  Cokpokations. 

But  the  usual  instrument  with  which  the  impression  is  made 
is  one  prepared  expressly  for  the  purpose,  and  on  which  is 
engraved  the  name  of  the  corporation  with  the  words  "  corporate 
sfeal,"  or  "  seal."  And  it  has  been  held  that  an  instrument  exe- 
cuted by  the  proper  agent  or  officer  of  the  corporation  and  sealed, 
'though  by  the  im]3ression  of  the  common  desk  seal  of  a  merchant, 
it  will  be  presumed  to  be  the  seal  of  the  corporation  until  rebut- 
ted by  competent  evidence/ 

§  256.  By  whom  the  seal  should  be  affixed.  — As  all  physical  acts 
of  corporations  must  be  done  by  agents  duly  appointed  for  that 
purpose,  it  follows  that  the  corporate  seal  must  be  affixed  by  an 
agent  duly  authorized  for  that  purpose.  Such  agent  may  be  desig- 
nated in  the  law  creating  or  constituting  the  corporation  ;  but  it  is 
usually  annexed  by  an  officer,  duly  authorized  by  the  by-laws,  or 
by  the  president,  by  virtue  of  the  implied  authority  conferred 
upon  him  as  such  officer. 

But  it  is  evident  that  the  majority  of  the  members  of  a  cor- 
poration might  direct  and  authorize  any  j^erson  to  not  only  exe- 
cute an  instrument  for  the  corporation,  but  to  affix  the  corporate 
seal ;  and  this  authority  could  be  conferred  by  them  or  by  the 
fundamental  law,  as  by  the  statute  of  its  creation,  or  by  the  arti- 
cles of  association  constituting  the  association,  upon  a  limited 
number  of  the  corporators  as  a  board  of  directors,  who,  in  that 

paper  without  the  intervention  of  was  acts  of  their  legislatures.     Though  we 

or  wafer  was  held  to  be  a  lawful  cor-  know  of  no  decision  upon  the  subject, 

porate  seal.     In  the  southern  and  west-  yet  we  see  no  reason,  unless  the  act 

ern  parts  of  the  United  States,  from  of    incorporation    expressly   provides 

Xew  Jersey    inclusive,  a   flourish   of  what  the  common  seal  shall  be,  why 

the  pen  at  the  end  of  a  name  or  a  cir-  the  substitute  allowed  for  the  private 

cle  of  ink  or  scroll  has  been   allowed  seals  of  an   individual  should  not  be 

to  be  a  valid  substitute  for  a  seal ;  and  allowed  for  the  seal  of  a  corporation." 
in    the  states  of    Delaware,    Illinois,         For  an  interesting  article  on   this 

Missouri  and  Tennessee  this  substitute  subject,  see  1  Am.  Law  Rev.  649. 
has,  we  believe,   been  introduced  by 

'  Moisea  v.  Thornton,  8  T.  R.    303  ;  To  an  indenture  between  a  corpora- 

Peake's   Law   of  Ev.  48;   Jackson  v.  tion  and  an  individual  the  parties  "set 

Pratt,  10  Johns.  381  ;  Mann   v.  Pentz,  their  hands,"  but  there  was  no   refer- 

2  Saudf.  Ch.   271  ;  Foster  v.  Shaw,  7  ence  to  a   seal.      To   the   instrument, 

S.  &  R.  156  ;  Den  v.  Vreelaudt,  17  N.  however,  were  attached  seals  consist- 

J.  L.  252;  Darnell  V.  Dickens,  4  Yerg.  ing  of  small   bits   of  paper   fastened 

7;  City  Council,  etc.,  V.  Moorehead,  2  with  wafers  without  any  impression. 

Rich.  450.     See,   also.   Bank   of  Mid-  Held  to  oe  sufficient.     Mill  Dam  Foun- 

dlebury  v.  Rutland  R.  Co.,  30  Vt.  159.  dry  v.  Hovey,  21  Pick.  417. 


The  Corporate  Seal.  407 

case,  could  duly  authorize  and  appoint  some  officer  or  agent  to 
execute  a  contract  on  behalf  of  the  corporation,  and  affix  the 
common  seal  thereto.' 

The  seal  of  a  corporation  affixed  to  an  instrument,  like  the  seal 
of  a  natural  person,  makes  it  a  specialty." 

Sec.  257.     Where  an  acknowledgment  is  required.  —  It  is   generally 

necessary,  not  only  to  have  certain  instruments,  especially  deeds 
and  other  writings  relating  to  lands,  executed  by  a  corporation 
through  its  duly  constituted  agent,  and  the  corporate  seal  annexed 
or  impressed  upon  the  parchment  or  paper  upon  which  the  instru- 
ment or  conveyance  is  written,  but  for  the  pui-j^oses  of  recording 
to  have  the  same  acknowledged  before  a  proper  officer.  Where 
this  is  required,  the  proper  officer  or  agent  executing  the  instru- 
ment may,  generally,  make  the  acknowledgment  required  by  the 
recording  laws.^ 

Sec.  258.  Doctrine  in  relation  to  agents.  —  We  have  considered 
the  subject  of  corporate  agents,  generally  ;  but  in  this  connection 
we  will  observe  that  the  recognized  principle  that  the  agent  of  a 
natural  person,  in  order  to  bind  his  principal  by  deed,  must  have 
an  authority  so  to  do  by  deed,  that  is,  by  an  instrument  duly 
executed  under  seal,  has  no  application  to  the  agents  of  corpora- 
tions.* 

'Jackson  V.  Campbell,  5  Wend.  572;  sists    of    several,  who   all  sign  their 

Damon  v.  Granby,  3  Pick.  345 ;  Derby  names,  only   one    seal    is    necessary. 

Canal  Co.  v.Wilmot,  9  East,  360  ;  Bank  Decker  v.  Freeman,  3   Me.   338.     See, 

of  the  U.  S.  V.  Dandridge,  13  Wheat,  also,  Burrill  v.  Nahant  Bank,  2  Mete 

68,113;  Burks   &   D.  Turn.   Bead   v.  167. 

Myers,  6  S.  &  R.  13  ;  Clarke  v.  The  The  corporate  seal  affixed  to  an  in- 
Imperial  Gas  Co.,  4  B.  &  A.  315  ;  1  N.  strument  does  not  render  it  a  corpo- 
&  M.  306;  Leggett  v.  New  Jersey  rate  act,  unless  it  is  affixed  by  a  duly 
Banking  Co.,  IN.  J.  Eq.  541;  Clark  authorized  otBcer  or  other  agent.  Jack- 
V.  Woolen  Manuf.  Co.,  15  Wend.  256.  son  v.  Campbell,  5  Wend.  573. 
See,  also.  Bank  of  Ireland  v.  Evans,  But  the  seal  is  prima  facie  evidence 
5  H.  of  L.  Cas.  889  ;  33  Eng.  L.  &  Eq.  that  it  was  so  affixed.  Lovett  v.  Steam 
23.  Saw  Mill  Association,    6   Paige's  Ch. 

2  Clark  V.  The  Woolen  Manuf.  Co.,  54. 

15  Wend. -256;  Benoist   v.  Carondelet,  ^  Gordon  v.  Preston,  1  Watts  (Penn.), 

8  Mo.  250 ;  City  of  Davenport   v.  The  385  ;  Lovett  v.  The  Steam  Saw  Mill 

Peoria,  etc.,  Ins.  Co.,  17  Iowa,  276;  Ring  Association,  6  Paige's  Ch.  60. 

V.  Johnson   Co.,   6   id.    265  ;    Dill,  on  ''Hopkins  v.  Gallatin  Tump.  Co.,  4 

Mun.  Corp.,  i^  133.  Humph.   403;    Beckwith  v.    Windsor 

A  vote  authorizing  a  committee   to  Manuf.  Co.,  14   Conn.   594;  Howe  v. 

sell  lands  empowers  them  to  make  the  Keeler,  37   Conn.  538;    Burr  v.  Mc- 

necessary   deeds  in  the  name  of   the  Donald,  3  Gratt.  315  ;  Redf.  on  Rail., 

corporation,  and  if  the  committee  con-  §§  113,  143. 


408  Private  Coepokations. 

"  The  technical  doctrine  that  a  corporation  could  not  contract, 
except  under  its  seal,  or,  in  other  words,  could  not  make  a  promise, 
if  it  ever  had  been  fully  settled,  must  have  been  productive  of  great 
mischiefs.  Indeed,  as  soon  as  the  doctrine  was  established  that 
its  regularly  appointed  agents  could  not  contract  in  their  name 
without  seal,  it  was  impossible  to  support  it ;  for  otherwise  the 
party  who  trusted  such  contract  would  be  without  remedy  against 
the  corporation.  Accordingly,  it  would  seem  to  be  a  sound  rule 
of  law,  that  whenever  the  corporation  is  acting  within  the  scope 
of  the  legitimate  purposes  of  its  institution,  all  parol  contracts 
made  by  its  authorized  agents  are  express  promises  of  the  corpo- 
ration ;  and  all  duties  imposed  on  them  by  law,  and  all  benefits 
conferred  at  their  request,  raise  implied  promises  for  the  enforce- 
ment of  which  an  action  will  lie."^ 

And  in  the  case  of  The  United  States  Bank  v.  Dandridge^ 
Mr,  Justice  Stoky,  in  delivering  the  majority  opinion  of  the 
supreme  court  of  the  United  States,  observes :  "  In  ancient  times, 
it  was  held  that  corporations  aggregate  could  do  nothing  but  by 
deed  under  their  common  seal.  But  this  principle  must  always 
have  been  understood  with  many  qualifications,  and  seems  inap- 
plicable to  acts  and  votes  passed  by  such  corporations  at  corporate 
meetings.  It  was  probably,  in  its  origin,  applied  to  aggregate 
corporations  at  the  common  law,  and  limited  to  such  solemn  pro- 
ceedings as  were  usually  evidenced  under  seal,  and  to  be  done  by 
those  persons  who  had  the  custody  of  the  common  seal,  and  had 
authority  to  bind  the  corporation  thereby  as  their  permanent 
ofiicial  agent.  Be  this  as  it  may,  the  rule  has  been  broken  in 
upon  in  a  vast  variety  of  cases  in  modern  times,  and  cannot  now 
as  a  general  proposition  be  supported.  And  it  is  now  firmly 
established,  both  in  England  and  America,  that  a  corporation  may 
be  bound  by  a  promise,  express  or  implied,  resulting  from  the  acts 
of  a  corporate  vote  unaccompanied  with  the  corporate  seal,"  ^ 


'  Bank  of  Columbia  v.  Patterson,  7  being  speak  or  act  otherwise  than  in 

Cranch,  299.     See,  also,  Gray  v.  Port-  writing?     Being  destitute  of  the  natu- 

land  Bank,  3  Mass.  364  ;  Gilmore  v.  ral  organs  of  man,  being  distinct  from 

Pope,  5  id.  491  ;  Bank  of  Metropolis  v.  all  its  members,  can  it    communicate 

Guttschlick,  14  Pet.  19.  its  resolutions  or  declare  its  will,  with- 

'^  12  Wheat.  64.  out  the  aid  of  some  adequate  substi- 

3  But  in  this  case,  Marshall,  in  his  tute  for  those  organs  ?     If  the  answer 

dissenting  opinion,  says ;  '•  Can  such  a  to  this  question  must  be  in  the  nega- 


The  Corporate  Seal. 


409 


Sec.  259.  Same  continued.  —  Whatever  may  have  been  the 
doctrine  of  the  common  law,  it  is  now  evident  that  the  acts  of  the 
directors  of  a  corporate  body,  evidenced  by  a  recorded  vote,  are 
as  bindiu<^  upon  the  corporation,  and  as  complete  autliority  to 
agents,  as  if  such  will  was  expressed  in  writing,  authenticated  by 
the  common  seal.* 


tive,  what  is  that  substitute  ?  I  can 
imagine  no  other  than  writing.  The 
will  to  be  announced  is  the  aggregate 
will.  The  voice  which  utters  it  is  the 
aggregate  voice.  Human  organs  be- 
long only  to  individuals.  The  words 
they  utter  are  the  words  of  individ- 
uals. These  individuals  must  speak 
collectively  to  speak  corporately,  and 
must  use  a  collective  voice.  They 
have  no  collective  voice  and  must 
communicate  this  collective  will  in 
some  other  mode.  That  other  mode, 
as  it  seems  to  me.  must  be  in  writing. 
A  corporation  will  generally  act  by  its 
agents,  but  those  agents  have  no  self- 
existing  power.  It  must  be  created  by 
law,  or  communicated  by  the  body 
itself.  This  can  be  done  only  by 
writing.  If,  then,  corporations  were 
novelties,  and  all  were  required  to  de- 
vise the  means  by  which  they  should 
transact  their  affairs,  or  communicate 
their  will,  we  should,  I  think,  from  a 
consideration  of  their  nature,  of  their 
capacities  and  disabilities,  be  com- 
pelled to  say,  that  when  other  means 
were  not  provided  by  statute,  such 
will  must  be  expressed  in  writing. 
*  *  *  According  to  the  decisions 
of  the  courts  of  England,  as  well  as  of 
this  court,  a  corporation,  unless  it  be 
in  matters  to  which  the  maxim  de  min- 
imis non  curat  lex  applies,  can  act  or 
speak,  and  of  course  contract,  only  by 
writing.  This  principle,  which  seems 
to  be  an  essential  ingredient  of  its  very 
being,  has  been  maintained  by  all  the 
judges  who  have  ever  discussed  the 
subject.  Upon  this  principle,  and  the 
authority  of  these  cases,  I  have  sup- 
posed that  a  corporation  cannot  assent 

'  Bank  of  U.  S.  v.  Dandridge,  13 
Wheat.  64. 

The  weight  of  authority  in  this  coun- 
try seems  to  be  in  favor  of  the  position 
that  private  corporations,  or  the  boards 
of  directors  as  agents  for,  and  lawfully 
representing  them,  and  through  which 

52 


to  a  deed  of  any  description  unless 
this  assent  be  exi)ressed  regularly  in 
writing.  It  ought  to  be  entered  on 
the  books  of  the  corporation.'' 

In  Mayor  of  Ludlow  v.  Charlton,  6  M. 
&  W.  815,  RoLFE,  B.,  says  .  "  The  seal 
is  required  as  authenticating  the  con- 
currence of  the  whole  body  corporate. 
If  the  legislature,  in  creating  a  body 
corporate,  invest  any  member  of  it , 
either  expressly  or  impliedly,  with 
authority  to  bind  the  whole  body  by 
his  mere  signature,  or  otherwise,  then, 
undoubtedly,  the  adding  of  the  corpo- 
rate seal  would  be  matter  purely  of 
form  and  not  of  substance.  Every  one 
becoming  a  member  of  such  a  corpo- 
ration knows  that  he  is  liable  to  be 
bound  in  his  corporate  character  by 
such  an  act,  and  persons  dealing  with 
the  corporation  know  that  by  such  an 
act  the  body  will  be  bound.  But  in 
other  cases  the  seal  is  the  only  authen- 
tic evidence  of  what  the  corporation  has 
done  or  agreed  to  do.  The  resolution 
of  a  meeting,  however  numerously  at- 
tended, is,  after  all,  not  the  act  of  the 
whole  body.  Every  member  knows 
he  is  bound  by  what  is  done  by  the 
corporate  seal,  and  by  nothing  else. 
It  is  a  great  mistake,  therefore,  to 
speak  of  the  necessity  of  a  seal  as  a 
relic  of  ignorant  times.  It  is  no  such 
thing.  Either  a  seal,  or  some  substi- 
tute for  a  seal,  which  by  law  shall  be 
taken  as  conclusively  evidencing  the 
sense  of  the  whole  body  corporate,  is 
a  necessity  inherent  to  the  very  nature 
of  a  corporation."  See,  also,  Kidder- 
minster V.  Hard  wick,  L.  R. ,  9  Exch. 
29. 


the  business  of  the  corporation  is 
transacted,  may  appoint  an  agent  for 
the  conveyance  of  even  real  estate  by 
vote,  without  an  instrument  under 
the  corporate  seal.  And  that  if  the 
formality  of  a  sealed  instrument  was 
required,  it   would  not  affect  the   au- 


410 


Pkivate  Cokporations. 


And  a  valid  appointment  of  an  agent  for  any  purpose  may  be 
made  without  annexing  to  the  authority  or  power  of  attorney  a 
common  seal.^ 

And  the  corporate  will  evinced  by  a  vote  recorded  or  unrecorded 
is,  generally,  as  completely  binding  upon  it,  and  confers  as  com- 
plete authority  upon  its  agents  as  if  authority  was  given  under  its 
corporate  seal/ 

Sec.  260.  The  seal  as  evidence.  —  It  is  said  that  the  common  seal 
of  a  corporation  is  not  evidence  of  its  own  authenticity,  but  must 
be  proved  if  controverted.^  But  this  fact  need  not  be  shown  by 
the  agent  who  did  it,  or  other  person  who  saw  it  done.^  It  may  be 
shown  by  any  one  acquainted  with  the  seal  or  the  motto,  or  device 
engraved  thereon.*  If  the  seal  is  affixed  to  an  instrument  by  a 
proper  officer,  this  would  he  prima  faoie^  but  not  conclusive  evi- 
dence of  the  corporate  assent  to  the  instrument.*  The  affixing  of 
the  seal  by  a  proper  officer,  as  by  the  president,  would,  at  least. 


thenticity  of  the  conveyance,  if  the 
individual  who  acts  as  agent  and  af- 
fixes  the   seal   derives   his   authority 


from  a  mere  vote  of  the  corporation. 
Dispatch  Line,  etc.,  v.  Bellamy  Man. 
Co.,  12  N.  H.  305. 


*  Bank  of  Alexandria  v.  Bank  of  Co- 
lumbia, 5  Wheat.  326;  O wings  v. 
Speed,  id.  420  ;  Osborn  v.  Bank  of  U. 
S.,  9  id.  738  ;  Bank  of  Columbia  v.  Pat- 
terson, 7  Cranch,299  ;  Warren  v.  Ocean 
Ins.  Co.,  16  Me.  439  ;  Methodist  Chapel 
V.  Herrick,  25  id.  354  ;  Badger  v.  Bank 
of  Cumberland,  27  id.  428  ;  Trundy  v. 
Farrar,  32  id.  225 ;  Haven  v.  New 
Hampshire  Asylum,  13  N.  H.  532  ; 
Goodwin  v.  Union  Screw  Co. ,  34  id. 
378  ;  Andover  Turnpike  Co.  v.  Hay,  7 
Mass.  102  ;  Thayer  v.  Middlesex  Ins. 
Co.,  10  Pick.  326  ;  Topping  v.  Bickford, 
4  Allen,  120  ;  Stamford  v.  Benedict,  15 
Conn.  445  ;  Dunn  v.  St.  Andrew's 
Church,  14  Johns.  118;  Powell  v.  New- 
burgh,  19  id.  284;  Randall  v.  Van 
Vechten,  id.  60  ;  Clark  v.  Benton  Man. 
Co.,  15  Wend.  256  ;  Baptist  Church  v. 
Mulford,  3  Halst.  182  ;  Wolf  v.  Qod- 
dard,  9  Watts,  544  ;  Elysville  Manuf . 
Co  v.  Okiso  Co.,  1  Md.  Ch.  392  ;  Union 
Bank,  etc.,  v.  Ridgely,  1  H.  &  G.  424; 
Kennedy  v.  Baltimore  Ins.  Co.,  3  H. 
&  J.  367  ;  Northern  Central  R.  Co.  v. 
Bastian,  15  Md.  494;  Bates  v.  Bank, 
etc.,  2  Ala.  461  ;  St.  Andrew's  Bay 
Land   Co.    v.    Mitchell,    4    Fla,     192; 


Lathrop  v.  Com.  Bank,  8  Dana,  114  ; 
Richardson  v.  St.  Johns  Ins.  Co.,  5 
Blackf.  146  ;  Legrand  v.  Hampden 
Sidney  Coll.,  5  Munf.  324  ;  Garrison  v. 
Coombs,  7  J.  J.  Marsh.  85  ;  City  of 
Detroit  v.  Jackson,  1  Doug.  106. 

2  Bank  of  U.  S.  v.  Dandridge,  12 
Wheat.  68;  New  York  R.  Co.  v.  New 
York,  1  Hilt.  567 ;  Merrick  v.  Burling- 
ton, etc.,  R.  Co.,  11  Iowa,  75  ;  Buckley  v. 
Briggs,  30  Mo.  452 ;  Fleckner  v.  U,  S. 
Bank,  8  Wheat.  357 ;  American  Ins. 
Co.  V.  Oakley,  9  Paige's  Ch.  496. 

3  Jackson  v.  Pratt,  10  Johns.  281  ; 
Den  V.  Vreelaudt,  7  N  J.  L.  352  ;  Fos- 
ter V.  Shaw,  7  S.  &  R.  163 ;  Leazure  v. 
Hillegas,  id.  318  ;  Crossman  v.  Hill- 
town,  etc.,  Co.,  3  Grant's  Cas.  225  ; 
Mann  v.  Pentz,  2  Sandf.  Ch.  271  ;  Far- 
mers'  Turnpike  Co.  v.  McCuUough,  25 
Penn.  St.  203. 

4  Foster  v.  Shaw,  7  S.  &  R.  163  :  Dar- 
nell V.  Dickens,  4  Yerg.  7  ;  Moises  v. 
Thornton,  8  T.  R.  304. 

^  City  Council  v.  Moorehead,  2  Rich. 
430  ;    Moises  v.  Thornton,  8  T.  R.  304. 

^  Leggett  V.  New  Jersey  Manuf.  Co., 
1  N.  J.  Eq.  541  ;  Reed  v.  Bradley,  17 
111.  321. 


The  Corporate  Seal.  411 

iwTm^jfyrima  facie  evidence  of  authority  to  so  use  it ; '  and  the  use 
of  the  seal  by  such  an  oflScer,  purporting  to  be  the  common  seal, 
would,  at  least,  be  presumptive  evidence  that  it  was  the  corporate 
seal.^ 

In  a  recent  case  where  the  concluding  part  of  a  deed  was  in  the 
following  language :  "In  witness  whereof  the  said  B.  0.  S.  Bank 
by  J.  S.,  thei7'  treasurer,  duly  authorized  for  this  purpose,  have 
hereunto  set  their  name  and  seal,"  and  signed  "J.  S.,  treasurer 
B —  C —  S —  Bank,"  and  sealed,  it  was  held  to  be  the  deed  of 
the  bank.^ 


'  Hopkins  v.  Gallatin  Turnpike  Co.,  See,  also,  Haven  v.  Adams,  4  Allen,  80  ; 

4  Humph.  403.  Sherman  v.  Fitch,  98  Mass.  59  ;  Eureka 

2  Mill  Dam  Foundry  v.  Hovey,  21  Co.  v.  Bailey  Co.,  11  Wall.  488  ;  Ten- 
Pick.  428  ;  Flint  v.  Clinton  Co.,  12  N.  ney  v.  Lumber  Co.,  43  N.  H.  343.  But 
H.  434.  See,  also,  Miller  v.  Ewer,  27  for  contrary  opinion,  Hatch  v.  Barr,  1 
Me.  509;  Josey  v.  Railroad  Co.,  13  Ohio,  390 ;  Brinley  v.  Mann,  2  Cash. 
Rich.  134;  Bowen  v,  Irish  Presb.  Cong.,  337.  See,  also,  Bank  of  the  Metropolis 
6Bosw.  263.  V  Guttschlick,  14  Pet.  19. 

3  Hutchins  v.  Byrnes,  9  Gray,  367. 


412  Private  Coeporations. 


CHAPTEK  XI. 


Sec.  261.  General  principlea  relating  to  by-laws. 

Sec.  203.  Eequisites  of,  and  construction  relating  to  by-laws. 

Sec.  263.  By-laws  must  be  reasonable  and  not  oppressive,  nor  contrary  to  the 

laws  of  the  state. 
Sec.  264.  By-laws  in  restraint  of  trade . 
Sec.  265.  By-laws,  when  adopted  by  the  corporate  body. 
Sec.  266.  By-laws  adopted  by  the  directors . 
Sec.  267.  Distinction  between  by-laws  adopted  by  the  corporation  and  those 

adopted  by  directors. 
Sec.  268.  By-laws  contrary  to  the  general  laws  of  the  land  void. 
Sec.  270.  Matters  that  may  be  regulated  by  by-laws. 
Sec.  272.  How  by-laws  are  made. 
Sec.  273.  Repeal  of  by-laws. 

Sec.  274.  Functions  of  by-laws  —  eflFect  on  third  i^ersons. 
Sec.  275.  By-laws  regulating  the  transfer  of  stock. 
Sec.  277,  278.  Providing  for  a  corporate  lien  on  stock. 
Sec.  279.  Notice  conferred  by  the  by-laws. 
Sec.  280.  By-laws  cannot  enlarge  or  abridge  the  rights  of  stockholders. 

Sec.  261.  General  principles  relating  to  by-laws.  —  Incident  to  and 
inherent  in  eveiy  corporation  is  the  right  to  make  by-laws,  to 
regulate  the  management  of  its  affairs  and  to  fulfill  the  purposes 
of  its  institution,^  The  constating  instruments  seldom,  if  ever, 
provide  in  detail  for  the  mode  of  executing  the  powers,  express 
or  implied,  conferred  upon  a  corporation,  but  such  matters  are 
left  to  be  regulated  by  the  corporation  itself.  In  the  absence  of 
provisions  in  the  constating  instruments  relating  to  by-laws,  the 
power  primarily  vests  in  the  corporate  body.'^  But  these  instru- 
ments, especially  in  private  corporations  for  pecuniary  profit,  usu- 

1  Dunston  v.  Imperial  Gas  Co.,  3  B.  v.    Westwood,  7   Bing.  90  ;  Norris  v. 

&Ad.    125  ;  Everett   v.    Grapes,  3  L.  State,  Hob.  21 . 

T.  (N.  S.)669;  Case  of  Sutton  Hospi-        ^p^opje  y.  Throop,  12  Wend.  183  ; 

tal,- 10  Coke,  23  ;  Kearney  v.  Andrews,  Child  v.  Hudson  Bay  Co.,  2  P.  Wms. 

9N.  J.  Eq.  70;  Martin   v.  Nashville  209;  Salem  Bank  v.  Gloucester  Bank, 

Building  Assoc'n,  2  Caldw.  418  ;  City  17  Mass.  29;  Morton  Gravel  R.  Co.  v. 

of  London  v.  Vanacker,  12  Mad.  270  ;  W^song,  51  Ind.  4 ;  Martin   v.  Nash- 

Newling  v.  Francis,  3  T.  R.  189  ;  Rex  ville  Build.  Assoc,  2  Coldw.  332. 


By-Laws. 


413 


ally  provide  for  and  vest  the  power  of  making  by-laws  in  the 
board  of  directors.^ 

Sec.  262.  Requisites  of,  and  constiuction  cf  law  relating  to  by-laws. 
—  It  is  a  universally  recognized  doctrine  that  by-laws,  whether 
made  by  the  corporate  body  or  a  duly  constituted  and  select  body 
of  persons,  must  not  be  repugnant  to  the  constating  instruments 
or  the  laws  of  the  land,"  nor  in  excess  of  the  powers  specifically 
conferred  in  this  respect.^  If  the  constating  instruments  provide 
for  and  enable  the  company,  or  the  directors,  to  make  by-laws  for 
particular  and  certain  specified  purposes,  this,  on  the  maxim 
exj)ressio  unius  est  exclusio  alterhts,  would  undoubtedly  exclude 
the  making  of  by-laws  for  other  purposes.*  This  doctrine  is 
equally  applicable  to  municipal  as  to  private  corporations.  Saw- 
TEK,  J.,  observes  in  relation  to  this  rule  of  construction  as  appli- 
cable to  the  latter  class  as  follows  :  "  The  power  to  make  by-laws 
when  not  expressly  given  is  implied  as  an  incident  to  the  very 
existence  of  a  corporation  ;  but  in  case  of  an  express  grant  of  the 


1 2  Kent's  Com.  296  ;  ExpaHe  Will- 
cocks,  7  Cow.  403  ,  Cahill  v.  Kalama- 
zoo Ins.  Co.,  3  Mich.  124;  Rex  v. 
Westwood,  7  Bing.  1. 

-  United  States  v.  Hart,  1  Pet.  390  ; 
Bank  v.  Lanier,  11  Wall.  369  ;  Case 
of  Phil.  Sav.  Bank,  1  Whart.  461  ; 
Butchers'  Association,  35  Penn.  St. 
151  ;  Kennebec  R.  Co.  v.  Kendall,  31 
Me.  470  ;  Jay  Bridge  Co.  v.  Woodman, 
id.  573;  People  v.  Tibbets,  4  Cow. 
382;  Auburn  Academy  v.  Strong,  Hopk. 
Ch.  278;  Philips  v.  Wickham,  1  Paige, 
590 ;  Seneca  Bank  v.  Lamb,  26  Barb. 
595  ;  Davis  v.  Meeting  House,  8  Mete. 
321 ;  Carr  v.  St.  Louis,  9  Mo.  190  ; 
State  V.  Conklin,  34  Wis.  21.  Under 
the  act  incorporating  a  charitable  asy- 
lum which  authorized  the  trustees  to 
make  all  proper  and  reasonable  rules 
and  regulations  for  the  government  of 
the  corporation  not  inconsistent  with 
the  constitution  and  laws  of  the 
United  States  and  of  the  state  of  New 
York, — held,  that  by-laws  adopted  by 
the  trustees  forbidding  the  inmates  to 
leave  the  premises  without  permission 
from  the  governor  of  the  asylum,  or 
one  of  his  assistants,  or  indulging  in 
contention,  or  boisterous  and  disor- 
derly conversation  at  table,  on  pain  of 


expulsion,  were  reasonable,  proper  and 
valid  ;  and  that  for  a  breach  thereof, 
by  an  inmate,  the  governor  was  au- 
thorized to  dismiss  the  offender  from 
the  institution,  by  the  direction  of  the 
executive  committee  ;  after  giving  him 
reasonable  notice  of  the  examination 
and  an  opportunity  of  being  heard,  of 
exculpating  himself,  and  of  disproving 
the  charge.  People  v.  Sailors'  Snug 
Harbor,  54  Barb.  532. 

3  Free  School  v.  Flint,  13  Mete.  539  ; 
Bullard  v.  Bank,  18  Wall.  594;  Bank 
v.  Lanier,  11  id.  369.  But  see  Lock- 
wood  V.  Merchants'  Nat.  Bank,  9  R.  I. 
308  ;  Dubois  v.  Augusta,  Dudley  (Ga.) 
30  ;  Williams  v.  Augusta,  4  Ga.  509 ; 
Adams  v.  Mayor,  etc.,  29  id.  56. 

They  cannot  contravene  the  consti- 
tution. People  V.  Crockett,  9  Cal.  112. 
Nor  the  fundamental  rules  of  common 
law.  People  v.  Tibbets,  4  Cow.  382; 
Kennebec,  etc.,  R.  Co.  v.  Kendall,  31 
Me.  470  ;  Hayden  v.  Noyes,  5  Conn. 
891  ;  Adley  v.  Whitestable  Co.,  17  Ves. 
315;  Taylor  V.  Griswold,  2  N.  J.  Eq. 
222 

"*"child  V.  Hudson  Bay  Co.,  2  P.Wms. 
207;  2  Kyd  on  Corp.  102;  Rex  v. 
Spencer,  3  Burr.  1837 ;  Dill  on  Mun. 
Corp.,  §  250;  Redf.  on  Rail.,  i^26,par.3. 


414 


Private  Cokporations. 


power  to  enact  by-laws  limited  to  certain  specified  cases  and  for 
certain  purposes,  the  corporate  power  of  legislation  is  confined 
to  the  objects  specified,  all  others  being  excluded  by  implication."  ' 

Sec.  263.  By-laws  must  be  reasonable,  and  not  oppressive,  nor  con- 
trary to  the  laws  of  the  state.  —  Whether  the  power  to  make  by-laws 
is  expressly  conferred  or  implied  from  the  constating  instruments, 
such  power  is  always  subject  to  the  restriction,  that  such  by-laws 
must  be  reasonable,  not  oppressive,  nor  contrary  to  public  policy, 
or  the  laws  of  the  State.  And  this  doctrine  is  applicable,  not 
only  to  private  but  to  municipal  corporations.^  So,  by-laws  must 
be  fair  and  impartial  and  not  in  restraint  of  trade.^  Thus,  it  has 
been  held  that  a  by-law,  restraining  a  person  from  exercising  the 
art  of  painting  in  the  city  of  London,  unless  free  of  the  company 
of  painters,  is  void.*     So,  it  has  been  held,   that  a  by-law  of   a 


'  State  V.  Ferguson,  33  N.  H.  424. 
See,  also,  Heisembittle  v.  Charleston, 
3  McMull.  233  ;  Wadleij^h  v.  Oilman, 
12  Me.  403  ;  State  v.  Clark,  8  N.  H. 
176  ;  State  v.  Freeman,  38  id.  426  ; 
Commonwealth  v.  Turner,  1  Cush. 
493  ;  Collins  v.  Hatch,  18  Ohio,  523  ; 
New  Orleans  v.  Philippi,  9  La.  Ann. 
44 ;  State  v.  Morristown,  33  N.  J.  L. 
57. 

2  Kip  V.  Paterson,  26  N.  J.  L.  298; 
Commissioners  v.  Gas  Co.,  12  Penn. 
St.  318;  Fisher  v.  Harrisburg,2  Grant's 
Cas.  291;  Commonwealth  v.  Robert- 
son, 5  Cush.  438  ;  Waters  v.  Leech,  3 
Ark.  110  ;  Mayor  v.  Winfield,  8 
Humph.  767;  People  v.  Throop,  12 
Wend.  183;  Mayor  v.  Beasley,  1 
Humph.  232  ;  State  v.  Freeman,  38 
N.  H.  426;  White  v.  Mayor,  etc.,  2 
Swan,  564;  Pedrick  v.  Bailey,  12  Gray, 
161 ;  Dunham  v.  Rochester,  5  Cow. 
4G2.  They  must  be  reasonable  and 
not  oppressive  or  vexatious.  Common- 
wealth V.  Gill,  3  Whart.  228;  St.. 
Luke's  Church  v.  Matthews,  4  Des. 
Ch.  578;  People  v.  Crockett,  9  Cal. 
112;  Howard  v.  Savannah,  T.  Charlt. 
173.  See,  also,  Slee  v.  Bloom,  19 
Jolins .  456  ;  Davis  v.  Prop,  of  Meet- 
ing-house, 8  Mete.  321 ;  Amesbury  v. 
Insurance  Co.,  6  Gray,  596  ;  Cooper  v. 
Frederick,  9  Ala.  738  ;  Commissioners, 
etc.,  V.  Gas  Co.,  12  Penn.  St.  318; 
Green's  Brice's  Ultra  Vires.  12  et  seq.; 
Mayor,  etc.,  v.  Winfield,  8  Humph. 


707  ;  Mayor,  etc. ,  v.  Beasly,  1  id.  232; 
St.  Louis  V.  Weber,  44  Mo.  547  ;  Ken- 
nebec, etc.,  R.  Co.  V.  Kendall,  31  Me. 
470. 

^  Tailors,  etc.,  v,  Ipswich,  11  Rep. 
53  ;  Chamberlain,  etc.,  v.  Compton,  7 
D.  &  R.  601  ;  King  v.  Coopers'  Co.,  7 
T.  R.  543  ;  Clark  v.  Lecren,  9  B.  &  C. 
52.  But  it  has  been  held  that  a  by- 
law is  not  in  restraint  of  trade,  which 
requires  loaves  of  bread  baked  for 
sale  to  be  of  specified  weight  and 
properly  stamped,  or  which  requires 
bakers  in  a  city  to  be  licensed.  Mayor, 
etc.,  V.  Yuille,  3  Ala.  137. 

Whether  a  by-law  is  reasonable  is 
to  be  decided  by  the  court.  Common- 
wealth V.  Worcester,  3  Pick.  473. 

4  Clark  V.  Lecren,  9  B.  &  C.  52  ; 
Chamberlain,  etc.,  v.  Compton,  7  D.  & 
R.  597.  A  provision  in  the  by-laws  of 
a  bank  that  its  "  shares  shall  be 
transferable  by  indorsement  in  writing 
by  the  holder  in  presence  of  the 
cashier  or  two  other  witnesses,"  re- 
quires that  the  cashier  or  two  other 
witnesses  shall  in  writing  attest  the 
signature  of  the  holder  in  order  to 
render  the  transfer  valid  between  the 
parties.  Dane  v.  Young,  61  Me.  160. 
Membership  in  a  cotton  exchange  con- 
stitutes property  which  is  subject  to 
be  applied  in  payment  of  the  debts 
of  the  member,  and  restrictions  in 
the  by-laws  on  the  sale  or  assignment 
of  shares  or  right  of  membership  will 


By-Laws. 


415 


bank,  that  all  payments  made  or  received  by  the  bank  must  be 
examined  at  the  time,  and  mistakes  corrected  at  the  time,  or  the 
bank  would  not  be  responsible  therefor,  was  unreasonable 
and  invahd,  and  that  a  recovery  might  still  be  had,  for  an  over- 
payment discovered  afterward.  But  in  such  a  case,  the  regula- 
tion being  reasonable,  it  is  evident  that  if  known  to  the  party 


not  destroy  the  character  as  property 
of  such  shares  or  right  of  member- 
ship. Ritterband  v.  Baggett,  42  N.  Y. 
Superior  Ct.  5o6.  An  incorporated 
company  loaned  money  to  a  member 
of  the  company  upon  its  stock  owned 
by  him,  to  be  repaid  in  weekly  install- 
ments, and  took  a  mortgage  to  secure 
payment,  by  which  he  agreed  to  pay 
such  fines  and  penalties  as  might  be 
imposed  upon  him  by  the  by-laws  of 
the  company.  He  failed  to  pay  an  in- 
stallment when  due,  but  tendered  the 
amount  on  the  succeeding  day.  The 
secretary  of  the  company  refused  to 
receive  it  unless  he  would  also  pay  the 
fine  imposed  by  a  by-law  of  the  cor- 
poration upon  those  who  neglected  to 
pay  the  weekly  installments  when 
due.  The  mortgagor  tendered  each 
week  thereafter  until  the  date  of  a  de- 
cree for  the  sale  of  the  mortgaged 
premises,  the  amount  of  the  accrued 
and  accruing  installments,  but  refused 
to  pay  the  fines  claimed  to  be  due. 
Held,  that  while  the  mortgagor,  by 
his  failure  to  pay  punctually  the 
weekly  installment  when  due,  sub- 
jected himself  to  the  fine  provided  by 
the  by-law  for  such  default,  his  ten- 
der thereafter  of  the  weekly  install- 
ments as  the  same  fell  due,  exempted 
him  from  liability  to  further  fines. 
His  refusal  to  pay  the  first  fine  did  not 
give  the  right  to  impose  additional 
fines.  Pentz  v.  Fire  Ins.  Co.,  35  Md. 
73.  Under  the  rule  that  the  by-laws 
of  corporations  must  be  reasonable, 
and  that  all  which  are  vexatious,  un- 
equal, oppressive,  or  manifestly  de- 
trimental to  the  interests  of  the  corpo- 
ration, are  void ,  a  by-law  of  a  benev- 
olent association,  providing,  as  a 
penalty  for  the  non-payment  of  dues, 
that  the  delinquent  should  forfeit  his 
right  to  any  benefits  while  in  arrears, 
and  for  a  period  of  three  months  after 
the  payment  of  arrears,  is  invalid. 
Cartan  v.  Father  Matthew,  etc.,  Soc, 
3Daly  (N.  Y.  C.  P.),  20. 

A  by-law  of  a   bank   is  a   contract 


between  the  stockholders  ;  and  the 
ordinary  rules  of  construing  contracts 
apply:  in  its  construction,  and,  if 
possible,  it  should  be  so  construed,  ut 
res  magis  valeat,  quam  pereat.  Be 
Dunkerson,  4  Biss.  227. 

In  quo  icarranto  to  determine  the 
defendant's  title  to  the  office  of  treas- 
urer of  an  incorporated  benevolent 
society,  his  answer  averred  that  he 
was  duly  elected  in  a  meeting  held  and 
called  at  a  certain  church  and  hour, 
"the  same  as  every  other  annual 
meeting  has  been  called  and  notified 
since  the  organization  of  said  society." 
The  complaint  showed  that  at  least 
three  annual  meetings  for  such  elec- 
tion had  been  held  before  this  one. 
Held,  that  this  was  a  sufficient  aver- 
ment under  the  Wisconsin  Code,  of  a 
usage  of  the  kind,  and  that  such 
usage,  if  proven,  would  show  a  valid, 
practical  construction  by  the  society 
itself,  of  the  by-law  relating  to  hold- 
ing the  annual  meeting  and  election. 
State  V.  Conklin,  34  Wis.  21. 

A  by-law,  which  is  a  mere  rule  for 
the  government  of  the  officers  of  the 
corporation  in  conducting  their  own 
business,  can  have  no  eflect  upon  the 
contracts  of  the  corporation  with  other 
parties.  Samuels  v.  Central,  etc., 
Exp.  Co.,  McCahon,  214. 

Where  the  by-laws  of  a  corporation 
express  an  individual  liability  of 
members  for  company  debts,  and  each 
member  subscribed  the  by-laws 
merely  to  become  a  member,  this  is 
not  enough  to  sustain  an  action  by  a 
creditor  of  the  company  against  a 
member  for  the  amount  due.  The 
office  of  a  by-law  is  to  regulate  the 
duties  of  members  toward  the  corpo- 
ration and  among  themselves.  A 
third  party  can  enforce  them  only 
when  he  shows  some  privity;  as 
where  his  claim  is  for  value  advanced 
upon  the  credit  of  the  by-law  and  the 
signature,  or  the  like.  Flint  v.  Pierce, 
99  Mass.  68. 


416 


Private  Corpokations. 


depositing,  it  would  impose  on  him  the  necessity  of  showing 
clearly  that  the  mistake  occurred. ' 

Sec.  264.  By-laws  in  restraint  of  trade.  —  It  has,  however,  been 
held  in  England  that  by-laws  even  in  restraint  of  trade  will 
be  sustained,  where  the  corporations  are  verj  ancient,  and  they 


'  Mechanics  and  Farmers'  Bank  v. 
Smit,  19  Johns.  115;  Gallatin  v.  Brad- 
ford, 1  Bibb,  209  ;  Hayden  v.  Noyes,  5 
Conn.  391  ;  Peck  v.  Lockwood,  5  Day, 
22  ;  Marietta  v.  Fearing,  4  Ohio,  427  ; 
Mx  parte  Burnett,  30  Ala.  461  ;  Austin 
V.  Murray,  16  Pick.  121  ;  Milhau  v. 
Sharp,  17  Barb.  435  ;  27  N.  Y.  611  ; 
Dunham  v.  Trustees,  etc.,  5  Cow.  462; 
Strauss  v.  Pontiac,  40  111.  301  ,  Austin 
V.  Murray,  16  Pick.  125  ;  Wreford  v. 
People,  14  Mich.  41.  Under  this  rule 
it  is  held  that  a  corporation  organized 
under  a  statute  which  authorizes  it  to 
make  by-laws  for  "  the  management 
of  its  property,  the  regulation  of  its 
affairs,  and  the  transfer  of  its  stock," 
and  further  provides,  that  the  stock  of 
the  company  "shall  be  transferable  in 
such  manner  as  shall  be  prescribed  by 
the  by-laws  of  the  company,"  has 
power  to  make  a  by-law  providing 
that  no  transfer  of  stock  shall  be 
made  upon  the  books  of  the  corpora- 
tion, until  after  the  payment  of  all 
indebtedness  to  the  corporation  due 
from  the  person  in  whose  name  the 
stock  stands  on  its  books.  Pendergast 
V.  Bank  of  Stockton,  2  Sawyer,  108. 
So  too  a  by-law  of  a  New  York  manu- 
facturing company,  which  assumes  to 
prohibit  a  transfer  of  stock  by  the 
owner,  because  he  is  indebted  to  the 
company,  is  ultra  vires  and  void.  The 
statutory  power  of  these  companies 
to  make  by-laws  on  that  subject  only 
extends  to  prescribing  the  manner  and 
form  in  which  transfers  shall  be 
made.  Driscoll  v.  West,  etc.,  Manuf. 
Co.,  36  N.  Y.  Superior  Ct.  488.  A 
national  bank  cannot,  even  by  provis- 
ions framed  with  a  direct  view  to 
that  effect  in  its  articles  of  association 
and  by  direct  by-laws,  acquire  a  lien 
on  its  own  stock  held  by  persons  who  are 
its  debtor  ;  and  a  by-law  attempting 
to  create,  in  favor  of  the  bank,  a  lieii 
on  stock  held  by  its  debtors,  is  not  a 
regulation  of  the  business  of  the 
bank,  or  a  regulation  for  the  conduct 
of  its  affairs,  within  the  meaning  of 


the  national  banking  act,  and,  there- 
fore, not  such  a  regulation  as,  under 
that  act,  national  banks  have  a  right 
to  make.  Bullard  v.  Bank,  18 
Wall.  589.  And  see  Rosenback  v. 
Salt  Springs  Nat.  Bank,  53  Barb.  495  ; 
Conklin  v.  Second  Nat.  Bank,  id.  512, 
note  ;  45  N.  Y.  655.  To  the  contrary, 
Lockwood  V.  Mechanics'  Nat.  Bank,  9 
R.  I.  308.  A  by-law  of  a  national 
bank  which  declares  that  no  transfer 
of  stock,  the  holder  of  which  is  at  the 
time  indebted  to  the  bank,  shall  be 
made  without  the  consent  of  the  di- 
rectors, attempts  to  create  a  lien  upon 
the  stock  for  the  debts  of  the  holder, 
and  is  contrary  to  the  provision  of  the 
act  which  forbids  loans  by  such  banks 
upon  the  security  of  their  own  stock. 
Evansville  Nat.  Bank  v.  Metropolitan 
Nat.  Bank,  2  Biss.  527.  The  right  of 
alienation  is  an  incident  of  property  ; 
and  a  by-law  of  a  bank  prohibiting 
the  alienation  of  stock  therein,  or  put- 
ting restrictions  thereon,  is  void,  as 
being  in  restraint  of  trade.  Moore  v. 
Bank  of  Commerce,  52  Mo.  877.  Un- 
der the  principle  that  a  by-law  of  a 
corporation  which  is  clearly  unreason- 
able and  contrary  to  public  policy  is 
void,  a  by-law  of  a  merchants'exchange 
which  requires  members  to  submit 
their  controversies  to  arbitration,  on 
pain  of  expulsion  if  they  bring  suit, 
is  invalid.  The  law  favors  arbitration 
when  it  is  acceptable  to  both  parties 
to  a  difficulty.  But  every  citizen 
must  be  protected  iu  his  right  to  resort 
to  the  courts  if  he  prefers.  State  v. 
Union  Merchants'  Exchange,  2  Mo. 
App.  96.  A  by-law  of  a  chamber  of 
commerce,  providing  for  the  ex- 
pulsion of  a  member  for  noucompli- 
ance  with  the  terms  of  any  contract, 
whether  verbal  or  written,  is  reason- 
able and  valid,  and  enforceable,  even 
though  the  contract  violated  were 
void  by  the  statute  of  frauds,  or  as 
not  made  "during  a  session  of 
'Change."  Dickenson  v.  Chamber  of 
Commerce,  29  Wis.  45. 


By-Laws. 


417 


"arc  supported  by  special  customs  wliicli  suppose  a  former  grant 
of  a  moiKjpoly.'' '  But  in  such  cases  the  custom  must  be  strictly 
proved  to  be  in  harmony  with  the  by-laws  •  and  the  doctrine  can- 
not be  applied  to  new  corporations.' 

Sec.  265.  By-laws  adopted  by  the  corporate  body. —  If  by-laws 
are  lawfully  framed  and  adopted  by  tlie  corporate  body,  relating 
to  the  powers  and  duties  of  the  directors,  they  become  as  to  them 
the  fundamental  law,  and  hence  a  board  of  directors  can  no  more 
disregard  such  by-laws  of  the  corporate  body  than  they  could  the 
provisions  of  the  incorporating  statute  or  other  constating  instru- 
ments.' 

Sec.  266.  By-laws  adopted  by  directors.  — Where  the  directors 
have  authority  conferred  upon  them,  to  make  by-laws,  either  by 
the  constating  instruments  or  by  the  corporation,  tliey  may  adopt 
such  as  they  deem  proper,  provided  they  come  within  tlie  scope 
of  the  authority  conferred  upon  them.  In  the  exercise  of  this 
power  they  may  do  wliatever  the  corporate  body  itself  might 


'  Bos  worth  V.  Budj^en,  7  Mod.  459  ; 
Colchester  v.  Goodwin,  Carter,  117; 
Bricklayers  and  Plasterers,  Palm.  395, 
Hardres,  56  ;  Player  v.  .Tones,  1  Vent. 
21;  Broadnox's  Case,  id.  196  ;  Bosworth 
V.  Hearne,  Andre,  97;  2  Stra.  1085;  Cme 
temp.  Hardw.  408  ;  Player  v.  Vere,  T. 
Raym.  288  ;  Bodwic  v.  Fennell,  1  Wils. 
233  ;  Harrison  v.  Goodman,  1  Burr.  16; 
Hesketh  v.  Braddock,3id.  1858;  Wooley 
V.  Idle,  4  id.  1953;  The  King  v.  Coop- 
ers' Co.,  7  T.  R.  543  ;  The  King  v.  Tap- 
peuden,  3  East,  186;  Chamberlain,  etc., 
V.  Compton,  7  D.  &  R.  601  ;  Clark  v. 
Denton,  1  B.  &  Ad.  92;  Clark  v.  Le 
Crean.  9  B.  &  C.  52. 

2  Hesketh  v.  Braddock,  8  Burr.  1858; 
Colchester  v.  Goodwin,  Carter,  117. 
But  see  Fazakerly  v.  Wiltshire,  1 
Stra.  466,  Bolton  v.  Throgmorton, 
Skin.  55.  But  see  Wile,  on  Corp. 
146.  See,  also,  as  to  ordinances  of 
municipal  corporations  in  restraint  of 
trade,  Dunham  v.  Rochester,  5  Cow. 
462 ;  Freeholders  v.  Barber,  7  N.  J.  L. 
64. 

On  the  subject  of  the  reasonableness 
of  by-laws,  see  People  v^.  Medical  Soc. 
of  Erie,  24  Barb.  570;  S.  C,  32  N.  Y. 
187.  See,  also.  State  v.  Ferguson,  33 
N.  H.430;  Phillips  v.  Allen, 41  Penn. 

53 


St.  481  ;  Kirk  v.  Nowill,  1  T.  R.  124  ; 
White  V.  Tallman,  26  N.  J.  L.  07  ;  Hart 
V.  Albany,  9  Wend.  588  ;  Peoria  v.  Cal- 
houn, 29  111.  317;  St.  Paul  v.  Coulter, 
12  Minn.  41.  But  "in  this  country," 
observes  Mr.  Dillon,  "  corporations 
derive  all  their  powers  from  legislative 
acts  of  comparatively  modern  date, 
and  prescriptive  customs,  in  restraint 
of  trade  or  against  common  right,  are 
unknown."  Commonwealth  v.  Stodder, 
2  Cush.  562  ;  Herzo  v.  San  Francisco, 
33  Cal.  134. 

3  See  opinion  of  Justice  Miller,  in 
Samuel  v.  Holladay,  1  Woolw.  (C.  C.) 
400  ;  Cummings  v  Webster,  43  Me. 
192  ;  Anacosta  Tribe  v.  Murbach,  13 
Md.  91 ;  Brick  Pres.  Church  v.  Mayor, 
etc.,  5  Cow.  538;  McDermott  v.  Board, 
etc  ,  5  Abb.  Pr.  443.  But  the  legisla- 
ture cannot  authorize  the  making  of  a 
by-law  contravening,  repealing,  or  in 
any  way  changing  the  statutory  or 
common  law  of  the  land.  Seneca 
County  Bank  v.  Lamb,  26  Barb.  595  ; 
Kvnaston  v.  The  Mayor,  etc.,  2  Stra. 
1051  ;  King  v.  Theodorick,  8  East, 
543  ;  Stow  v.  Wvse,  7  Conn.  214  ;  War- 
ner V.  Mower, '11  Vt.  885;  State  v. 
Ancker,  3  Rich.  245. 


il8  Private  CoKroRAxioNS. 

in  tliis  rospect  have  done,  if  the  power  had  not  been  vested  in 
them. 

If  the  authority  is  conferred  upon  them  by  the  constating 
instruments,  it  is  exclusive  of  the  authority  of  the  corporate 
body  to  act  in  the  premises.^ 

But,  if  the  authority  is  conferred  b}'  the  corporation  upon  them, 
such  authority  may,  like  the  authority  of  an  agent  generally,  be 
revoked  at  any  time.  But  such  revocation  could  not  affect  the 
vested  rights  of  parties,  by  virtue  of  the  powers  exercised  by  such 
agents  before  such  revocation. 

The  acts  of  such  directors,  however,  will  be  in  all  cases  subject 
to  such  limitations  and  restrictions  in  the  adoption  of  by-laws  as 
we  have  noticed  is  imposed  upon  the  corporate  body  itself  in  this 
respect.  In  fact  the  authority  to  the  directors  may  be  even  more 
limited  than  that  possessed  by  the  body  itself,  where  the  author- 
ity proceeds  from  it.^  In  such  a  case  the  px)wer  to  act  must  depend 
upon  the  provisions  of  the  act  conferring  it.  But  if  it  is  one  in 
general  to  make  such  by-laws  as  may  be  necessary  and  proper  to 
regulate  and  conduct  the  business  of  the  corporation,  then  it 
would  be  construed  as  giving  them  complete  authority  in  that 
respect,  limited  only  in  the  manner  we  have  stated  where  they 
are  framed  by  the  corporate  body.  But  we  have  already  consid- 
ered this  subject  in  treating  of  directors. 

Sec.  267.  Distinction  between  by-laws  adopted  by  the  corporation 
and  those  adopted  by  directors.  —  The  distinction  between   by-laws 

'  Dana  v.  Bank  of  U.  S,,  5  W.  &  S.  for  the  management  of  its  affairs.     It 

247;  Mahshall,  C.  J.,  inBank  of  U.  S.  is  no   answer   that   individual    stock- 

V.  Dandridge,  12  Wheat.  113  ;  Dayton,  holders  who  were  present  at  the  meet- 

etc.  R.  Co.  V.  Hatch,  1  Dis.  84;  Conro  ing  when  the  lease  was  ordered,  were 

V.  Port  Henry  Iron  Co.,  12  Barb.  27,  in  also  directors.     They  did  not  meet  and 

which  the  court  say:  "It  is  quite  ob-  act  as  directors,  but  as  stockholders." 
vious  from  the  charter  that  the   com-         '■'  If  the   general   power   of  making 

pany  could  do  no  act  except  through  by-laws   is  by  the    provisions   of   the 

the  directors.      When  the  charter  pre-  charter  vested  in  the  corporation  itself, 

scribes  the  mode  of  its  action,  its  in-  it  may  circumscribe  the  powers  of  the 

junctions  must  be  rigidly  pursued.     *  board    of    directors.     Salem    Bank  v. 

*     *     The  stockholders    in   this  case  Gloucester  Bank,  17   Mass.    29.     See, 

had  no  power  to  make   a  lease,  or  do  also,  Fleckner  v.  United  States  Bank, 

any   other   administrative   act   in  the  8  Wheat.  338;  State  of    Louisiana  v. 

management  of  the  affairs  of  the  cor-  Bank  of  Louisiana,  6  La.  745  ;  White- 

poration.     If  a   lease   could   be  made  well,  Bond  &  Co.  v.  Warner,    20   Vt. 

at  all,  it  could  be  executed  only  in  pur-  425;  Ridgeway  v.  Farmers'  Bank,  12 

suance  of  the  act  of  the  directors,  who  S,  &  R,  256. 
are  the  body  appointed  by  the  charter 


By-Laws.  419 

adopted  by  the  corporate  body  and  those  of  tlie  directors  is  pointed 
out  by  Mr.  Justice  Millki*  iu  a  recent  case,  in  whirli  it  was  at- 
tempted to  set  aside  a  trust  deed  as  void,  because  the  meeting  of 
the  board  of  directors  at  which  the  president  of  the  company  was 
authorized  to  execute  the  instrument  was  held  without  the  notice 
prescribed  for  such  meetings  by  a  by-law  adopted  by  the  directors. 
He  says :  '"  Such  a  by-law,  when  made  by  the  board  of  directors 
for  their  government,  cannot  be  extended  to  affect  contracts  witli 
third  persons.  There  are  many  cases  in  which  it  has  been  held 
that  notice  of  special  meetings  must  be  given  as  required  by  the 
by-laws,  or  the  meetings  would  be  wholly  without  authority,  and 
all  business  attempted  to  be  then  done  would  be  of  no  binding 
force  upon  the  corporation.  But  in  all  these  cases,  and  in  all 
others  in  which  the  same  rule  is  laid  down,  the  by-laws  were  made 
by  the  stockholders  at  the  annual  and  stated  meeting,  under  the 
authority  and  direction  of  a  provision  of  the  charter.  In  such 
cases  the  stockholder  m^y  be  supposed  to  retain  a  control  over  the 
management  of  their  aliairs  and  intend  to  put  a  restraint  upon 
their  agents.  Their  will,  expressed  in  the  by-laws,  becomes  a 
rule  to  the  directors.  It  cannot  be  disregarded  any  more  than  a 
provision  in  the  charter.  But  the  reason  for  the  rule  fails  when 
the  by-law  is  made  by  the  directors  for  the  government  of  them- 
selves in  the  management  of  the  business  of  the  corporation.  The 
same  power  which  enacts  can  repeal  the  law.  It  is  a  mere  guide 
for  their  own  convenience,  and  for  the  orderly  conduct  of  their 
business.  It  cannot  be  extended  to  affect  the  validity  of  acts 
done  in  disregard  of  it,  especially  when  third  parties  are  con- 
cerned." ' 

We  have  already  considered  the  subject  of  notice  as  imparted 
by  the  by-laws,  and  the  acts,  documents  and  instruments  for  in- 
corporation, in  treating  of  directors  and  agents.^ 

'  Samuel  V.  Holladay,  1  Woolw.  (C.  mouwealtli    v.    The    Mayor,    etc.,   5 

C.)  400.     See.  also,  Brick  Presbyterian  Watts,  153. 

Church  V.  The  Mayor,  etc.,  5  Cow.  538  ;  *  See  chap.  6  and  7.  See,  also.  Fay  v. 

The  Mechanics',  etc..  Bank  v.    Smith,  Noble,  12  Cush.  1  ;  Wyman  v.  Hallow. 

19  Johns.  115  ;  Seneca  Co.  B'k  v.  Lamb,  ell,  etc..  Bank,  14  Mass.  58  ;   State  v. 

26  Barb.  595  ;    Com.  Dig.,  tit.  By-law,  Commercial  Bank,  6  S.  &  M.  237  ;  Kis- 

chap.  2  ;  Dodwell  v.  The  University  of  ley  v.  Ind.  B.  &W.  R.  Co.,  1  IIuu,  202  ; 

Oxford,    2   Vent.   33 ;   Vandine,   Peti-  Adriance    v.    Roome,   52   Barb.    399  ; 

tioner,  6  Pick.  187  ;  Sargeant  v.    The  Lowell  Sav.    Bank    v.    Winchester,  8 

Essex  Marine  R.  Co.,  9  id.  203  ;  Com-  Allen,  109. 


420  Private  Cokporations. 

SeO.  268.  By-lavrs  contrary  to  the  general  lavrs  of  the  land,  void.  — 
It  has  been  noticed  that  by-laws  contrary  to  tlie  law  of  the  land 
were  void  ;  but  a  fuller  statement  and  illustration  of  the  subject 
may  be  required. 

And  first,  we  may  say  that  a  by-law  of  the  directors,  who  re- 
ceive their  authority  directly  from  the  corporate  body,  in  conflict 
with  any  by-law  or  regulation  of  the  body  itself,  would  be  void.^ 
For,  as  in  such  a  case  the  powers  of  the  agents  are  subordinate,  on 
general  principles,  to  the  authority  of  the  principal,  the  principal 
may  prescribe  and  limit  the  authority  of  the  agent  in  any  manner 
that  may  be  deemed  proper. 

Secondly,  the  by-laws  of  either  the  directors  or  of  the  corporate 
body  must  not  conflict  with  the  provisions  of  the  charter,  corpo- 
rate acts,  articles  of  association,  deed  of  settlement,  certificate,  or 
other  original  and  constating  instrnments.^  These  become,  by 
acceptance  and  adoption,  the  fundamental  law  of  the  institution, 
the  constitutional  law  of  the  body,  and  paramount  to  the  by-laws 
which  may  be  adopted. 

Thirdly,  they  must  not  conflict  with  the  constitution  of  the 
state  or  of  the  general  government.  For,  as  the  legislature  has 
no  authority  to  pass  laws  in  conflict  with  such  constitution,  so  it 
of  course  follows  that  they  cannot  authorize  others  to  do  so  ;  and 
any  by-law  in  conflict  with  either,  or  that  authorizes  any  infringe- 
ment of  personal  rights  or  privileges  secured  to  individuals  by 
either,  would  be  mill  and  void.  Therefore,  no  by-law  can  impair 
the  obligation  of  a  contract,  or  provide  for  the  taking  of  the 
private  property  of  a  person  for  the  use  of  the  cori^oration,  with- 
out just  compensation,^  or  authorize  the  violation  of  any  other 
rights  secured  by  constitutional  provisions,^  or  impose  any  personal 
or  individual  liability  beyond  such  as  is  specified  in  the  charter, 

'  Salem  Bank  v.  Gloucester  Bank,  17  ^  Aug.  &  Am.  on  Corp.,  §  333  ;  Stuy- 

Mass.  29.  See,  also,  Wliitewell  V.  War-  vesaut  v.   Mayor,  7  Cow.    585;    New 

ner.  20  Vt.  425  ;    Bank  of  Middlebury  York  v.  New  York,  3  Duer,  119. 

V.   Rutland,  etc.,  R.    Co.,  30   id.    159  ;  *  Id.    See,  also,  Coates  v.  New  York, 

Augusta  Bank  v.  Hamblet,  35  Me. 491  ;  7  Cow.  604  ;  Qoszler  v.  Georgetown,  6 

Hoyt  V.  Thompson,  19  N.  Y.  207.  Wheat.  593  ;  Bank  v.  Lanier,  11  Wall. 

''  Hoyt   V.    Shelden,    3   Bosw.    267 ;  369 ;  Kennebec    R.  Co.  v.    Kendall,  31 

Hoyt  V.  Thompson,  19  N.  Y.  207;  Rex  Me.  470  ;  Jay  Bridge  Co.  v.  Woodman, 

V.    Spencer,    3   Burr,   1839;    King   v.  id.  573  ;  Carr  v.  St.  Louis,  9  Mo.  190  ; 

Ginever,  6  T.  R   735.     See,  also,  State  State  v.  Coukliu,  34  Wis.  21. 
V.  Curtis,  9  Nev.  325  (1874). 


By-Laws. 


421 


incorporating  laws,  or  other  constating  instruments  nnder  which 
it  is  constituted.' 

Fourthly,  by-laws  infringing  the  laws  of  congress,  made  in 
})ursuance  of  the  constitution,^  the  general  statutes  of  a  state,  or 
particular  statutes  relating  to  tlie  corporation  (provided  these  do 
not  impair  the  obligation  of  the  charter),  are  void.' 

Fifthly,  they  must  not  be  contrary  to  the  general  principles  of 
the  common  law,  as  recognized  in  the  state,  or  of  general  public 
policy.' 

Sec.  269.  It  is  true,  however,  that  the  legislature,  having 
paramount  authority,  except  so  far  as  restrained  by  the  constitu- 
tion of  the  state,  may  authorize  acts  which  interfere  with  rights 
which  may  be  said  to  be  generally  possessed  by  persons.'  This 
subject  has  .been  illustrated  by  Mr.  Justice  Evans  as  follows  : 
"  If  there  was  no  law  interfering,  the  butcher  might  kill  his  hogs 
and  beeves  in  the  street.  If  the  butcher  could  do  it  any  man 
might,  and  it  might,  therefore,  be  said  to  be  a  common  right ;  but 
when  the  law  prohibited  it,  it  was  no  longer  a  common  right.  A 
legal  restraint  may  be  imposed  on  a  few  for  the  benefit  of  the 

^1   6 

many. 


»  Tavlor  V.  Griswold,  2  N.  J.  Eq.  232  ; 
Lee  V.  Wallis,  1  Key.  292;  Sayer,262  ; 
People  V.  Tibbets,  4  Cow.  882  ;  Ken- 
nebec R.  Co.  V.  Kendall,  31  Me.  470. 
And  it  has  been  held  thai  a  by-law, 
which  assumes  to  prohibit  the  transfer 
of  stock  by  the  owner,  because  he  is 
indebted  to  the  company,  is  ^di)•a  vires 
and  void.  Driscoll  v.  West  Bradley 
Man.  Co.,  36  N.  Y.  Superior  Court, 
488. 

•^  Free  School  v.  Flint,  18  Mete.  539. 

3  United  States  v.  Hart,  1  Pet.  (C.  C  ) 
390. 

^Norris  v.  Staps,  Hob.  211  ,  Clark's 
Case,  5  Coke,  63.  See  by-laws,  3  Salk. 
76  ;  Rex  v.  Barber  Surgeons,  1  Ld. 
Ravm.585  ;  Rex  v.  Miller,  6  T.  R.  277; 
Rex  V.  Haythorne,  5  B.  &  C.  425; 
Williams  v.  Great  Western  R.  Co.,  10 
Exch.  15;  28  Eng.  L.  &  Eq.  439; 
Butchers'  Ben.  Association,  35  Penn.  St. 
151  ;  Auburn  Academy  v.  Strong,  1 
Hopk.  Ch  278;  Jay  Bridge  Co.  v. 
Woodman,  31  Me.  573  ;  Connecticut  R. 
Co.  V.  Bailey,  24  Vt.  465. 


'  Taylor  v.  Griswold,  supra.  See, 
also,  Philips  v.  Wickham,  1   Paige,  598. 

^  Citv  Council  v.  Ahrens,  4  Strobh. 
{^.  C.)  L.  241 ;  City  Council  v.  Baptist 
Church,  id.  306  ;  Peoria  v.  Calhoun, 29 
HI.  217;  St.  Paul  v.  Colter,  12  Minn. 
41.  As  transceudiug  the  charter,  by- 
laws creating  a  new  office,  imposing 
an  oath  of  office  where  none  is  pro- 
vided by  the  constitution  [of  the  cor- 
porate body],  giving  a  vote  to  a  person 
or  a  casting  vote  to  an  officer  who  is 
not  entitled  to  it  by  the  charter,  re- 
stricting the  right  of  an  officer  to  vote 
to  a  mere  casting  vote  in  ca.se  of  a  tie, 
restricting  or  extending  the  right  of 
admission  or  eligibility  to  office,  or  re- 
stricting the  discretionary  power  of 
removing  a  master  or  usher  of  a  gram- 
mar school  vested  in  the  governors,  as 
given  by  the  charters,  altering  the  pre- 
scribed mode  of  election,  or  imposing 
ne%v  and  additional  tests  or  qualifica- 
tions on  members  or  voters  ;  delegat- 
ing the  power  of  laying  assessments 
to  the  directors  when  the  charter  or 


422 


Private  Corpobations. 


Sec.  270.  Matters  that  may  be  regulated  by  by-laws.  —  TllC  term 
"  bj-iaw  "  is  used  to  designate  tliose  regulations  which  a  corporation 
has  a  riglit  to  make,  either  directly  as  a  corj^orate  body,  or  by  a 


general  law  vests  it  exclusively  in  the 
corporation,  or  changing  the  salaries 
of  officers,  or  imposing  a  personal 
liability  for  the  debts  of  the  corpora- 
tion not  contemplated  by  the  charter, 
are  void.  And  where  a  by-law  confers 
the  right  of  voting  by  proxy,  or  im- 
poses the  ownersliip  of  a  certain  num- 
ber of  sliares  as  a  qualification  for  office 
or  admission,  there  being  nothing  in 
the  charter  expressed  or  implied  speci- 
ally authorizing  such  by-law,  or,  wliere 
in  cases  of  a  "  savings  institution,"  a 
by-law  is  passed,  prescribing  that  per- 
sons owning  one  share  of  the  capital 
required  to  be  invested  for  the  purpose 
of  security  to  the  depositors  should  be 
members,  and  should  cease  to  be  mem- 
bers upon  its  transfer,  the  by-law  is 
held  void,  as  invading  the  spirit  and 
meaning  of  the  charter.  So,  where 
the  act  incorporating  an  insurance  com- 
pany gave  a  vote  for  each  share  of 
stock,  but  provided  that  no  share 
should  entitle  the  holder  to  a  vote 
unless  the  stock  should  have  been  held 
by  him  at  least  sixty  days  next  and 
immediately  preceding  an  election,  and 
provided  that  the  major  part  of  the 
directors  should  constitute  a  board, 
with  power  to  pass  such  by-laws  as  to 
them  should  appear  needful  and  proper 
respecting  elections,  and  they  passed 
a  by-law  requiring  a  trans^'er  of  stock 
to  be  registered  in  order  to  be  effectual, 
it  was  held  that  a  by-law  requiring  the 
inspectors  of  elections,  whenever  they 
should  or  might  suspect  that  stock 
voted  on  had  been  sold  or  bargained 
for  within  the  sixty  days ,  but  not  trans- 
ferred on  the  books,  to  oblige  the  per- 
son proposing  to  vote  on  such  stock  to 
adduce  satisfactory  proof,  either  by  his 
own  oath  or  affirmation  or  otherwise, 
that  the  stock  had  not  been  sold,  or 
the  beneficial  interest  parted  with  by 
any  bar<rain  or  contract  within  the 
sixty  days,  and  in  default  of  such  proof 
to  reject  the  vote,  was  void ;  and  that 
the  vendor  might  vote,  notwithstand- 
ing the  transfer  within  sixty  days,  the 
same  being  unregistered  ;  tlie  inspect- 
ors having  no  right  to  require  other 
tests  of  a  voter  than  those  provided  in 
the   act    of  incorporation,  and    it    not 


being  competent  to  the  directors  to 
pass  any  by-laws  at  variance  with  the 
provisions  of  the  same.  An  act  incor- 
porating a  church  provided  that  the 
vestry  should  be  elected  "  in  the  man- 
ner accustomed,"  whicli  was  at  a  cer- 
tain time  and  place,  by  the  inhabitants 
of  the  parish,  being  of  the  religion  of 
the  church  of  England,  and  possessing 
certain  other  enumerated  qualificii- 
tions.  It  was  held  that  a  by-law  made 
by  the  vestry,  enacting  that  no  person 
should  be  admitted  a  member  of  the 
church,  or  be  entitled  to  the  privilege 
of  a  vote  in  the  election  of  the  vestry, 
unless  he  should  pay  the  sum  of  fifty 
dollars,  a  qualification  not  named  in 
the  charter,  was  void  ;  inasmuch  as  '  it 
required  a  new  qualification  to  entitle 
persons  otherwise  entitled  to  vote,  and 
was  therefore  an  attempt  to  transcend 
the  powers  given,  and  to  alter  the  qual- 
ifications of  the  voters,  and  was  a  vio- 
lation of  the  charter." 

And  generally,  where  the  charter 
vesta  the  admission  of  members  in 
the  body  at  large,  a  power  vested  in 
the  directors,  to  provide  for  the  admis- 
sion of  members,  gives  them  only  a 
right  to  prescribe  in  their  by-laws,  the 
time,  place,  and  manner  of  holding  the 
election  of  members,  and  not  the  right 
to  pass  a  by-law  imposing  a  test  of 
membership  not  contemplated  by  the 
charter,  as  the  ownership  of  a  share  in 
the  capital  stock  of  a"  savings  institu- 
tion." In  a  recent  case  in  England,  it 
was  decided,  that  a  by-law  of  a  navi- 
gation company,  that  the  navigation 
should  be  closed  on  Sundays,  except 
for  works  of  necessity,  and  for  the 
purpose  of  going  to  and  returning 
from  any  place  of  divine  worship,  was 
not  authorized  by  a  charter  empower- 
ing the  company  to  make  by-laws  for 
the  good  government  of  the  company 
and  for  the  good  and  orderly  using  of 
navigation,  and  also  for  the  well  gov- 
erning of  the  bargemen,  watermen, 
and  boatmen,  who  should  carry  goods 
on  any  part  of  the  navigation,  on  the 
ground,  that  the  power  of  making 
by-laws  was  vested  in  them  solely  for 
the  orderly  use  of  the  navigation,  and 
not  for  the  purpose  of  controlling  the 


By-Laws.  423 

select  body  of  its  own  members,  by  virtue  of  a  power  conferred 
by  the  corporation,  the  statute  or  constating  instruments.  These 
by-laws  or  regulations  may,  in  fact,  be  a  part  of  the  constating 
instruments.  But  they  are  usually,  in  cases  of  corporations  for 
pecuniary  emolument,  referred  to  the  board  of  directors  to  fi-ame 
and  adopt ;  and  they  may  properly  regulate  all  those  internal 
affairs  of  the  corporation,  in  the  prosecution  and  management  of 
the  business  for  which  it  was  organized,  and  for  the  management 
of  which  there  are  no  other  regulations  in  the  charter  or  constat- 
ing instruments. 

Sec.  271.  The  statute  and  other  corporate  and  constating  in- 
struments are  the  suj)erior  or  constitutional  law  of  the  corpora- 
tion ;  by  which  the  authority  is  conferred  upon  the  corporate 
body,  or  a  select  body  of  the  corporators,  to  frame  by-laws,  for 
the  general  management  of  the  business  of  the  corporation,  sub- 
ject to  the  limitations  specifically  prescribed,  and  such  as  we  have 
noticed  as  on  general  principles  are  applicable  thereto.  And 
by-laws  thus  legally  adopted  have,  in  respect  to  the  matters  of 
which  they  are  appropriately  the  subject  of  regulation,  the  force 
and  effect  of  a  legislative  act.' 

Thus,  subject  to  the  conditions  before  stated,  they  may  provide 
for  the  time  and  place  of  meeting  of  the  stockholders;  for  the 
time  and  manner  of  giving  notice  thereof ;  how  the  directors  shall 
be  elected ;  in  what  way  the  will  of  the  members  shall  be 
expressed,  as  by  ballot  or  otherwise  ;  how  vacancies  in  the  board 
of  directors  may  be  filled  ;  how  the  other  officers  shall  be  appointed 

moral  or  religious  conduct  of  carriers  parte  Winsor,  3  Story,  411  ;  Carr  v.  St. 

along  the  navigation,  which  is  to  be  Louis,  9  Mo.  191  ;  Free  Sch.,etc.,  v. 

left  to  the  general  law   of  the   land,  Flint,  18  Mete.  539  ;  Kennebec  R.  Co.  v. 

and  to  the  laws  of  God.     Rex  v.  Bird,  Kendall,  31  Me.  470  ;  Phillips  v.  Wici^- 

13  East,  384;  Rex  v.  Giuever,  6  T.  R.  ham,  1  Paige,  598;  Taylor  v.  Griswold, 

736;  McCullough  V.  Annapolis  R.  Co.,  3   N.    J.   Eq.   223;    Co'mmonwealih  v. 

4  Gill.   58  ;  Rex  v.  Coopers,  etc.,  7  T.  Gill,  3  Whart.  228  ;  Andrews  v.  Union 

R.  548  ;  Rex  v.  Atwood,  1  Nev.  &  M.  Ins.  Co.,  37  Me.  256  ;  People  v.  Tibbets, 

286  ;  Rex  v.  Weymouth,  7  Mod.  373  ;  4  Cow.  358  ;  Rollins  v.  Columbia  Ins. 

Queen  v.  Governors,  etc.,  6  Q.  B.  682  ;  Co..  5  Fost.  200  ;  Calder  Navigation  Co. 

Queen   v.  Sadlers'  Co.,  10  H.   L.  Cas.  v.  Pilling,  14  M.  &  W.  75. 
,414  ;  3  Ell.  &  E.  42  ;  4  B.  &  S.  570  ;  Ex 

'  Helland  v.  Lowell,   3   Allen,  407  ;  Pr.  422  ;  Taylor  v.  Carondelet,  22  Mo. 

Church    V.    City,    etc.,    5    Cow.    548;  105;  Hopkins  v.  Mayor,  etc.,  4  M.  & 

St.    Louis    V.   Boffinger,   19    Mo.    13 ;  W.  621. 
McDermott  v   Board  of  Police,  5  Abb. 


424  Pkivate  Corporations. 

or  elected,  and  their  qualifications ;  what  number  shall  constitute 
a  quorum  of  meetings  held  by  directors  ;  how  vacancies  in  offices 
shall  be  filled ;  how  committees  shall  be  appointed,  and  their 
powers  and  duties ;  how  special  or  general  agents  may  be  ap- 
pointed, and  their  duties,  qualifications  and  powers ;  when  and 
where  meetings  of  the  board  of  directors,  or  of  the  corporate  body 
shall  be  held,  or  when  called,  and  what  notice  of  the  same  shall 
be  given  ;  what  bond,  if  any,  shall  be  required  of  officers,  and 
who  shall  approve  of  the  same ;  what  books  of  the  company 
shall  be  kept,  and  by  whom  and  how,  and  for  what  purpose ;  how 
the  by-laws  may  be  repealed  or  amended  ;  for  the  transfer  of  stock 
from  one  to  another ;  and  for  securing  to  the  corporation  a  lien 
on  all  such  stock,  for  all  debts  due  the  corporation.  Of  course 
the  by-laws,  whether  made  by  the  corporate  body  or  by  the  board 
of  directors,  can  confer  no  power  upon  themselves  or  their  agents 
not  possessed  by  the  corporation.  And  any  attempt  to  exercise 
such  powers  would  be  ultra  vires  and,  as  we  have  seen,  void. 
The  distinction  between  a  corporation  and  an  individual  in  this 
respect  is,  that  a  corporation  is  an  artificial  person  created  for  a 
specific  purpose,  and  its  powers  are  limited  by  the  acts  and  instru- 
ments of  its  creation,  and  it  can  only  execute  such  contracts  and 
perform  such  acts  as  it  is  authorized  to  make  and  perform,  in  this 
respect  differing  from  a  natural  person  who  may  perform  all  acts, 
and  execute  all  contracts  which  are  not  forbidden  by  some  posi- 
tive law.^  The  rights  of  natural  persons  in  this  respect  are 
limited  only  by  provisions  of  law,  or  public  policy,  which  is  a 
part  of  the  law. 

A  corporation  authorized  by  statute  to  make  by-laws  for  the 
management  of  its  property,  the  regulation  of  its  affairs,  and  the 
transfer  of  its  stock,  has  power  to  make  a  by-law  providing  that 
no  transfer  of  stock  shall  be  made  upon  the  books  of  the  corpora- 
tion until  after  the  payment  of  all  indebtedness  to  the  corporation 
due  from  the  person  in  whose  name  the  stock  stands  on  its  books." 


'  Root  V.  Wallace,  4  McLean  (C.  C),  And  ex  post  facto  laws  by  corporations 

8 ;  Davis  v.  Bank,  etc.,  id.  387  ;  Gage  are  no  more   lawful  for   corporations 

V.  New  Market  R.  Co.,  18  Q.  B.  457  ;  than  for  states.     Pulford  v.  Fire  Dept. 

14  Eng.  L.&  Eq.  57  ;  Preston  v.  Liver-  of  Detroit,  31  Mich.  458. 

pool  R.  Co.,    5  H.  L.  Cas.   605.     But  ^  Pendergrast  v.  Bank  of  Stockton,  2 

by-laws  can  have  no  retroactive  effect.  Saw.  108.     And  if  the  making  of  by- 


ByLaw8.  425 

Sec.  272.  How  by-laws  are  made.—  In  treating  of  corporate 
meetings  we  stated  the  manner  in  whicli  the  corporate  will  was 
expressed,  viz.  :  by  the  voice  or  vote  of  the  majority,  and  that  this 
majority  was,  unless  otherwise  provided,  the  voice  or  vote  of  those 
representing  a  majority  of  the  stock ;  each  share  entitling  the 
holder  to  a  vote  on  all  questions  submitted  at  a  meeting  of  tlie 
corporate  body.  If  the  power  to  adopt  by-laws  is  conferred  upon 
the  directors,  a  majority  of  them,  or  of  those  constituting  a  quo- 
rum for  doing  business,  may  ado])t  or  enact  them.^ 

But  in  whatever  manner,  either  by  tlie  corporate  body  or  by 
the  board  of  directors,  they  may  be  enacted,  it  should  be  done  at 
a  meeting  duly  called  and  lawfully  held.  If  there  is  a  mode  of 
enacting  by-laws  prescribed  by  the  constating  instruments,  that 
mode  must  be  pursued;^  but  in  the  absence  of  any  prescribed 
mode,  such  by-laws  are  usually  prepared  by  some  committee  ap- 
pointed for  that  purpose  by  the  corporate  body  or  the  board  of 
directors,  as  the  case  may  be,  and  adopted  by  resolution  or  other- 
wise, by  such  body  or  board,  at  a  lawful  meeting,  and  duly 
recorded  by  the  proper  officer.^ 

This  is  the  usual  and  regular  way  of  enacting  or  making  by- 
laws ;  but  it  has  been  held  that  this  mode  of  adopting  them  is  not 
absolutely  essential.  In  fact,  it  appears  from  the  adjudications 
that  by-laws  may  be  inferred,  without  proof  of  their  actual  or 
formal  adoption  in  any  manner  by  the  corporation  or  the  directors. 
Thus,  as  it  has  been  observed  of  a  corporation,  "  that  it  may  adopt 
by-laws,  as  well  by  its  own  acts  and  conduct,  and  the  acts  and  con- 
duct of  its  officers,  as  by  an  express  vote  or  an  adoption  in 
writing."  * 

laws     vests     in  tbe    corporate     body     by  them.     Salem  Bank   v.  Gloucester 
it  may  confer  the  power  on  the  board     Bank,  17  Mass.  39. 
of  directors,  and  they  may  be  limited 

»  Wilcocks,    7   Cow.   403  ;  Cahill  v.  &  G  334;  Fairfield  v.  Thorp.  13  Conn. 

Kalamazoo  Ins.  Co.,  3  Mich.  134.  173 ;  Langsdale  v.  Bonton,  13  Ind.  467, 

"  State   V.   Jersey  City,  37   N.   J.  L.  *  In  the  case  of   the  Union  Bank  of 

493;  Sower  V.  Philadelphia,  35  Penn.  Maryland  v.  Ridgely,  1  H.  &  G.  334, 

St.  331  ;  Gas  Co.  v.  San  Francisco,  6  where  it  appeared  that,by  charter,  the 

Cal.   190  ;  Municipality    v.    Cutting,  4  president    and    directors    of  the  bank 

La.  Ann.  335;  Cincinnati   v.  Gwynne,  were  authorized  to  make  all  such  by- 

10  Ohio,  193;  Markle  v.  Akron,  14  id.  laws  and  regulations  for  the  govern- 

586.  meut  of  the  corporation, its  officers  and 

*  Union  Bank,  etc.  ,v.  Ridgely,  1  Harr.  membe.rs,as  they  or  a  majority  of  them 

54 


426 


Private  Coepoeations. 


Sec.  273.  Repeal  of  by-laws.—  It  is  a  common  doctrine  relating 
to  legislative  bodies,  that  where  they  have  authority  to  make  laws 
they  have  also  authority  to  repeal  them  ;  and  that  the  power  to 
make  includes  the  power  to  repeal.  This  doctrine  is  applicable 
to  private  corporations,  and  they  or  the  boards  of  directors  may 
not  only  make  by-laws  for  the  regulation  and  management  of 
their  affairs,  but  amend  or  repeal  the  same.^ 

The  general  doctrine  in  reference  to  legislative  bodies  is,  that 
no  such  body  can  part  with  its  privileges  so  as  to  prevent  the 
exercise  of  the  same  again,  and  hence  that  they  may  repeal  or 
modify  any  act  passed  by  them.  But  this  doctrine  does  not  apply 
to  those  cases  of  grant  of  rights  and  privileges  to  private  corpora- 
tions, which,  as  we  have  seen,  have  the  character  of  contracts, 
and  become  vested  rights  In  the  corporators.  This  doctrine  is 
applicable  to  corporate  bodies,  or  boards  of  directors  thereof,  in 
reference  to  by-laws.  They  have  the  power  to  repeal  or  modify 
the  same ;  but  this  power  cannot  be  used  to  impair  the  rights 
of  parties  which  have  been  conferred,  and  are  vested  in  them,  under 
and  by  virtue  of  the  repealed  or  amended  by-law.     "  The  repeal 


sliould  from  time  to  time  think  fit  ; 
upon  a  certain  writing  being  given  in 
evidence,  headed  '  By-laws,'  and  which 
purported  to  have  been  the  by-laws 
of  the  bank,  while  its  business  was 
transacted  under  articles  of  association, 
and  before  the  act  incorporating  it  was 
passed,  it  was  objected  that  tliere  was 
no  evidence  that  the  writing  produced 
had  been  adopted  as  the  by-laws  of 
tlie  corporation,  there  being  no  entry 
or  memorandum  of  such  adoption 
among  the  minutes  of  its  proceedings. 
The  court  of  appeals  of  Maryland, 
however,  decided  that  authority  to 
make  by-laws  being  specially  dele- 
gated to  the  president  and  directors, 
without  the  mode  of  exercising  it  be- 
ing prescribed  by  the  charter,  it  was 
no  more  necessary  that  their  adoption 
should  be  in  writing  than  that  the 
acts   or    contracts   of   any  other   duly 


authorized  agent ;  and  it  being  proved 
by  the  cashier  that  the  by-laws  in 
question  were  always  reputed  to  be 
the  by-laws  of  the  corporation,  and 
with  the  exception  of  two  articles, 
were  so  observed  by  iiim  ;  and  by  a 
director,  that  they  were  delivered  to 
him  as  such,  upon  his  election,  and 
that  the  decisions  by  the  board  of  di- 
rectors were  made  agreeably  to  them 
in  any  question  upon  their  conduct  ; 
this  was  held  a  sufficient  adoption  of 
the  by-laws  by  the  president  and  di- 
rectors, and  sufficient  proof  of  the 
same,  there  being  no  record  or  minute 
of  the  fact.  As  a  corporation  has  a 
legal  existence  only  within  the  state 
of  its  creation,  all  acts  by  it,  including 
the  making  of  by-laws,  must  be  within 
such  state.  Mitchell  v.  Vermont  Cop- 
per Min.  Co.,  49  N.  Y.  Superior  Ct. 
406. 


1  Rex  V.  Ashwell,  12  East,  22  ;  3  T.  230  ;  Bigelow  v.  Hillnian,  37    Me.  52  ; 

R.  198  ;  State  V.  Pinto,  City  Clerk, etc.,  Reiif  v.   Connor,    11    Ark.    241  ;  Road 

7  Ohio  St.   355;  Stoddard  v.    Gilman,  Cases,  17  Penn.  St.  71  ;  Rex  v.  West- 

22  Vt.  568 ;  Pond   v.   Negus,    3    Mass.  wood,  4  B.  &  C.  806. 


By-Laws.  427 

cannot  operate  retrospectively  to  disturb  private  riglits  vested 
under  it."  ' 

Sec.  274.      Function  of  by-laws—  effect  on  third  parties TllC  proper 

function  of  by-laws  is  to  regulate  the  nuuiagenient  and  control  of 
corporate  affairs  and  especially  to  regulate  the  conduct  and  define 
the  duties  of  the  members  toward  the  corporation  and  between 
themselves.  "  So  far  as  its  provisions  are  in  the  nature  of  a  con- 
tract, the  parties  thereto  are  the  members  of  the  association  as 
between  themselves,  or  the  corporation  on  the  one  side  and  its 
individual  members  upon  the  other."  "  They  are  not  designed  to 
confer  rights  or  privileges  upon  third  parties,  or  strangers  to  the 
corporation,  but  to  protect  rights  and  secure  privileges  to  the  cor- 
porators. 

Thus,  where  a  by-law  provided  as  follows:  "The  members  of 
this  association  pledge  themselves  in  their  individual  as  well  as 
their  collective  capacity  to  be  responsible  for  all  moneys  loaned  to 
this  association,  and  for  the  payment  of  which  the  treasurer  may 
have  given  his  obligation  agreeably  to  the  direction  of  the  direct- 
ors," and  a  note  was  duly  executed  by  the  treasurer  for  the  asso- 
ciation on  which  payments  had  been  made,  but  for  the  balance, 
the  association  having  failed  to  pay  it,  suit  was  brought  against 
the  defendant  as  a  member  of  the  corporation,  demand  having 
first  been  made  of  him,  the  supreme  court  of  Massachusetts,  Wells, 
J.,  observing  :  "  The  note  upon  which  this  action  is  based  is  the 
contract  of  the  corporation.  The  defendant  is  not  a  party  to  that 
contract,  and  the  plaintiff  does  not  seek  by  this  suit  to  charge 
him  upon  any  statute  liability  as  a  stockholder.  Kesponsibility 
for  the  amount  of  the  note  is  sought  to  be  established  through  a 
by-law  of  the  corporation  to  which  the  defendant  had  attached 
his  signature.  To  become  a  member  of  the  association  it  was  re- 
quisite to  subscribe  the  by-laws.  It  does  not  appear  that  the  defend- 


•  East  Hartford  v.  Hartford  Bridge  ^  pii^t    y    Pierce,    99    Mass.  C8  > 

Co.,  10  How.  (U.  S.)5Br);  Debolt  V.  Ins.  Mellen    v.    Whipple,     1    Gray,     317: 

and  Trust  Co.,  1  Ohio  St.  564;    Plank-  Field    v.  Crawford,  6  id.  116  ;"  Dow  v. 

road  Co.  v.  Husted,  3  id.  578;  Matheny  Clark,  7  id.  198.     See,  also, Trustees  of 

V.  Golden,  5  id.  375;  Mott  v.  Pennsyl-  Free  Schools,  etc.,  v.  Flint,    13   Mete, 

vania,   etc.,   R.    Co.,   30  Penn.  St.  9;  543. 
Sedg.  on  Const,  and  Stat.  Law,  616. 


428  Private  Cokpoeations. 

ant's  signature  was  attached  for  any  other  purpose  than  to  con- 
stitute him  a  member  of  the  corporation.  It  does  not  appear  that 
tlic  plaintiff  lent  his  money  [for  which  the  note  was  given]  upon 
the  faith  or  credit  of  the  individual  pledge  contained  in  the  by- 
law ;  nor  that  the  by-law  was  in  any  manner  made  known  to  him 
or  to  the  public  as  tlie  basis  of  such  credit.  *  *  *  The  right 
of  any  third  party,  stranger  to  the  association,  to  establish  a  legal 
claim  through  such  a  by-law,  must  depend  upon  the  general  prin- 
ciples applicable  to  express  contracts.  *  *  *  ]^o  action  can 
be  maintained  by  such  third  party,  unless  he  can  bring  his  case 
within  some  of  the  recognized  exceptions  to  that  general  rule.  A 
pledge  like  the  one  in  question,  if  made  for  the  purpose  of  enab- 
ling the  corporation  to  obtain  a  loan  upon  the  faith  of  it  and  used 
for  that  purpose,  may  perhaps  give  a  right  of  action  against  the 
subscribers  in  favor  of  a  party  who  has  been  induced  to  advance 
money  upon  its  credit."  ' 

Sec.  275.  By-laws  regulating  the  transfer  of  stock.— The  most  im- 
portant matters  which  by-laws  may  regulate  are  those  relating  to 
the  transfer  of  stock  and  securing  to  the  corporation  a  lien  on 
the  same  for  any  indebtedness  of  the  holder  to  the  corporation. 
For  instance,  it  is  sometimes  provided  by  the  by-laws  of  the  cor- 
poration that  no  transfer  of  stock  shall  be  made  unless  it  is  regis- 
tered upon  the  proper  books  of  the  company,  kept  for  that  pur- 
pose. In  such  a  case  can  the  holder  transfer  or  assign  his  stock 
without  a  compliance  with  the  provisions  of  the  by-laws?  Or  can 
he  still  transfer  the  interest  in  stock  held  by  him,  subject  to  the 
equitable  claims  and  liens  of  the  corporation  ? 

On  these  questions  there  have  been  a  variety  of  decisions.  "  A 
very  literal  construction  has  been  given  in  Connecticut  to  such 
clauses,  either  in  the  charter  or  by-laws  of  a  corporation ;  the 
scope  and  object  of  such  provisions  being,  in  the  view  of  the 
supreme  court  of  that  state,  '  to  render  the  purchase  of  stock  secure 
to  any  person,  if  at  the  moment  of  his  purchase  the  company 
books  did  not  furnish  evidence  that  it  had  been  previously  trans- 
ferred.' The  settled  law  of  Connecticut  is,  that  where  such  clauses 
are  found  in  the  charter  and  by-laws,  or  either,   the   transfer 

•  Flint  V.  Pierce,  99  Mass.  68. 


By-Laws.  429 

is  invalid  and  of  no  effect  for  any  purpose,  unless  made  or  regis- 
tered on  the  books  uf  the  company.  The  registry  is  there 
deemed  the  original  act  in  tlie  change  of  title,  and  an  entry  by 
the  clerk  on  the  deed,  '  received  for  record,'  is  not  considered 
equivalent  to  a  registry."  ^ 

Seo.  276.  This,  however,  is  not  the  general  doctrine  on  this 
subject ;  the  rule  recognized  being  that  such  regulations  are  pri- 
marily if  not  solely  for  the  protection  of  the  interests  of  the  cor- 
poration ;  that  it  is  important  if  not  necessary  for  the  cor])oration 
to  know  who  are  the  stockholders  and  members,  not  only  to  ena- 
ble them  to  determine  to  whom  dividends  are  to  be  paid,  but  also 
to  determine  who  are  entitled  to  vote  upon  stock ;  that  this  pro- 
vision is  necessary  to  enable  the  corporation  to  avail  itself  of  a  lien 
upon  the  stock  held,  without  prejudice  to  purchasers  and  assignees ; 
but  that  as  between  the  holder  and  the  assignee  an  assignment 
passes  all  the  rights  of  the  holder,  at  least  his  equitable  fnterest, 
subject  to  the  rights  of  the  corporation,  and  that  such  a  provision 
has  application  only  to  the  relations  between  the  stockholder  and 
the  corporation.^ 

Sec.  277.  Providing  for  a  corporate  lien  on  stock.  —  The  right  of  lien 
of  the  corporation  on  shares  owned  by  parties  is  held  to  be  conferred 
only  by  virtue  of  some  provision  of  the  statutes  or  by-law^s,  and 
not  by  common  law.'  A  provision,  howevei",  is  sometimes  con- 
tained in  the  statute  of  incorporation  or  other  constating  instru- 
ments, but  more  frequently  in  the  by-laws,  to  the  effect  that  no 
stockholder  indebted  to  the  corporation  shall  be  authorized  to 
make  a  transfer  or  receive  a  dividend,  until  all  indebtedness  to  the 
corporation  is  discharged.     And  in  case  of  such  a  pi'ovision  it  has 

'Northrop   v.   Newtown   T.    Co.,    3  v.  Harris,  20  Mo.  382  ;  Fisher  v.  Essex 
Conn.  544  ;  Marlborough  Man.  Co.  v.  Bank,  5  Gray,  373  ;  Sargent  v.  Frank- 
Smith.  2  id.  579  ;  Northrop  V.  Curtis. 5  lin  Ins.  Co.,  8  Pick.  90;  Nesmith  v. 
id.  246  ;  Oxford  v.  Bunnell,  6  id.  552.  Washington  Bank,  6  id.  324. 
But  see  Colt  V.  Ives,  31  id.  25.  ^  Union  Bank    v.    Laird,   2    Wheat. 

2 Farmers' Bank  v.  Iglehart,  6  Gill.  390;  Rogers  v.  Huntington  Bank,  13  S. 

50;    Stebbins   v.    Phenix    Ins.   Co..   3  «&  R.  77  ;  Grant  v.  Mechanics' Bank,  15 

Paige,  350;  Union  Bank    v.    Laird,  2  id.  140;  Sewall  v.  Lancaster  Bank,  17 

Wheat.  390  ;  Black  v.  Zacharie,  3  How.  id.  285  ;  Utica  Bank  v.  Smalley,  2  Cow. 

513;  Quiner  V.  Marblehead  Ins.  Co.,10  770;    Steamsliip    Dock  Co.  v.    Heron, 

Mass.  476  ;  Grant  v.  Mechanics'  Bank,  52  Penn.  St.  280. 
15  S.  &  R.  143  ;  Chouteau  Spring  Co. 


430 


Private  Corporations. 


been  held  to  embrace  not  only  an  amount  dne  for  the  original 
subscription,  but  also  any  debt  due  from  the  stockholder  on  notes 
discounted,  where  he  is  either  principal  or  surety.-^ 

Sec.  278,  The  lien  thus  created  will  also  cover  dividends  as 
well  as  the  shares  of  stock,  although  only  shares  may  be  desig- 
nated.^ But  in  New  York,  where  a  stockholder  of  a  bank  which 
had  such  a  by-law  sold  his  stock  to  a  purchaser  who  had  no  notice 
of  the  by-law,  and  the  bank  gave  the  assignor  credit  before  a  trans- 
fer of  the  stock  was  made  on  its  books,  and  before  notice  of  his 
assignment,  it  was  held  that  the  purchaser  had  an  equitable  title 
to  the  stock  free  from  any  lien  on  the  part  of  the  bank.' 


'  Brent  v.  Bank  of  Washington,  10 
Pet.  596  ;  McDowell  v.  Bank  of  Wash- 
ington, 1  Harr.  (Del )  27 ;  St.  Louis 
Ins.  Co.  V.  Goodfellovv,  9  Mo.  149  ; 
Farmers'  Bank  v.  Iglehart,  6  Gill.  50. 

**  Hague  V.  Dandeson,  2  Exch.  741. 

^  Bank  of  Attica  v.  Manufacturers' 
Bank,  20  N.  Y.  501.  Of  the  right  of 
banking  corporations  under  such  pro- 
visions it  has  been  observed  "  that  it 
is  not  defeated  or  prevented  from 
attaching  by  a  transfer  to  a  fictitious 
holder,  and  subsequently  by  a  person 
represented  by  the  indebted  stock- 
holder to  be  that  holder  to  one  who 
pays  no  consideration  for  it ;  nor  does 
it  yield  to  a  claim  of  priority  on  the 
part  of  the  general  government.  Such 
lien  being  intended  solely  as  a  pro- 
tection to  the  bank  for  debts  due  to  it, 
equity  will  not  compel  the  bank  to 
enforce  it  in  favor  of  the  sureties  on 
such  debts,  on  the  ground  that  it  was 
intended  for  the  benefit  of  sureties, 
and  giving  precedence  to  debts  prior 
in  date,  although  upon  general  prin- 
ciples it  might  interpose  at  the  suit  of 
the  sureties  to  prevent  an  abuse  by 
the  directors  of  the  power  conferred 
upon  them  by  the  clause  giving  the 
lien.  And  where  the  charter  of  a  cor- 
poration, authorized  to  lend  money, 
enacts  that  the  stock  shall  be  assign- 
able on  the  books  of  the  corporation 
under  such  regulations  as  the  board  of 
trustees  shall  establish,  it  is  competent 
for  the  trustees  to  enact  a  by-law  that 
'  no  stockholder  shall  be  permitted  to 
transfer  his  stock  while  he  is  in  de- 


fault.' If  a  stockholder  borrow  money 
of  a  bank,  with  full  knowledge  of  a 
usage  not  to  permit  a  transfer  of  his 
stock  whi-le  he  is  indebted  to  the  bank, 
he  is  bound  by  such  usage,  and  neither 
he  nor  his  assignee,  under  a  voluutar}' 
general  assignment,  can  maintain  an 
action  against  the  bank  for  refusing 
to  permit  his  stock  to  be  transferred. 
A  by-law  of  a  bank  giving  to  the  in- 
stitution a  lien  upon  the  shares  of  a 
stockholder,  for  debts  due  from  him  to 
the  bank,  is  a  reasonable  and  valid  by- 
law, and  under  it  a  bank  may  defend 
against  a  suit  brought  by  a  stock- 
holder for  a  refusal  to  permit  him  to 
transfer  his  stock  on  its  books  without 
first  paying  the  debts  he  owes  to  it. 
Whether,  however,  a  by-law  of  a  cor- 
poration, merely  as  such,  can  create  a 
general  lien  on  the  shares  of  a  stock- 
holder to  the  amount  of  the  debts  due 
from  him  to  the  bank,  so  as  to  affect 
the  rights  of  creditors,  or  of  a  special 
assignee  for  value,  without  notice  of 
the  restriction,  has  been  considered 
questionable.  See,  also,  Stebbins  v. 
Pheuix  Ins.  Co.,  3  Paige,  350  ;  Brent 
V.  Bank,  etc.,  10  Pet.  596  ;  Cross  v. 
Phenix  Bank,  1  R.  I.  39  ;  Cunningham 
v.  Alabama  Ins.  Co.,  4  Ala.  652  ;  St. 
Louis  Ins.  Co.  v.  Good  fellow,  9  Mo. 
149 ;  Morgan  v.  Bank  of  North  Amer- 
ica, 8  S.  &  R.  73  ;  Nesmith  v.  Bank  of 
Washington,  6  Pick.  329;  Plymouth 
Bank  v.  Bank  of  Norfolk,  10  id.  454; 
Steamship  Dock  Co.  v.  Heron,  52  Penn. 
St.  280;  Bank  of  Attica  v.  Manufac- 
turers' Bank,  20  N.  Y.  501. 


By-Laws.  431 

Sec.  279.  Notice  contained  in  the  by-laws.  —  It  is  a  common  doc- 
trine that  persons  dealing  with  the  agents  and  officers  of  a  corpo- 
ration are  chargeable  with  notice  not  only  of  the  authority  con- 
ferred upon  them  but  of  the  restrictions  and  limitations  of  the 
same  contained  in  the  by-laws,  aiul  that  no  authority  to  exercise 
powers  can  be  inferred  by  virtue  of  an  office  where  the  authority 
of  such  officer  is  specifically  provided  for  in  the  by-laws.^  But 
there  is  a  distinction  made  as  to  notice  of  the  authority  conferred 
by  by-laws  between  the  by-laws  of  the  corj)oi'ation,  conferring  or 
restricting  such  authority,  and  the  by-laws  of  the  directors." 

Sec.  280.  By-laws  cannot  enlarge  or  abridge  the  rights  of  stock- 
holders. ■ —  Although  a  corporation  may,  subject  to  the  limitations 
wx  have  noticed,  make  all  needful  and  convenient  regulations  for 
the  management  of  its  internal  affairs,  it  cannot,  by  resolutions  or 
by-laws,  abridge  or  enlarge  the  privileges  conferred  npon  the  cor- 
poration or  the  corporators  by  the  incorporating  statutes  or  in- 
struments.' 

'  Adriance  v.  Roome,  52  Barb.  399  ;  ^  Brewster  v.  Hartley,  37  Cal.  14. 
Wild  V.  Bank  of  Passamaquoddy,  3  In  this  case  the  court,  per  Rhodes, 
Mason,  505;  State  v.  Commercial  J.,  say:  "The  power  of  electing  the 
Bank.O  Sm.  &M.  218;  Risley  v.  Indian-  directors  of  a  railroad  corporation  is 
apolis,  etc.,  R.  Co.,  1  Hun,  202;  Me-  [by  the  statutes  of  California]  lodged 
chanics'  Bank  v.  New  York,  etc.,  R.  Co.,  in  the  hands  of  the  stockholders.  The 
13  N.  Y.  599;  Adriance  v.  Roome,  52  exercise  of  this  power  having  been 
Barb.  599  ;  Dabney  .v.  Stevens,  40  regulated  by  the  statute,  the  corpora- 
How.  Pr.  341  ;  Lowell  Savings  Bank  tion  cannot  by  its  by-laws,  resolutions 
V.  Winchester,  8  Allen,  109.  or    contracts    either  give   or   take   it 

■•'See  Samuel  v.  Holladay,  Woolw.  away." 
(C.  C.)  400.     See,  also,  chap.  7. 


432  Private  Corporations. 

CHAPTER  XII. 

LIABILITY    OF    CORPOKATIONS    FOR   TORTS. 

Sec.  281.     General  principles  relating  to  the  liability  of,  for  torts. 

Sec.  283.     Corporations,  when  liable  for  torts. 

Sec.  285.     They  may  do  wrongful  acts,  or  direct  them  to  be  done. 

Sec.  286.     Frauds  of  corporations,  or  of  their  agents. 

Sec.  288.     Frauds  of  agents  for  which  the  corporation  is  liable. 

Sec.  290.     Particular  acts  of  fraud  by  agents. 

Sec.  291.     Doctrine  where  the  corporation  is  the  occasion  of  the  loss  by  the 

fraudulent  act  of  a  servant. 
Sec.  292.     Corporations    enjoying  the  benefit  of   contracts  secured   by  the 

frauds  of  agents  will  be  responsible  for  such  frauds. 
Sec.  294.     Right  to  repudiate  a  contract  for  fraud  limited  to  the  original 

parties. 
Sec.  295.     Ratification  of  a  contract  effected  by  the  fraud  of  the  agent. 
Sec.  297.     Corporate  liability  for  other  wrongs. 
Sec.  298.     Assault  and  battery  ;  when  committed  in  the  line  of  duty  of  the 

agent. 
Sec.  300.     Liability  of  corporations  for  trespasses  to  property. 
Sec.  802.     Liability  of  corporations  in  cases  of  the  negligence  of  agents. 
Sec.  303.     Limitation  of  liability  in  case  of  negligence. 
Sec.  807.     Complications  arising  from  successive  negligence. 
Sec.   811.     Damages  generally,  in  cases  of  torts. 
Sec.  318.     Exemplary  damages. 

Sec  315.     Application  of  the  doctrine  to  private  corporations. 
Sec.  316.     Extreme  doctrine  of  liability  for  exemplary  damages. 
Sec.  317.     Gross  negligence,  which  authorizes  exemplary  damages. 
Sec.  318.     Inconsistency  of  the  rule  in  its  application  to  corporations. 
Sec.  819.     Recent  examination  of  the  doctrine  of  exemplary  damages. 
Sec.  322.     Conflict  growing  out  of  the  diverse  rules. 
Sec.  323.     Damages  for  an  injury  resulting  in  death. 
Sec.  324.     Elements  of  damages  in  case  of  death  ;  what  it  is  competent  to 

show. 

Sec.  281.  Geueral  principles  relating  to  the  liability  of,  for  torts. — 
When  it  is  considered  that  a  corporation  is  a  mere  ideal  and 
immaterial  person,  it  may  appear  unreasonable  that  it  can  be 
guilty  of  a  wrong  or  tort ;  but  when  we  reflect  that  it  must 
always  execute  its  will  through  agents,  and  that  the  principal 
is  always  responsible  for  the  torts  of  agents,  committed  in  the  per- 
formance of  the  duties  conferred  upon  them,  it  will  be  seen  that, 
after  all,  a  corporation  should  be  liable  for  torts  done  and  com- 


Liability  of  Cokpouations  for  Torts.  433 

iiiitted  by  agents  while  acting  witliin  the  general  scope  of  their 
authority.' 

In  an  English  case  Lord  Oottenham  said  :  "  Strictly  speaking, 
a  corporation  cannot,  itself,  be  guilty  of  fraud.  But  when  a  cor- 
poration is  formed  for  the  purpose  of  carrying  on  a  trading  or 
other  speculation  for  profit,  such  as  forming  a  railway,  these  ob- 
jects can  only  beacconi])lished  through  the  agency  of  individuals; 
and  there  can  be  no  doubt  that  if  the  agents  employed  conduct 
themselves  fraudulently,  so  that  if  they  had  been  acting  for  pri- 
vate employers,  the  persons  for  whom  they  were  acting  would 
have  been  affected  by  their  fraud,  the  same  principles  must  pre- 
vail where  the  principal  under  whom  the  agent  acts  is  a  corpo- 
ration." " 

Sec.  282.  The  common  law  in  relation  to  the  liability  of  the 
principal  for  the  tortious  acts  of  the  servant,  generally,  is  equally 
applicable  to  the  relation  between  a  corporation  and  its  servants 
and  agents.  In  relation  to  this  liability,  it  may  be  affirmed  that  the 
master  or  principal,  as  the  case  may  be,  is  liable  for  any  negligence, 
misfeasance,  or  omission  of  duty  of  the  servant  or  agent,  which 
occurs  in  the  discharge  of  the  duty,  or  that  comes  within  the  scope 
of  the  authority  conferred  upon  him.'  "And  this  liability,"  observes 

'  Phil.  &  Read.  R.  Co.  v.  Derby,  14  create  tlie  liability  is  the  fact  of  their 

How.  (U.  S.)  4G8  ;    Noyes  v.  Rut.   &  assuming  such  offices.    So,  too,  for  the 

Burl.  R.   Co.,  27  Vt.  110;  Alabama  &  most   part,   in    regard    to    injuries   to 

Ten.  R.  Co.  v.  Kidd,  29  Ala.  221 ;  Yar-  strangers  and  mere  torts,  it  is  not  ex- 

borou<rh  v.  The  Bank  of  England,  16  pected  that  proof  will  be  given  of  any 

East,  6  ;  Reg.  v.  Birmingham  &  Glouc.  express    authority    to    the  servant   or 

R.  Co.,  3  Q.  B.  223;  Bloodgood  v.  M.  employee   to  do    the  particular  act." 

&  H.  R.  Co.,  18  Wend.  9  ;    Dater  v.  1  Redf.  on  Rail.  513.    See,  also,  Lowell 

Troy  &  T.  R.  Co..  2  Hill,  G29  ;  Hale  v.  v.  Boston  &  Low.  R.  Co.,  23  Pick.  24. 

Union  Mut.   Fire.  Ins.  Co.,  32  N.  H.  •'Ranger  v.  Great  Western  R.  Co.,  5 

295.    Mr.  Redfield  observes:  "  As  rail-  H.  L.  72.    See,  also.  Royal  British  B'k, 

ways  are,  like  other  corporations,  mere  ex  parte  Nicol,  28  L.  J.  Ch.  257  ;  Green 

entities  of  the    law,   inappreciable  to  v.  Loudon  General  Omnibus  Co.,  7  C. 

the   senses,  we   do   not   see  why  this  B.    (N.    S.)    290;   29    L.  J.   C.   P.    13; 

mere   abstraction    should    not    be   re-  Brice's  Ultra  Vires,  240. 

garded  as  always  existing  and  present  A  corporation  is  liable  for  even  the 

in  the  discharge  of  its  functions.   It  is,  willful  acts  of  the  servants,  if  done  in 

indeed,  a  mere  fiction,  whether  we  re-  relation  to  their  legitimate  duties.    1 

gard  the  company  as  present  or  absent.  Redf  on  Rail.  508  ;  Whiteman  v.  Wil- 

And  it  seems  more  just  and  reasonable  mington  &  Susq.  R.  Co.,  2  Harr.  514; 

that  this  fiction  should  not  be  resorted  Edwards  v.  Union  B'k,  1  Fla.  !',]{]. 

to,  to  excuse  just  responsibility.     It  is  ^  Story  on  Agency,  j?  308  ;   Paley  on 

certain  we  never  require  proof  of  any  Agency    by    Lloyd,    396 ;    Chitty    on 

organic  action  of  the  corporation  to  con-  Com.  and  Man.  214;  Story  on  Bailm., 

stitute  railway  carriers  of  freight  and  t^  400. 
passengers.     All   that  is   required  to 

55 


434  Private  Corporations. 

Mr.  Story,  "  is  not  limited  to  principals  who  arc  mere  private 
persons,  but  extends  also  to  private  corporations,  for  the  misfeas- 
ances, negligences  and  omission  of  duty  of  their  agents,  in  the 
course  of  their  employment,  whenever  they  are  duly  appointed."  ' 
Upon  tlie  same  principle  that  private  persons  are  liable  for  the 
wrongful  acts  of  their  servants  and  agents,  so  are  private  corpora- 
tions, and  for  the  same  reasons,  liable  under  the  same  circum- 
stances as  private  persons.* 

Sec.  283.  Corporations,  when  liable  for  torts. —  The  liability  of 
corporations  for  the  tortious  acts  of  their  agents  and  servants  is 
the  same  in  all  cases  as  though  they  were  natural  persons  ;  and 
they  are  liable  in  the  same  manner  and  to  the  same  extent.^ 
Neither  is  the  liability  in  such  cases  affected  by  the  fact  that  the 
acts  done  are  not  within  the  legitimate  powers  of  the  corporation, 
if  the  acts  are  such  as  come  within  the  scope  of  the  powers  at- 
tempted to  be  conferred  upon  the  agents."  The  doctrine  of  ultra 
vires,  it  is  claimed,  has  no  application  in  such  cases,  for  in  exe- 
cuting such  acts  the  corporation  is  liable  for  the  direct  or  conse- 
quential injuries  which  others  may  sustain  for  every  grade  and 
description  of  willful,  malicious,  or  negligent  tort  or  wrong  which 
it  commits,  however  foreign  to  its  nature  or  beyond  its  legitimate 
powers  the  wrongful  transaction  or  act  may  be.* 

^  Id.  See,  also,  Yarborough  v.  Bank  for   the    consequences    of   acts  of  its 

of  England,  IG  East,  (i  ;  Smith  v.  Bir-  oflBcers,  done  within  the  scope  of  their 

luiugham  Gas  Co.,  1  Ad.   &  El.  52G  ;  general  powers,  is  not  affected  by  the 

Salem  Bank  v.    Gloucester  Bank,    17  fact  that  the  act  which  the  officer  has 

Mass.     1  ;    Foster  v.   Essex  Bank,  id.  assumed  to  do  is  one  which  the  corpo- 

479  ;  Fowle  v.  Common  Council,  etc.,  ration  itself  could  not  rightfully  do. 

3  Pet.  398.  A  corporation  may  do  wrong,  through 

'^  Stevens  v.  Boston,  etc.,  R.  Co.,  1  its  agents,  as    well  as  a  private  iudi- 

Gray,  277  ;  Blackstock  v.  N.  Y.,etc.,  R.  vidual." 

Co.,  1  Bosw.     77;  Albert  v.  Savings  ^  j^g^  York,  etc.,  R.  Co.  v.  Schuyler, 

Bank,  1    Md.  Cli.    407;    Thatcher  v.  34  N.  Y.  30  ;  Philadelphia,  etc.,  R.  Co. 

Bank.  5  Sandf.  121  ;  Thompson  v.  Bell,  v.  Quigley,  21  How.  209  ;  Life  Ins.  Co. 

10  Exch.   10;  20  Eng.    L.  &  Eq.   536;  v.  Mechanics'  Fire  Ins.   Co.,  7  Wend. 

Bargate  v.  Shortridge,  5  H.  L.  C.  297;  31   ;  Bissell  v.  Michigan,  etc.,  R.  Co., 

31  Eng.  L.  &  Eq.  44.  22    N.    Y.    258  ;     Frankfort  Bank    v. 

^  Id.     See,  also.  Merchants'  Bank  v.  Johnson,   24  Me.  490  ;  Thayer  v.  Bos- 
State  Bank,  10  Wall.  604.      See  as  to  ton,  19   Pick.  511  ;  Goodspeed  v.  East 
their  liability  for  libel,    Whitfield  v,  Haddam  Bank,  22  Conn.  630. 
South    Eastern  R.  Co.,  1  E.   B.  &  E.  A  corporation  may  become  responsi- 
115;  S.  C,  4  Jur.  (N.  S.j  688.  ble    for  the    publication    of    a  libel. 

*  Booth    V.    Farmers   &   Mechanics'  Whitfield    v.  South    Eastern  R.    Co., 

Bank,  50  N.  Y.  396,   where  the  court  1  E.  B.   &  E.   115  ;  1  Redf.   on    Rail, 

say  :  "  The  liablity  of  the  corporation  514. 


LfAI'.ILITY    OF    C0Ul'01iATIOiV8    FOR    ToKTS. 


435 


SkC.  2S-i.  Liability  of  principal  for  acts  of  agent— The  general 
doctrine  applicable  to  private  corporations  as  well  as  to  natural 
persons  is  thus  stated  by  Mr.  Story  :  "  It  is  a  general  doc- 
trine of  law,  that  although  the  principal  is  not  ordinarily 
liable  (for  he  sometimes  is)  in  a  criminal  suit,^  for  the  acts 
or  misdeeds  of  his  agent,  unless,  indeed,  he  has  authorized  or 
co-operated  in  those  acts  or  misdeeds ;  yet,  he  is  held  liable  to 
third  persons  in  a  civil  suit  for  the  frauds,  deceits,  concealments, 
representations,  torts',  negligences  and  other  malfeasances  or  mis- 
feasances and  omissions  of  duty  of  his  agent,  in  the  course  of  his 
employment,  although  the  principal  did  not  authorize,  or  justify, 
or  participate  in,  or,  indeed,  know  of  such  misconduct,  or  even  if 
he  forbade  the  acts,  or  disapproved  of  them.'  In  all  such  cases 
the  rule  applies,  respondeat  superior  y  for  in  no  other  way  could 
there  be  any  safety  to  third  persons  in  their  dealings,  either 
directly  with  the  principal,  or  indirectly  with  him  through  the 
instrumentality  of  agents.^  In  every  such  case  the  principal 
holds  out  his  agent  as  competent  and  fit  to  be  trusted,  and 
thereby,  in  effect,  he  warrants  his  fidelity  and  good  conduct  in  all 
matters  within  the  scope  of  the  agency."  * 


^  Attorney-General  v.  Siddon,  1 
Tyrwh.  41  ;  Rex  v.  Gutcb,  1  Mood. 
&  Malk.  437;  Paley  on  Agency,  by 
Lloyd,  294-298  ;  id.  303,  306  ;  3  Chitty 
on  Com.  and  Man.  209,  210  ;  Smith  on 
Merc.  Law,  B.  1,  chap,  o  §  3,  p.  130 
(3d  ed.,  1843). 

-  Chitty  on  Com.  and  Man.  208- 
210;  Paley  on  Agency,  by  Lloyd, 
294-290,  301-307;  Smithon  Merc.  Law, 
70.71  (2d  ed.);  id.  B.  1,  chap.  5.  §3,  pp. 
127-130  (3d  ed.,  1843);  Story  on  Kg., 
§55  130,  217,  308-310;  Doe  v.  Martin,  4 
Term  11.  66,  per  Lord  Kenyon  ;  Bush 
V.  Steinman,  1  Bos.  &  Pull.  404  ;  At- 
torney-General V.  Siddon,  1  Tvrwli. 
412;  Story  on  Ag.,  §i^  31 1,  315-319; 
Milligau  V.  Wedge,  12  Ad.  &  El.  737, 
742  ;  C^uarman  v.  Burnett,  6  Mees.  & 
Wels.  499;  Locke  v.  Stearns,  1  Mete. 
(Mass.)  5'H);  Penn.  Steam  Nav.  Co.  v. 
Hungerford,  0  G.  &  J.  291. 

3  Story  on  Agency,  §  308 ;  1  Bl. 
Cora.  431,  432;  Abbott  on  Shipp., 
part  2,  cliap  .  2,  §  11  ;  Ellis  v.  Turner,  8 
T.  R.  533  ;  Bush  v.  Steinman,  1  B.  & 
P.    404  ;  Laugher   v.    Pointer,  5  B.  & 


C.  546  ;  Randleson  v.  Murray,  8  Ad. 
&  El.  109  ;  Milligan  v.  Wedge,  12  id. 
737  ;  Quarman  v.  Burnett,  6  M.  &  W. 
499  ;  Rapson  v.  Cubitt,  9  id.  7l0  ; 
Winterbottom  v.  Wright,  10  id. 
109. 

•*  Story  on  Agency,  §  452,  citing 
Lane  v.  Cotton,  12  Mod.  490; 
Paley  on  Ag.,  by  Lloyd,  294,301-307  ; 
4  Bac.  Abr. ,  tit.  Master  and  Servant, 
K.;  Story  on  Ag. ,  ^i^  11-13,  315  310, 
319;  Herii  v.  Nichols,  1  Salk.  289. 

Mr.  Justice  BLACKSTOKE,in  liis  Com- 
mentaries, gives  a  different  reason , and 
says:  ' '  We  may  observe  that  in  all  the 
cases  here  put  the  master  may  be  fre- 
quently a  loser  by  the  trust  reposed  in 
his  servant, but  never  can  be  a  gainer  ; 
lie  may  frequently  be  answerable 
for  his  servant's  misbehavior,  but 
never  can  shelter  himself  frmn  punish- 
ment, by  laying  the  blame  on  liis 
agent.  The  reason  of  this  is  still  uni 
form, and  the  same  —  that  the  wrong 
done  by  the  servant  is  looked  upon  in 
law  as  the  wrong  of  the  master  him- 
self ;  and  it  is  a  standing  maxim,  that 


436  Private  Corporations. 

Sec.  285.  They  may  do  wrongful  acts  or  direct  them  to  be  done.  — 
It  is  sometimes  said  that  a  corporation,  being  an  invisible  and 
artificial  person,  can  execute  directly  no  act,  but  for  this  purpose 
must  employ  agents.  But,  as  we  have  seen,  the  directors  at 
a  lawful  meeting  may  direct  acts  to  be  done,  and  they  may  be 
supposed  to  very  closely  represent,  if  they  do  not  practically  con- 
stitute, the  corporate  body  itself.  And  if,  at  such  a  meeting,  they 
should  direct  a  wrongful  or  tortious  act  to  be  done,  this  would 
undoubtedly  be  considered  the  act  of  the  corporate  person,  and 
would  make  the  corporation  liable,  on  the  general  principle  that 
a  party  who  directs  an  agent  or  any  other  person  to  commit  a  tres- 
pass, or  do  any  other  wrongful  act,  is  responsible  to  the  party  who 
suffers  damage  thereby,  the  same  as  though  the  act  was  done  by 
the  party  himself.^ 

Sec.  286.  Frauds  of  corporations  or  their  agents.  —  A  COinmon 
cause  of  liability  of  corporations  is  the  frauds  of  their  agents. 
These  consist,  like  those  of  natural  individuals,  of  actual  and 
constructive  frauds.  Fraud  in  law  has  been  defined  as  any  trick 
or  artifice  employed  by  one  person  to  induce  another  to  fall  into 
an  error,  or  to  detain  him  in  it,  so  that  he  makes  an  agreement 
contrary  to  his  interest.  It  may  consist  in  misrepresentation  or 
concealment  of  a  material  fact.'' 

Corporations  are,  like  individuals,  liable  for  frauds  committed 
by  their  agents.  An  illustration  of  liability  on  the  part  of  the 
corporation,  by  approval  of  fraudulent  acts  of  agents,  is  found  in 
the  answer  of  Lord  Chancellor  Westburt  to  the  question : 
"  Under  what  circumstances  can  fraud  be  imputed  to  the  corpo- 
ration itself  ? "     He  says :    "  That  if   reports  are  made  to  the 

no  man  shall  be  allowed  to  make  any  reverse  of   the  truth   in  many  cases ; 

advantage  of  his  own  wrong."     1  Bl.  for  the  master  is  liable  for  the  wrong 

Com.   43'-J.     Mr.    Story    comments    as  and  negligence  of  his  servant,  just  as 

follows  on  the  above  quotation  from  much,  when  it  has  been  done  contrary 

Blackstone's  Commentaries  :  ''  It  seems  to  his  orders  and  against  his  intent,  as 

to   me  that   the  reason  here  given  is  he  is,  when  he  has  co-operated  in,  or 

artificial   and   unsatisfactory,  and   as-  known   the  wrong."      Story   on   Ag., 

pumes  as  its  basis  a  fact  which  is  the  §  453,  note. 

1  Glasgow    V.   Drew,   2   Macq.  103;         ''Bouv.  L.  Die;   Mansfield  v.  Wat- 
Kerr  on  Fraud  (Am.  ed.),  117  ;  Sharp     eon,  2  Iowa,  111. 
V.  Mayor,  etc.,  40  Barb.  273  ;  40  N.  Y. 
454 ;  Beach  v.  Fulton,  7  Cow.  485. 


Liability  of  Corpokations  fok  Torts. 


437 


shareholders  of  a  company  by  their  directors,  and  these  reports 
are  afterward  industriously  circulated,  misrepresentation  con- 
tained in  those  reports  must  undoubtedly  be  taken,  after  their 
adoption,  to  be  the  representations  and  statements  made  with  the 
authority  of  the  company,  and,  therefore,  binding  upon  the  com- 
pany." 1 

And  in  an  English  case  it  has  been  held  that  the  acts  of  the  di- 
rectors were  the  acts  of  the  corporation.  Lord  St.  Leonards 
observed  :  "  If  representations  are  made  by  a  company  fraudu- 
lently, for  the  purpose  of  enhancing  their  stock,  and  tliey  induce 
a  third  person  to  purchase  stock  these  representations  so  made  by 
them  for  that  purpose  do  bind  the  company.  I  consider  rep- 
resentations by  the  directors  of  a  company  as  representations 
by  the  company,  and  although  they  may  be  representations  made 
to  the  company,  it  is  their  own  representation."  * 


'New  Brunswick,  etc.,  R.  Co.  v. 
Coiiybeare,  9  H.  L.  725;  Brice's  Ultra 
Vires,  244. 

^  National  Exchange  Co.  v.  Drew,  2 
Macq.  103.  See,  also.  Re  National 
Patent  Steam  Fuel  Co.,  Ex  j)urte 
Worth,  4  Drew.  529  ;  28  L.  J.  Ch.  590  ; 
Nicol's  Case,  28  L.  J.  Ch.  257;  Kerr 
on  Fraud  (Am.  ed.).  117.  Mr.  Brice 
observes  :  "  Frauds  form  the  most  im- 
portant class  of  torts  in  connection 
with  the  liability  of  corporations,  and 
they  have  given  rise  to  many  compli- 
cated and  difficult  questions.  The  re- 
quisites to  support,  at  common  law,  an 
action  for  fraud  are  well  known  — 
first,  defendant,  i.  c,  the  party  guilty 
of  the  fraud,  which  is  the  oftenest  a 
misrepresentation,  and  must  be  as  to  a 
matter  of  fact,  must  bave  committed 
the  fraud  knowingly,  recklessly,  or 
with  negligence.  Taylor  v.  Ashton,  11 
M.  &  W.  4^5. 

Secondly.  He  must  have  intended 
some  other  to  act  upon  it.  Thorn,  v. 
Bigland,  8  Ex.  735. 

Thirdly.  The  plaintiff  must  have 
relied  upon  the  fraud  dolus  dans  locum 
contractui,  Attwood  v.  Small,  6  CI.  & 
F.  232,  though  it  is  sufficient  if  there 
was  a  fraudulent  representation  as  to 
any  part  of  that  wliich  induced  him  to 
enter  into  the  contract.  Kennedy  v. 
Pan;una  l.oyal  Mail  Company,  L.  R., 
2  Q.  13.  580. 


Fourthly.  The  plaintiff  must  have 
sustained  damage. 

"  These  requisites  should  be  care- 
fully kept  in  mind  when  fexamining  a 
case  of  fraud  at  common  law  whether 
it  concerns  a  corporation  or  a  private 
individual.  But  chancery  proceeds 
upon  somewhat  diflerent  considera- 
tions, often  holding  that  to  be  con- 
structive fraud  whicli  would  afford  no 
ground  for  an  action  at  law,  and  very 
frequently  granting  to  a  .suitor  some 
redress  when  he  would  be  utterly 
remediless  at  law,  as  by  ordering  the 
wrong-doer  to  recoup  the  plaintiff,  as 
far  as  he  (the  wrong-doer)  has  bene- 
fited by  the  wrong.  In  considering 
the  question  of  fraud,  it  will  be  con- 
venient to  take  first,  frauds  and  mis- 
representations which  can  be  imputed 
to  corporations,  directly  and  imme- 
diately, and  secondly,  those  which 
can  be  imputed  to  them  only  indirectly 
and  by  implication. 

"  Corporations  are  liable,  like  other 
individuals,  for  frauds  committed  di- 
rectly by  themselves  or  by  their  direc- 
tion. 

"  Not  a  shadow  of  doubt  now  exists 
either  at  law  or  in  chancery  as  to  a 
corporation's  liability,  where  the  cir- 
cumstances are  such  that  the  fraud 
can  be  imputed  to  the  corporation 
itself.  Wlifu  will  this  be  tlie  case? 
The  answer  given  by  Lord  Chancellor 


438 


PlilVATE    COEPORATIONS. 


Sec.  287.     Doctrine  of  ultra  vires  not  applicable  to  torts.  —  We    liave 
affirmed    that    the   corporation,    either    by    its    direct    action    or 


Westbury,9  H,  L.  725,  is:  'That  if 
reports  are  made  to  the  shareliolders 
of  a  company  by  their  directors,  and 
the  reports  are  adopted  by  the  share- 
holders at  one  of  the  appointed  meet- 
ing.-iof  the  company,  and  tliese  reports 
are  afterward  industriously  circulated, 
misrepresentation  contained  in  those 
reports  must,  undoubtedly,  be  taken 
aiter  their  adoption,  to  be  representa- 
tions and  statements  made  with  tlie 
authority  of  the  company,  and,  there- 
fore, binding  on  the  company.'  Simi- 
larly in  National  Exchange  Company 
of  (ilasgow  V.  Drew,  2  Macq.  10-i, 
Lord  St.  Leo:j^ards  said:  '1  have 
certainly  come  to  this  conclusion,  that 
if  representations  are  made  by  a  com- 
pany fraudulently  for  the  purpose  of 
enhancing  the  value  of  their  stock, 
and  they  induce  a  third  person  to  pur- 
chase stock,  these  representations  so 
made  by  them  for  that  purpose  do 
bind  the  company.' 

"I  consider  representations  by  the 
directors  of  a  company  as  representa- 
tions by  the  company,  and  altliough 
they  may  be  representations  made  to 
the  company,  it  is  their  own  represen- 
tation. This  was  explained  or  rather 
restated  in  a  subsequent  case.  National 
Patent  Steam  Fuel  Compsinj,  Ex  parte 
Worth,  4  Drew,  529,  by  Kindkksley, 
V.  C,  thus:  'It  was  laid  down  in 
the  National  Exchange  Company  v. 
Drew  (I  do  not  say  that  the  point  was 
actually  decided,  but  the  opinion  of 
some  of  the  most  eminent  judges  of 
the  present  day  was  expressed)  that 
where  there  is  a  body  like  this  con- 
sisting of  a  great  number  of  share- 
holders, and  the  directors  make  a  re- 
port to  the  body  at  large  in  perform- 
ance of  their  duty,  then,  if  such  report 
contain  a  representation  of  the  affairs 
of  the  company  which  is  false,  and  if 
that  is  made  to  a  public  and  general 
meeting  of  the  shareholders  of  the 
company,  and  is  adopted  by  the  com- 
pany as  the  report  of  the  directors  to 
tiiat  general  meeting,  although  there 
be  no  order  to  publish  it,  either  by  the 
directors  or  tlie  body  at  large,  yet, 
from  the  very  nature  of  the  case,  it 
must  be  regarded  as  the  representa- 
tion of  the  company.' 

"  As  illustrating  the  liability  at  com- 


mon law  may  be  mentioned  Denton 
V.  Great  Northern  Railway  Company, 
5  E.  «&  B.  860.  This  was  an  action 
against  the  defendant  for  fraudulently 
publishing  in  their  time-tables  a  train 
which  had  ceased  to  run,  whereby  the 
plaintiff  who  had,  relying  on  the 
tables,  left  London  for  Peterborough 
with  the  intention  of  going  on  thence 
to  Hull  by  the  train  which,  on  arriv- 
ing at  Peterborough,  he  learned  had 
been  discontinued,  was  put  to  expense, 
and  it  was  unanimously  held  by  the 
queen's  bench  that  the  defendants 
were  liable  for  the  expenses  so  in- 
curred. 

"  These  are  such  frauds  as  are  com- 
mitted by  the  agents  of  the  corpora- 
tion in  the  management  and  furtlier- 
ance  of  its  business.  For  these  frauds 
it  is  now  fully  established  at  common 
law,  that  the  corporation  is  liable,  pro- 
vided the  agents  guilty  of  the  frauds 
kept  within  the  limits  of  their  author- 
ity. In  Barwick  v.  English  Joint-Stock 
Bank,  L.  R.,  2  Ex.  259,  the  court  of 
exchequer  chamber,  on  a  bill  of  ex- 
ceptions, held  the  defendants  responsi- 
ble for  the  fraud  of  their  manager. 
No  objection  was  taken  —  in  fact  the 
point  was  not  even  raised  by  either 
the  counsel  or  the  bench  —  to  the  ac- 
tion itself,  as  being  against  a  corpora- 
tion. It  wasassumed  throughout  that 
a  corporation,  like  any  other  principal, 
is  liable  for  the  acts  of  its  agents  So, 
in  Kennedy  V.  Panama,  etc.,  Mail'Com- 
pany,  L.  R.,  2  Q.  B.  580,  which  was  an 
action  brought  on  the  ground  of  mis- 
representation in  a  prospectus, issued 
by  the  directors  to  recover  calls  paid 
by  plaintiff,  the  same  liability  was 
assumed  as  beyond  all  argument.  In- 
deed the  judgment  of  the  court  notices 
it  only  incidentally.  These  would  not 
be  legitimate  consequences  if  there 
had  been  fraud  in  those  acting  for  the 
company.  Doubtless,  in  such  a  case, 
the  company  must  bear  all  the  conse- 
quences of  the  fraud  of  those  they 
employ." 

But  the  authorities  and  dicta  in 
chancery  are  very  conflicting,  if  not 
absolutely  irreconcilable.  On  the  one 
side  it  is  urged  that  the  agents  of  a 
corporation  are  its  agents  for  carrying 
on  its  operations  honestly  and  legally, 


Liability  of  Cokporations  foe  Torts. 


439 


through  its  agents,  may  be  liable  for  wrongs  done,  even  where 
the  acts  constituting  the  wrong  are  ultra  vires,  the  corporate 
authority. 


and  cease  to  be  so  when  they  act 
fraudiilcnfly  and  illeji;ally.  On  the 
other  sid(!  it  is  urged.with  equal  justice, 
that  no  distinction  can  be  drawn  be- 
tween a  principal,  who  is  merely  a 
legal  entity,  and  an  ordinary  human 
being,  and  that  as  a  corporation  must 
act  by  agents,  so  like  otlier  principals, 
it  ought,  in  common  fairness,  to  be 
responsible  for  the  frauds  as  well  as 
the  other  acts  of  these. 

In  support  of  the  former  view  we 
have  the  following  : 

North  of  England  Joint-stock  Bank- 
ing Co.,  E-i:  parte  Bernard, o  De  Gt.  &  Sm. 
283  ;  Dodgson  Case,  885,  per  Paukek, 
V.  C. :  "  As  to  the  argument  that  Mr. 
Bernard  was  induced  to  take  these 
shares  by  incorrect  representations, 
that  point  was  taken  in  Dodgsou's  Case, 
and  Knight  Bruce,  V.  C,  said  that 
"  whatever  fraud  there  might  be,  if 
fraud  there  was,  it  was  cliarged  against 
the  directors,  who  could  not  be  the 
agents  of  the  body  of  shareholders  to 
commit  a  fraud.  For  the  same  reason 
the  motion  must  be  refused." 

'Re  Athenieum  Life  Assurance  Co., 
Ex  parte  Sheffield,  28  L.  J.  Ch.  325, 
per  Paige- Wood,  V.  C:  "  With  re- 
gard to  any  fraud  in  misrepresent- 
ing what  the  deed  itself  was,  I  ap- 
prehend nothing  can  be  made  of 
that  ;  of  course  the  representation 
luade  by  the  secretary  could  have  no 
effect  at  all  if  the  deed  were  different 
from  what  it  was  represented  to  be  ; 
for,  though  companies  have  been  held 
to  be  bound,  in  some  cases,  by  the  act 
of  all  the  directors  acting  in  the  due 
execution  of  their  powers,  it  has  never 
yet  been  held  that  an  officer  of  a  com- 
pany misrepresenting  the  effect  of  a 
deed,  it  being  no  part  of  his  functions 
to  explain  or  expound  that  deed,  could 
release  a  shareholder." 

Duranty's  Case,  26  Beav.  268,  274, 
per  RoMiLLY,  M.  R.:  "  The  directors 
are  not  the  agents  of  the  company  to 
commit  a  fraud." 

Re  Hull  and  London  Life  Assurance 
Co.,  Ex  parte  Gibson,  2  De  G.  &  J.  275. 
28;!,  where  Lord  Chelmsfokd,  L.  C, 
expressed  himself  thus  :  "  There  is  no 
doubt  that  if  a  person  has  been  drawn 
in  by  the  misrepresentation  of  an  in- 
dividual  member  of  the  company,  he 


cannot  exonerate  himself  from  liabil- 
ity by  reason  of  such  false  representa- 
tion. If  he  has  any  remedy, it  is  against 
the  individual  sharehokler  who  has 
deceived  him.  With  respect  to  mis- 
representation by  the  company  itself, 
or  its  agents,  the  case  would  be  differ- 
ent ;  but  there  has  always  appeared  to 
me  to  be  great  difficulty  in  establish- 
ing such  a  case.  The  company  is 
represented  by  its  directors  who,  for 
certain  purposes,  are  its  agents;  but 
the  ditBcultyis  in  saying  that  they  are 
its  agents  for  the  purpose  of  making 
false  representations." 

In  re  Royal  British  Bank,  Mixer's 
Case,  4  De  (i.  &  J.  575,  580,  Lord  CIamp- 
BEM^,  L.  C:  "Clearly  there  was  fraud 
and  gross  fraud  on  the  part  of  the  di- 
rectors, and  I  have  no  doubt  that  he 
{i.  <•. ,the  appellant)  was  induced  by 
fraud  to  take  his  shares.  1  think, 
however,  that  it  was  a  fraud  on  the 
part  of  the  directors,  which  cannot  be 
imputed  to  the  company." 

The  above  cases,  however,  cannot  bo 
considered  binding  at  the  present  time, 
at  least,  not  to  the  full  extent  of  the 
language  employed.  It  would,  indeed, 
have  been  strange  if  that  could  have 
continued  to  be  deemed  fraud  in  a 
court  of  law,  which  chancery  refused 
to  recognize  as  such,  and  if  a  party 
injured  by  the  misrepresentations  of 
the  agents  of  a  corai)any  would 
have  been  compelled  to  apply  to  law 
for  the  relief  and  redress  which  equity 
denied  him  then.,  Three  recent  decis- 
ions of  the  supreme  court  of  appeal 
have  partiallv  removed  this  anomaly 
and  have  at  length  determined  that  a 
corporation  cannot,  in  chancery  any 
more  than  at  common  law,  shield  itself 
from  liability  for  the  frauds  of  thost; 
it  employs,  by  the  absurd  fiction  that 
not  possessing  real  existence,  mental 
or  bodily,  the  mental  element  inten- 
tion, requisite  to  constitute  fraud,  is 
wanting. 

In  the  first  of  these  decisions.  New 
Brunswick  Railwav  Land  Co.  v.  Conv- 
beare.  9  H.  L.  725;  L.  J.  Ch.  307, 
Lord  Ckanwohtii  said  :  "  If  the  di- 
rectors, or  the  secretary  acting  for 
them,  had  fraudulently  represented 
something  to  him  ((;".  <;.,the  i)laintitl') 
which  was  untrue,  he  then  adhered  to 


440  Private  CoRroKATioNS. 

In  Sharp  v.  Mayor,  etc.^  the  court  say :  "The  suggestion  that 
a  corporation  cannot  be  liable  for  a  fraud  committed  may  be  cor- 
rect as  to  fraud  not  in  any  way  connected  with,  or  committed  in 
the  course  of,  and  tending  to  carry  out  some  power  or  act  which 
it  is  authorized  to  perform.  *  *  *  The  principal  is  liable  for 
the  false  representations  of  the  agent,  made  in  and  about  the  mat- 
ter for  which  he  was  appointed  agent,  not  on  the  ground  of  ex- 
press authority  given  to  the  agent  to  make  the  statement,  but  on 
the  ground  that  as  to  the  particular  matter  for  which  the  agent  is 
appointed,  he  stands  in  the  place  of  the  principal,  and  whatever 
he  does  or  says  in  and  about  the  matter  for  which  the  agent  is 
appointed  is  the  act  and  declaration  of  the  principal,  for  which 
the  principal  is  just  as  liable  as  if  he  had  personally  done  or  made 
the  declaration.  The  power  of  the  agent  to  render  the  principal 
liable  for  representations  flows  from  his  mere  appointment  to  do 
the  act  or  transact  the  business,  in  and'  about  which  the  represen- 
tations are  made.     *     *     * 

Where  a  corporation  has  power  to  do  some  act,  and  as  incident 
to  that  act,  to  render  itself  liable  for  representations  made  in  and 
about  the  doing  of  that  act,  it  can  appoint  an  agent  to  do  that  act, 
and  from  the  mere  fact  of  such  appointment  the  same  powers  will 
flow  to  the  agent  as  if  he  had  been  appointed  by  an  individual, 
provided  only,  that  the  powers  so  flowing  could  have  been  exer- 
cised by  the  corporation  itself."  And  in  general  principles,  a 
person,  who,  by  false  and  fraudulent  representations  and  induce- 
ments held  out  to  him  by  a  corporation,  has  been  deceived  and 
misled   into   making  a  contract    whereby   he    suffers   loss,  may 

tlie  opinion  which   he   expressed   on  rescind  the  contract  on  the  ground  of 

former  cases,  that  the  company  would  fraud,    the  misrepresentations  are  im- 

have  been  bound  by  that  fraud."  putable  to  the  company,    and  the  pur- 

In  the  Western   Bank   of   Scotland  chaser  cannot  be  held  to  his  contract, 

V.  Addie,    L.  R.,    1  S.  <&  D.  145,   Lord  because  a  company  cannot  retain  any 

Chelmsford  laid  down,  that  "  Where  benefit     which    they    have    obtained 

a  person  has  been  drawn  into  a  con-  throua^h  the  fraud  of  their  agents." 

tract  to  purchase  shares  belonging  to  In  Oakesv.  Turquand,  L.  R.,2  H.  L. 

a  company    by    fraudulent   misrepre-  325,  the  same  judge  quoted  this  last 

sentations   of  the   directors,   and   the  extract,  and  adhered  to  it  as  being  a 

directors,  in  the  name  of  the  company,  correct  exposition  of  the  liability  of  a 

seek  to  enforce  that  contract,  or  the  corporation  for  the  fraud  of  its  agents, 

person  who  has  been  deceived  insti-  Brice's  Ultra  Vires,  226  ct  seq. 
tutes  a  suit  against  the  company,  to 

'  40  Barb.  273  ;  40  N.  Y.  454. 


Liability  of  Corporations  for  Torts. 


441 


maintain  an  action  against   tlie  corporation  to  rescind  the  con- 
tract.' 


OEC.  288.  Frauds  of  agents  for  which  the  corporation  is  liable. — It 
is  affirmed  as  a  general  principle,  that  corporations  are  liable  at 
common  law  for  all  damages  sustained  by  others  through  the 
frauds  and  misrepresentations  of  their  agents,  which  ai'e  perpetra- 
ted in  the  exercise  of  their  employment,  and  within  the  scope  of 
the  authority  conferred  upon  them.  If  the  agents  of  tlie  corpo- 
ration, in  the  management  of  the  business  conferred  upon  it,  are 
guilty  of  frauds,  the  corporation  is  liable  for  damages  sustained  by 
parties  induced  to  deal  with  it  in  consequence  thereof.' 


'  Henderson  v.  Railroad  Co.,  17  Tex. 
560.  See,  also.  Kennedy  v.  Panama, 
etc.,  Mail  Co.,  L.  R.,  2  Q.  B.  580. 

^  Barwick  v.  Enc^lisli  Joint-stock 
Bank,  L.  R.,  2  Ex.  259;  Swift  v.  Win- 
terbotham,  P.  O.,  L.  R  ,  8  Q.  B  244; 
Kennedy  v.  Panama,  etc.,  ]Mail  Co.,  L. 
R.,  2  Q.  B.  580,  in  which  the  court  re- 
marks: "These  would  not  be  legiti- 
mate  consequence.^  if  there  had  been 
fraud  in  those  acting  for  the  company. 
Doubtless  in  such  a  case  the  company 
must  bear  all  the  consequences  of  the 
fraud  of  those  they  employ." 

On  this  subject  Mr.  Brice  says:  "  It 
must  not  here  be  forgotten  that  in  de- 
termining whether  a  company  can  hold 
a  shareholder  to  the  contract  into 
which  by  their  own  fraud  they  have 
induced  him  to  enter,  other  equities 
have  to  be  considered,  and  a  totally 
different  result  will  be  arrived  at  than 
when  we  are  examining  whether  that 
person  will  be  liable  to  third  parties, 
the  creditors  of  the  company,  for  its 
debts.  Between  the  company  and  the 
person  whom  they  have  duped  the  sub- 
ject is  clear,  if  we  put  the  question  on 
the  simple  ground  that  no  one  can  be 
allowed  to  retain  that  which  he  has 
acquired  by  fraud,  but  as  regards  third 
parties,  such  person  is  a  de  facto  share- 
holder as  long  as  he  has  not,  from 
whatever  cause,  taken  measures  to 
denude  himself  of  his  shares,  and  it 
has  been  consequently  decided  that  as 
such,  as  a  member  of  the  company,  he 
is  subject  to  the  companv  lia1)ilities. 
Oakes  v.  Turquand,  L.  R.',  2  TI.  L.S25; 
Peek  V.  Gurney,  L.  R.,  13  Eq.  79; 
Pawle's  Case,  L.  R.,  4  Ch.  497. 
56 


"Moreover, it  isonly  the  party  orig- 
inally defrauded,  with  perhaps  excep- 
tions arising  in  very  special  cases,  who 
can  repudiate  the  contract.  For  in- 
stance, a  person  who  buys  shares  from 
one  who  could  have  repudiated  these 
shares  as  having  been  issued  to  him 
under  circumstances  of  fraud,  cannot, 
on  the  ground  of  the  original  fraud, 
have  such  share  canceled.  Duraniv, 
26  Beav.  268;  Grisewood  Case.  4  De  (i. 
&  J.  544.  At  common  law  an  action  of 
deceit  may  be  brought  at  any  time 
against  a  corporation  as  against  a  pri- 
vate individual,  till  the  plaintiff's 
right  is  barred  by  the  statute  of  limi- 
tations, but  it  is  different  when  a  share- 
holder seeks  the  relief  of  the  court  of 
chancery.  A  contract  induced  by  fraud 
is  voidable,  not  void,  and  the  injured 
party  will  be  deemed  to  have  acqui- 
esced i;nless  he  displayed  ordinary 
precautions  and  care  at  the  making  of 
the  contra<^t,  and  has  been  prompt  in 
appealing  to  the  court  on  discovering 
the  fraud.  Deposit  and  General  Life 
Assurance  Company  v.  Ayscough,  0  E. 
&  B.  761 ;  Clark  v.  Dickson,  27  L.  J., 
Q.  B.,  22:5;  Scholev  v.  Central  K.  Co., 
L.  R.,  9  Eq.  266;  "Hevmann  v.  Euro- 
pean C.  R.  Co.,  L.  R.,7  Eq.  154;  28  L. 
J.  Ch.  257  ;  In  re  Reese  River  S.  M 
Co.;  Smith  v.  Reese,  L.  R.,  2  Eq.  264; 
Central  R.Co.v.  Kisch.L.  R.,2H.  L.99. 

"  We  may  thus  summarize  the  au- 
thorities: 

"I.    At  law: 

"However  the  fraud  be  committed, 
if  it  can  be  imputed  to  the  corporation, 
whether  directly  or  indirectly,  an  ac- 
tion for  fraud  may  be  brought  against 


442 


Private  Corporations. 


Sec,  2S9.  Fraud,  etc,  of  directors — If  the  constating  instrument 
confers  iii:»on  the  board  of  directors  all  the  powers  of  manage- 
ment and  control  of  the  corporate  business,  which  would,  with- 
out some  special  provision,  vest  in  the  corporate  body,  such  board 
practically  represents  the  corporation,  and,  as  an  agent  of  the 
corporation,  its  power  is  limited  only  by  the  powers  conferred 
upon  the  corporate  body.  They  are  the  managing  officers  and 
tlie  only  direct  medium  of  communication  between  the  corpora- 
tion and  other  parties ;  and  from  their  peculiar  relations  to  the 
corporate  body  may,  for  all  practical  purposes,  be  treated  as  the 
body  itself.'  Hence,  any  fraud  or  material  misrepresentations  of 
the  corporate  business  or  the  condition  of  the  company,  by  them 
or  by  their  authorized  agents,  by  which  third  parties  relying  upon 
them  sustain  damage,  would  make  the  corporation  liable  for  the 
loss  sustained  thereby,  the  same  as  tliough  it  were  a  private  person." 

And  a  bank  is  liable  for  tlie  fraud  or  mistakes  of  its  clerks, 
cashiers  or  other  officers,  consisting  of  errors  or  false  accounts  in 


tlie  corporation  for  the  damage  thereby 
caused. 

"II.     In  chancery  : 

"  1.  If  the  fraud  be  imputable  to  the 
corporation  directly,  that  is,  if  it  has 
been  done  or  ratified  by  tbe  share- 
liolders  in  general  meeting,  then  the 
corporation  is  liable  for  the  conse- 
quences resulting  therefrom. 

"3.  If  it  be  imputable  only  indi- 
rectly, thfen  the  corporation  can  neither 
take  advantage  of  the  fraud  nor  re- 
tain, against  tbe  wish  of  the  injured 
party,  any  benefits  that  may  have  ac- 
crued to  it  (the  corporation)  from  such 
fraud.  But  the  person  aggrieved  may, 
at  his  election,  confirm  or  repudiate 
the  transaction. 

"3.  It  seems  that  the  corporation  can- 
not, by  any  proceedings  in  chancery, 
be  rendered  liable  for  damages  resu'lt- 


1  Perkins  v.  New  York,  etc.,  E.  Co., 
24  N.  Y.  213  ;  Lee  v.  Village  of  Sandy 
Hill,  40  id.  451. 

"Brokaw  v.  New  Jersey,  etc.,  R. 
Co.,  33  N.  J.  L.  381,  where  it  was  held 
that  tlie  corporation  was  liable  for  the 
frauds  of  the  agent  where  lie  acted 
within  the  a})pareut  scope  of  his  au- 
thority. McCiellan  v.  Scott,  9  Wis. 
81,  where  it  was  held  that  the  corpo- 


ing  from  fraud  imputable  to  it  indi- 
rectly. 

"  If  the  limitation  last  inentioned  be 
correct,  then  it  follows  that  in  future 
corporations  will  not  be  liable  at  law 
for  indirect  fraud,  since  the  supreme 
court  of  judicature  act  of  1873  ex- 
pressly provides  that  where  the  rules 
of  law  and  equity  conflict,  those  of 
equity  are  to  prevail.  3(3  and  37  Vict., 
chap.  66,    §  2l). 

"  This  result  —  the  holding  corpo- 
ration not  liable  for  the  frauds  of  their 
agents,  will  cause  a  considerable  qual- 
ification of  the  law  as  at  present  ex- 
isting of  principal  and  agent,  and  it 
will  be  a  strange  exemplification  of 
the  unexpected  etfects  produced 
by  sweeping  legislative  enactments 
passed  without  a  due  consideration  of 
the  matters  affected  thereby." 

Brice's  Ultra  Vires,  238  et  seq. 

ration  was  liable  for  misrepresen- 
tations of  the  agent  as  to  the  pecun- 
iary condition  of  a  railroad  company. 
Admissions  and  declarations  of  an 
agent  of  a  corporation  have  the  same 
effect  and  are  useful  as  evidence  in 
the  same  way  against  the  corporation, 
as  though  made  by  natural  persons. 
Henderson  v.  Eailroad  Co.,  17  Tex. 
500. 


Liability  of  Comporations  foh  Torts.  443 

the  books  of  the  corporation,  made  by  them,  or  for  refusing  to 
allow  a  person  entitled  thereto  to  subscribe  for  or  transfer  stock.' 

Sec.  200,  Particular  acts  of  fraud  by  agents.  —  AuiOUg  the  most 
common  acts  of  fraud  perpetrated  by  agents  are  those  which  con- 
sist of  misrepresentations  in  soliciting  subscriptions  to  the  stock 
of  the  company,  not  only  verbally  made,  but  by  means  of  circu- 
lars and  other  papers,  wdiicli  are  not  only  extravagant,  but  false. 
But  in  such  cases,  in  order  to  entitle  a  party  to  recover  damages 
sustained  thereby,  or  to  set  aside  the  contract,  it  must  be  made  to 
appear  that  the  party  seeking  to  take  advantage  of  sncli  fraud 
used  due  diligence  in  the  matter,  and  relied  upon  such  false  and 
fraudulent  misrepresentations  in  making  the  contract,  and  that 
the  misrepresentations  related  to  matters  materially  affecting  the 
value  and  success  of  the  enterprise  in  which  the  corporation  was 
engaged.  And  a  mere  commendation  of  the  company  or  of  its 
objects,  or  an  expression  of  opinion  as  to  its  success,  or  of  the 
dividends  it  would  earn,  would  not  be  sufficient,  either  to  base  an 
action  for  damages  or  to  set  aside  the  contract  on  the  ground  of 
fraud."  And  if  the  subscriber  has,  for  a  long  time,  acquiesced  in 
his  contract  with  the  corporation,  or  if,  by  his  laches,  he  has 
induced  the  belief  that  his  subscription  is  genuine,  and  especially 
if  the  rights  of  creditors,  or  other  persons  acting  bona  fi<le, 
are  involved  and  must  be  prejudiced  if  the  subscription  is  not  sus- 
tained, the  subscriber  will  not  be  relieved.'     And,  under  similar 

'  Union  Bank  v.  McDonongb.SLa  63;  Oregon,  etc.,  R.  Co.  v.  Scoggin,  3  Oreg. 

Ware  V.  Barataria  Canal  Co.,  15  id.  169.  161.     But  it  is  not  competent  as  evi- 

'■^  See,  on  these  propositions,  Hughes  dence,  to  prove  dechirations  made  hy 

V.  Antietam  Manuf.  Co. ,  34  Md.  316  ;  the  agent  in  his  spet^ches  and  remarks 

Vawter  V.  Ohio,  etc.,  R.  Co.,  14  Ind.,  in  ol)taining  subscri[itions,  as  to   tlie 

174  ;  Johnson  v.  Crawfordsville,  etc.,  location  of  the  road,  the  subscription 

R.  Co.,  11  id.  280;  Brownlee  v.  Ohio,  being  unconditional.     On  the  question 

etc.,  R.  Co.,  18  id.  68;  Carey  v.  Cinciu-  of  proper  evidence,  in  such  cases,  see 

nati,  etc.,  R.  Co.,  5  Iowa,  357  ;  Waldo  v.  Buffalo,  etc  ,  R.  Co.   v.  Dudley,  14  N. 

Chicago,  etc. ,R.  Co.,  14  VVis.  575;  Fogg  Y.  336  ;  Thigpen  v.  Mississippi,  etc.,  R. 

V.  Gritiin,  '3  Allen,  1  ;  Litchfield  Bank  Co.,  32   Miss.    347  ;   Vicksburgh,  etc., 

V.    Peck,    29    Conn.    384;    Kelsey    v.  R.  Co.  v.  McKean,    12  La.  Ann.  638; 

Northern  Light  Oil  Co.,  54  Barb,  111 ;  Mississippi, etc.,  R.  Co.  v. Cross,  20  Ark. 

S.  C,  45  X.   Y.  505;    Ri%'e9  v.  Mont-  443;  Piscataqua  Ferry  Co.  v.  Jones,  39 

goniery,  etc.,  R.  Co.,  30  Ala.  92  ;    Hen-  N.  H.  491  ;  Connecticut,  etc.,  R.  Co.  v. 

derson  v.   Railroad  Co.,  17  Tex.  560;  Bailey,  24  Vt.  477  ;   Kennebec,  etc.,  R. 

Mississippi,  etc.,  R.  Co.   v.  Cross,  20  Co.  v.  Waters,  34  Me.  369. 
Ark.    443;  Wight  v.  Shelby,  etc.,   R.         "Blodgett  v.   Morrill,    20    Vt.    509; 

Co.,  16  B.  Monr.  5  ;  Nugent  v.  Cincin-  O^ilvMe  v.  Knox  Ins  Co  ,  22  How.  380  ; 

nati,    etc.,    R.    Co.,   2   Dis.    (0.)    302  ;  Upton  v.  Hansbrough,  3  Biss.  417. 


444  Private  Corporations. 

circumstances,  a  subscriber  will  not  be  relieved  of  his  subscription 
on  the  ground  of  misrepresentations  made  by  the  agent,  that  he 
has  authority  to  and  will  release  the  subscription,  as  it  is  unrea- 
sonable for  the  subscriber  to  presume  that  the  agent  has  such 
authority.' 

Sec.  291.  Doctrine,  where  the  corporation  is  the  occasion  of  a  loss  by 
the  fraudulent  act  of  a  servant.—  The  familiar  maxim  in  equity,  that 
where  one  of  two  innocent  parties  must  suffer  a  loss  by  the  acts 
of  another  person,  he  should  bear  the  loss  who  has  enabled  such 
person  to  occasion  it,  is  as  applicable  to  corporations  as  to  natural 
persons.  Thus,  in  the  application  of  this  maxim,  coi-porations 
have  been  held  responsible  for  the  fraudulent  acts  of  their  offi- 
cers in  over-issuing  stock ;  and,  for  the  acts  of  cashiers  and  tellers, 
in  falsely  certifying  checks,  etc.,  as  such  agents  and  officers  are, 
by  the  corporation,  held  out  to  the  community  as  the  proper  par- 
ties to  perform  these  acts  and  to  furnish  information  in  reference 
to  such  matters." 

Where  a  paying  teller  of  a  bank,  on  which  a  check  was  drawn, 
certified  the  same  to  be  good,  although  his  authority  to  certify  in 
that  way  was  limited  to  cases  where  the  bank  had  funds  of  the 
drawer  in  hand  sufficient  to  cover  the  check,  it  was  held  that  a 
hona  fide  holder  for  value  of  such  check  could  enforce  payment 
of  the  same  against  the  bank,  altliough  the  drawer  did  not  have 
such  funds  ;  and  tliat  this  liability  existed,  even  though  the  certifi- 
cate by  the  teller  was  in  violation  of  his  duty,  and  for  the  mere 
accommodation  of  the  drawer,  and  made  upon  his  promise  that  it 
should  never  be  presented  for  payment.'  In  the  case  above 
referred  to,  Selden,  J.,  in  the  ISTew  York  court  of  appeals,  ob- 
serves :  "  The  act  of  certifying  a  check  is  simply  answering  the 
supposed  inquiry,  of  one  about  to  take  the  check,  whether  the 
bank  has  funds  of  the  drawer  to  meet  it ;  and  no  other  officer  or 

1  Custer  V.  Titusville  Gas,  etc.,  Co.,  497  ;  Barnet  v.  Smith,  30  IST.  H.  256  ; 
63  Penn.  St.  381 ;  Litchfield  Bank  v.  Meads  v.  Merchants'  Bank,  25  N.  Y. 
Peck,  29  Conn.  384  ;  Railroad  Co..  v.  143  ;  New  York,  etc.,  R.  Co.  v.  Scliuv- 
Rodrigues,  10  Rich.  (S.  C.)  378.  ler,  34  id.  30  ;  Irvine  Bank  v.  Wether- 

2  Lickbarrow  v.  Mason,  2  T.  R.  63;  aid,  3^5  id.  335;  Griavvold  v.  Haven, 
Merchants'    Bank   v.    Stale    Bank,   10  25  id.  596. 

Wall.  604  ;  Uirard  Bank  v.  Bunk,  etc.,  ^  Fanners    and  Mechanics'  Bank  v. 

39  Penn.  St.  92  ;   Roniida  v.  Smith.  42  Butchers  and  Drovers'  Bank,  16  N.  Y. 

Ill    245;    Bickford    v.  First   National  125;  S.  C,  28  id.  425. 
Bank,  id.  238  ;  Brown  v.  Leckie,  43  id. 


LiABiLTiY  OF  Corporations  for  Torts.  445 

agent  of  the  bank  would  seetn  to  be  so  competent  to  give  an 
answer  as  the  paying  teller.  He  is  charged  with  all  he  pays  out, 
and  if  he  ]jays  a  check  without  funds  in  hand,  he  is  responsible 
to  the  bank  for  the  amount.  His  knowledge  exceeds  that  of  the 
book-keeper,  because  to  the  information  obtained  from  the  latter 
he  adds  a  knowledge  whether  any  deposits  have  been  made  or 
cheeks  paid  since  the  last  entry  in  the  books.  No  doubt  the 
cashier,  by  virtue  of  his  general  powers,  and  his  presumed  knowl- 
edge of  the  affairs  of  the  bank,  would  bo  competent  to  answer 
the  question ;  but  he  could  only  do  so  by  first  inquiring  of  the 
book-keeper  and  teller.  Why  should  the  applicant  be  compelled 
to  seek  the  information  through  this  circuitous  channel,  instead 
of  going  directly  to  the  ultimate  source  of  knowledge  on  that  sub- 
ject. The  teller  is  put  in  the  place  of  the  cashier,  to  perform  a 
portion  of  his  duties.  His  appointment  is  virtually  a  division  of 
the  office  of  cashier ;  and  that  branch  of  the  office  which  the 
teller  fills  embraces  those  duties  which  particularly  require  a 
knowledge  of  the  state  of  the  accounts  of  the  depositors.  Why 
then  should  he  not  be  the  organ  of  coniniiinication  on  that  sub- 
ject? *  *  *  To  certify  a  check  when  the  bank  has  no  funds 
to  meet  it,  is  to  make  a  false  representation;  and  neither  the  inci- 
dental power  of  the  cashier,  nor  a  general  power  conferred  upon 
any  other  officer  could  be  construed  to  authorize  that.  Hence,  if 
a  bank  is  holden,  in  any  case,  upon  a  certificate  of  its  cashier  that 
a  check  is  good  when  it  has  no  funds  of  the  drawer,  it  is  not 
because  the  cashier  is  deemed  authorized  to  make  such  a  certifi- 
cate, but  because  the  bank  is  bound  by  his  representation,  not- 
withstanding it  is  false  and  unauthorized."^ 

Sec.  292.  Corporations  enjoying  the  benefits  of  contracts  secured 
through  the  frauds  of  agents  will  be  responsible  for  such  frauds.  —  It  is  a 
general  principle,  applicable  alike  to  corporations  as  to  private 
persons,  that  the  principal  cannot  enjoy  the  benefit  of  a  contract 

'  See,   also,   Butler  v.   Watkina,  13  chaser  was  deceived,  it  was  held  that 

"Wall.  (U.  S.)  4o6  ;  North  River  Bank  the   principal  was  liable.  Lord  Holt 

V.  Ayinar,  3  Hill,  262  ;  Hern  v.  Nichols,  observing  :    "  Seeing   somebody  must 

1  Salk.  289  ;  in  which  case  the  agent  be  a  loser  by   this   deceit,  it   is  more 

was  authorized   to  sell  a  quantity  of  reasonable  that  he  that  employs  and 

silk,  and  had  made  certain  fraudulent  puts  a  confidence  in  a  deceiver  should 

representations,    by    which    the    pur-  be  a  loser  rather  than  a  stranger." 


44:6  PkIVATK    CoBl'OliATIONS. 

secured  by  the  fraudulent  representations  or  acts  of  its  agents 
without  at  the  same  time  incurring  tlie  responsibility  of  such 
frauds.  They  cannot  ratify  and  enjoy  the  fruits  of  a  contract 
and  avoid  responsibihty  for  fraudulent  representations  which 
induced  the  making  of  the  contract  by  the  other  party.  On  this 
subject  Mr.  Story  observes:  "  Where  the  principal,  upon  a  full 
knowledge  of  all  the  circumstances  of  the  case,  deliberately  rati- 
fies the  acts,  doings  or  omissions  of  his  agent,  he  will  be  bound 
thereby  as  fully  to  all  intents  and  purposes  as  if  he  had  originally 
given  him  direct  authority  in  the  premises  to  the  extent  which 
such  acts,  doings  or  omissions  reach."  ^ 

Sec.  293.  Rule  in  England.  —  The  same  doctrine  has  been  held 
by  the  English  courts.  Thus,  in  the  case  of  The  Western  Bank  of 
Scotland  n.  Addie^  Lord  Chelmsford  said  :  "  Where  a  person 
has  been  drawn  into  a  contract  to  purchase  shares  belonging  to  a 
company  by  the  fraudulent  representations  of  the  directors,  and  the 
dii'ectors,  in  the  name  of  the  company,  seek  to  enforce  that  con- 
tract, or  the  person  who  has  been  deceived  institutes  a  suit  against 
the  company  to  rescind  the  contract  on  the  ground  of  fraud,  the 
misrepresentations  are  imputable  to  the  company,  and  the  purchaser 
cannot  be  held  to  his  contract,  because  the  company  cannot  retain 
any  benefit  which  they  have  obtained  through  the  fraud  of  their 
agents."  ^  But  it  has  been  held  that  stockholders,  who  have  been 
induced  to  become  such  by  fraudulent  statements  in  relation  to 
the  condition  of  the  company,  must  take  the  earliest  oj)portunity 
after  a  discovery  of  the  fraud  to  repudiate  the  contract,  and  they 
cannot,  as  we  have  already  noticed,  unreasonably  delay  until  the 

1  Story    on     Agency,   §   239.      The  353  ;  Hartshorn  v.  Day,  19  How.  211  ; 

maxim  of   the  common  law  is  omnis  Dorr  v.  Muusell,  13  Johns,  430  ;  Cliam- 

ratilutbitio  retrotrdhitur,    et   mandato  piou  v.  White,  5  Cow.  509  ;  Hazard  v. 

priori  (Bquiparatur.     Concord  Bank  v.  Dav,  18  Pick.  95;  Dobson  v.  Pearce, 

Uregg,  14  N.  H.  331  ;  Paley  on  Ag.  by  12  'N.  Y.  156  ;  Despard  v.  Walbridge, 

Lloyd,  .324  ;  Smith    on    Merc.  L.    47;  15  id.  374;   Weed  v.  Chase,  55   Barb, 

Odiorue    v.     Maxcy,    13    Mass.     178;  534  ;  Marsh  v.  Falker,  40  N.  Y.  562  ; 

Pratt    V.    Putnam,   id.  361  ;  Fisher  v.  Craiij  v.   Ward,  3  Keves,  387;  Lefier 

Willard,  id.  379;  Boynton  v.  Turner,  v.    Field,    52    N.    Y.    621;   Dubois    v. 

id.  391  ;  Copeland  v.   Merchants'  lus.  Hermance,  56  id.  673. 
Co.,   6   Pick.    198  ;  Conn.  v.   Penn.    1         ^  [^    r^  y  p   ^Sj  D.  145. 
Pet.  (C.  C.)    498;  Den  v.  Wright,  id.         ^  gge,  also,  Oakes  v.   Turquand,  L. 

72  ;  Breedlove    v.    Waraack,  2    Mart.  R.,  2  H.  L.  325,  334  ;  Barry  v.  Croskey, 

(La.  N.  S.)  181  ;  Buchanan  v.  Upshavy,  2  J.  &  H.  1  ;  Peck  v.  Gurney,  L.  R.,  6 

1  How.  56  ;  S.  C,  17  Pet.  70  ;  Crump  H.  L.  377,  390. 
V.  United  States  Mining  Co.,  7  (irait. 


LlABILITV    OF    COKPORATIONS    FOR    T0ET8. 


447 


rights  of  creditors  have  supervened,  and  then  if  the  corporate 
enterprise  proves  unsuccessful  and  losses  must  be  sustained,  avoid 
the  contract  of  subscription  so  as  to  prejudice  the  rights  of  cred- 
itors, who  had  a  right  to  rely  upon  the  subscriptions.  As  between 
the  corporation  itself  and  the  subscribers  where  no  intei'ests  of 
third  persons  are  concerned,  the  right  to  repudiate  a  subscription 
obtained  by  the  fraud  of  the  company  is  clear,  but  it  may  be  quite 
diiferent  as  to  the  rights  of  third  parties.^ 


1  Oakes  v.  Turquaad,  L.  II.,  2  II.  L. 
325;  Peck  v.  (iuiney.  L.  K.,  IS 
Eq.  79  ;  Upton  v.  Hausbrough,  6  Biss. 
417  ;  Gloucester  Bank  v.  Salem  Bank, 

17  Mass.  'Sd  ;  Kelsey  v.  Northern  Liglit 
Oil  Co.,  4o  N.  Y.  505  ;  Ex  parte  Booker, 

18  Ark.  S'SS  ;  Merchants'  Bank  v.  State 
Bank,  10  Wall.  604;  Butler  v. 
Walkins,  1.'5  id.  456;  Deposit,  etc., 
Assurance  Co.  v.  Avscough,  6  E.  &  B. 
761  ;  26  L.  J.  Q.  B.  29  ;  Clarke  v.  Dick- 
son, 37  id.  223  ;  Scholev  v.  Central, 
etc.,  R.  Co.,  L.  R.,  9  Eq.  266;  Hey- 
maun  v.  European,  etc.,  R.  Co.,  L.  R., 
7  Eq.  154. 

On  this  subject  Mr.  Brice  observes  : 
"  In  Barwick  v.  The  English  Joint- 
stock  Bank,  L.  R.,  2  Ek.  259,  the  ex- 
chequer chamber  held  unanimously 
and  in  the  most  unqualified  manner 
that  an  action  for  fraud  lies  against  a 
corporation  as  against  any  private  in- 
dividual, whether  the  fraud  be  that  of 
the  principal  directly  or  of  the  agents 
employed,  provided  only  that  the  lat- 
ter are  acting  within  the  ordinary 
scope  of  their  occupation.  But  in 
Western  Bank  of  Scotland  v.  Addie, 
L.  R..  3  H.  L.  325,  the  lord  chancel- 
tor  said  :  '  But  if  the  person,  who  has 
been  induced  to  purchase  shares  by 
the  fraud  of  the  directors,  instead  of 
seeking  to  set  aside  the  contract,  pre- 
fers to  bring  an  action  for  damages  for 
the  deceit,  such  an  action  cannot  be 
maintained  against  the  company,  but 
only  against  the  directors  personally.' 
To  the  same  effect  was  the  decision  of 
Lord  Gran  WORTH,  L.  R.,  1  S.  &  D. 
167  ;  1  J.  &  H.  1  ;  Peek  v.  Gurney,  L. 
R.,  6  H.  L.  370.  An  attentive  con- 
sideration of  the  case  has  convinced 
me  that  the  true  principle  is,  that 
tliese  corporate  bodies,  through  whose 
agents  so  large  a  portion  of  the  busi- 
ness of  the  country  is  now  carried  on, 


may  be  made  responsible  for  the 
frauds  of  those  agents  to  the  extent  to 
which  the  companies  have  i)rofited 
from  these  frauds,  but  they  cannot  be 
sued  as  wrong-doers,  by  imputing  to 
them  the  misconduct  of  those  whom 
they  have  employed.  A  person  de- 
frauded by  directors,  where  the  sub- 
sequent acts  and  dealings  of  the  par- 
ties have  been  such  as  to  leave  him 
no  remedy  but  an  action  for  the  fraud, 
must  seek  his  remedy  against  the  di- 
rectors personally.' 

"  Most  of  the  cases,  however,  which 
have  come  before  courts  of  equity, 
have  arisen  from  the  attempts  of  per- 
sons who,  induced  by  liowery  prospect- 
uses and  glowing  reports,  have  taken 
shares,  to  get  themselves  relieved  from 
their  responsibilities  upon  the  state- 
ments put  forth,  and  relied  on  by 
them  turning  out  incorrect.  In  all 
such  cases,  if  the  fraud  be  imputable 
to  the  corporation  and  the  injured 
party  has  not  debarred  himself  by 
laches,  relief  will  be  granted. 

"  Conybeare  v.  New  Brunswick, 
etc..  Land  Company,  9  H.  L.  711  ;  31 
L.  J.  Ch.  297,  1  Dr.  &  M.  363  ;  L.  R., 
3  Ch.  682,  is  a  leading  authority. 
Here  the  house  of  lords,  reversing  the 
decision  of  the  lords  justices,  decided 
that  the  plaintiff  was  not  entitled  to 
have  his  name  removed  from  the  list 
of  shareholders,  on  the  grounds,  first, 
that  there  had  not  been  any  conceal- 
ment, inasmuch  as  an  act  of  parlia- 
ment, the  absence  of  which,  from  a 
certain  report  published  by  the  com- 
pany, was  the  concealment  alleged, 
was  recited  on  the  articles  of  associa- 
tion, which  he  (plaintiff)  must  be  held 
to  have  perused,  and,  secondly,  that 
the  misrepersentation  complained  of, 
thus  stated  in  the  bill  :  '  The  said  re- 
port of  July,  1S58,  referred  to  the  lands 


448 


Private  Corporations. 


Tlic  doctrine  univ^ersally  recogiiizud  in  snch  cases  is  tluit  the 
contract  is  voidable  only,  and  hence  tlie  party  entitled  to  avoid  it 
must  be  prompt  in  the  exercise  of  his  right  in  this  respect ;  and 
he  cannot,  by  his  delay,  induce  innocent  third  parties  to  suppose 
the  contract  a  binding  one,  and  entice  them  into  contracts  on  the 
strength  of  such  subscriptions,  and  afterward  take  advantage  of 
it  to  the  prejudice  of  creditoi's  or  other  third  parties. 


of  the  said  compauy  in  terms  calcu- 
lated to  convey  to  the  mind  an  impres- 
sion that  sucli  lands  were  the  absolute 
and  indefeasible  property  of  the  com- 
pany,' was  not  a  representation  but  an 
inference  that  was  left  to  be  drawn 
from  the  expressions  used  in  the  re- 
port. Their  lordships,  however,  threw 
in  doubt  the  liability  of  a  corporation 
for  frauds  which  can  be  imputed  to 
itself  directly.  The  general  tenor  of 
their  judgments  is  well  expressed  in 
the  foot  note  on  the  House  of  Lords 
l^eports,  viz.  :  '  If  reports  are  made  to 
the  shareholders  of  a  company  by  their 
directors,  and  the  reports  are  adopted 
by  the  shareholders  and  afterward  in- 
dustriously circulated,  representations 
contained  in  those  reports  must  be 
taken  to  be  representations  made  with 
the  authority  of  the  company,  and, 
therefore,  binding  the  company  ;  and 
if  those  reports  having  been  industri- 
ously circulated  be  clearly  shown  to 
have  been  the  proximate  and  imme- 
diate cause  of  shares  having  been 
bought  from  the  company,  the  com- 
pany cannot  be  permitted  to  retain  the 
benefit  of  the  contract,  and  keep  the 
purchase-money  that  has  been  paid, 
liepresentations  made  by  the  secretary 
to  a  person  in  a  general  conversation, 
without  a  view  to  any  definite  state- 
ment by  that  person  tliat  he  wants  to 
purchase  shares,  are  not  binding  on 
tlie  company.' 

Another  very  recent  case  is  that  of 
Central  Railway  Company  of  Vene- 
zuela Limited  v.  Kisch,  L.  R.,  2  H,  L. 
99.  The  defendant,  the  original 
plaintiff,  filed  a  bill  to  have  his  name 
removed  from  the  list  of  shareholders 
in  the  railway  and  to  have  the  pay- 
ments he  had  made  on  account  of  calls 
returned  him.  He  had  taken  the  shares 
on  tlie  faith  of  a  prospectus  which  re- 
ferred to  a  concession  made  by  the 
Venezuelan  government  to  the  com- 
pany for  making  a  railway,  and  stated 


that  the  contractor  had  guaranteed  a 
dividend  of  2^  per  cent  on  the  paid-up 
capital,  during  the  construction  of  the 
works,while,in  fact, this  guarantee  was 
limited  to  £30,000,  and  that  the  con- 
tract had  been  entered  into  '  at  a  price 
considerably  within  the  available  capi- 
tal,' when  in  reality  —  on  account  of 
the  company  having  paid  £50,000  for 
the  concession,  which  payment  was 
not  mentioned  in  the  prospectus,  and 
which  concealment  the  defendant  al- 
leged as  a  ground  of  ccnnplaint,  it  left 
but  a  margin  of  £30,000  out  of 
£50,000.  On  these  grounds  of  misrep- 
resentation and  concealment,  and  more 
especially  of  the  latter,  the  house  of 
lords  granted  the  relief  prayed.  8o, 
in  many  other  cases,  shareholders 
have  been  relieved  of  their  shares  on 
the  ground  that  they  were  induced  to 
take  them  by  misrepresentation,  the 
false  statements  being  on  one  occasion 
with  respect  to  the  capital  subscribed 
or  shares  taken  ;  Ross  v.  Estates  In- 
vestment Company,  L.  R.,  8  Ch.  682  ; 
L.  R.,  5  Eq.  249  ;  upon  another,  as  to 
the  nature  of  the  business  to  be  under- 
taken; Blackburn's  Case,  3  Drew.  409  ; 
or  as  to  the  value;  Reese  River  Mining 
Co.  v  Smith,  L.  R.,  4  H.  L.  64; 
Denton  v.  Macneil,  L.  R.,  2  Eq.  352  ; 
or  locality,  Lawrence  Case,  L.  R.,  2 
Ch.  412  ;  L.  R.,  1  Ch.  575,  of  property 
already  or  to  be  thereafter  acquired  by 
the  company.  In  a  word,  misleading 
facts  of  any  description,  material  to 
the  contract  to  take  shares,  and  actu- 
ally the  inducement  to  such  contract, 
render  such  contract  voidable  on  the 
part  of  the  person  so  induced  to  enter 
into  the  same,  always  providing  that 
the  misleading  facts  in  question  were 
promulgated  by  the  company  itself  or 
its  duly  authorized  agents.  Frowd 
case,  3*0  L.  J.  Ch.  322;  Burnes  v. 
Penne,  2  H.  L.  497."  Green's  Brice'a 
Ultra  Vires,  255-8. 


Liability  of  Corporations  for  Torts.  449 

Sec.  294.  Right  to  repudiate  a  contract  for  fraud  limited  to  original 
parties. —  The  right  to  repudiate  a  contract  for  stock  on  the  ground 
of  fraud  is  limited  to  the  party  contracting  for  the  same  with  the 
company.  But  if  such  holder  of  stock,  even  where  the  subscrip- 
tion has  been  obtained  by  fraud  of  the  corporation,  and  where  for 
such  fraud  the  subscriber  might  have  the  contract  set  aside,  still, 
if  he  transfers  such  stock  to  another,  the  purchaser  cannot,  as  such 
stockholder,  set  aside  the  original  contract  on  the  ground  of  the 
fraud.  ^ 

But  it  may  be  observed  that  a  right  of  action,  even  for  a  tort, 
may  now,  under  the  provision  of  the  statutes  of  many,  if  not 
most  of  the  states,  be  assigned  so  as  to  entitle  the  assignee  to 
maintain  an  action  in  his  own  name  for  the  damages  sustained  by 
the  assignor  thereby. 

Sec.  295.  Ratification  of  the  contract  effected  by  the  fraud  of  the  agent 

We  have  had  occasion  to  notice  the  effect  of  the  ratification  of 
contracts  made  by  agents  in  the  name  of  the  corporation,  where 
they  exceed  the  authority  conferred  upon  them ;  "^  and  the  same 
general  principles  are  applicable,  not  only  where  the  ratification 
is  of  unauthorized  contracts,  but  also  of  unauthorized  torts.  "  In 
all  cases,"  observes  Mr.  Story,  "if  the  principal  subsequently  rati- 
fies the  act  he  is  bound  by  it,  whether  it  be  for  his  detriment  or 
for  his  advantage ;  and  whether  it  be  founded  upon  tort  or  upon 
a  contract.  And  a  ratification  once  deliberately  made,  Avith  full 
knowledge  of  all  the  material  circumstances,  cannot  be  recalled." " 
But  in  case  of  ratification,  as  before  observed,*  it  cannot  be  of  a 
part  of  the  unauthorized  or  tortious  act.  If  the  princij)al  adopts 
it  he  must  adopt  the  whole  or  none.  And  if  he  ratifies  at  all,  it 
operates  as  a  ratification  of  the  whole.  But  this  rule,  in  reference 
to  torts  in  particular,  must  be  received  with  the  qualification  that 
the  ratification  is  made  with  a  full  knowledge  of  the  facts  and  all 

'  Daranty's  Case,  26Beav.  268 ;  Oris-  173,  334,  and  note  ;  Wilson  v.  Poulter, 

wold's  Case,  4  De  G.  &  J.  544  ;  Peck  3  Str.  859  ;   Taylor  v.  Plumer,  3  M.  & 

V.  Guruey,  L.  R.,  13  Eq.  79  ;  Cross  v.  S.  5^2  ;  1  Liv.  on  Ag.  44-53  ;  Rogers 

Sackett,  3  Bosw.  617.  v    Kueeland,  10  Wend.  218  ;  Lench  v. 

-  Story  on  Agency,  §  243.     See,  also,  Leucli,   10  Ves.  517  ;  Kelley  v.  Mun- 

Lucena  v.  Crawford,  5  B.  &  P.   369;  son,  7  Mass.  319. 

Roiitli    V.    Thompson,    13    East,    274  ;         ^  Story  on  Agency,  §  250  and  notes. 
Paley  on  Ag.,  by  Lloyd,  112-115,  171,        '•See  Story  on  Agency,  §  253  et  seq. 

57 


450  Pbivate  Corporations. 

the  material  circumstances  relating  to  it ;  iu  which  case  it  becomes, 
eo  instantly  obligatory  upon  the  principal,  and  cannot  afterward 
be  revoked. 

Sec.  296.  Ratification  of  torts.  —  In  cases  of  contracts  secured  by 
the  fraud  of  corporate  agents  if,  after  knowledge  of  the  fraud, 
the  corporation  still  insists  upon  the  benelit  of  the  contract  thus 
secured,  it  is  evident  that  it  would  be  liable  not  only  for  damages 
thereby  sustained,  but  that  the  other  party  might  have  the  con- 
tract set  aside  and  canceled,  for  that  reason.  We  have  ah-eady 
considered,  in  treating  of  agents,  the  acts  and  circumstances  which 
would  be  evidence  of  ratification.^  And  we  have  also  considered 
the  personal  liability  of  corjjorate  agents  in  cases  where  they  ex- 
ceed their  authority  in  making  contracts,  and  also  in  cases  of  torts 
not  only  to  the  corporation  but  to  parties  injured  thereby. 

Sec.  297.  Corporate  liability  for  other  wrongs.  —  Having  consid- 
ered the  liability  of  corporations  for  the  frauds  of  itself  and  its 
agents,  we  will  now  proceed  to  consider  its  liability  for  other  torts. 
In  this  respect  it  may  be  affirmed  that  a  corporation  may  be  liable 
in  all  cases  for  torts  committed,  by  its  direction  or  approval,  the 
same  as  a  natural  person.  It  will  be  liable  for  the  tortious  acts  of 
its  servants  or  agents  committed  while  engaged  in  the  course  of 
his  duties  and  within  the  scope  of  the  authority  conferred  upon 
them,  either  express  or  implied,  and  whether  such  acts  come 
within  the  designation  of  forcible,  negligent,  malicious  or  fraud- 
ulent torts.^  Much  doubt  has  been  experienced  by  the  courts 
whether  a  corporation  could  be  made  liable  for  a  tort  committed 


'  See  Story  on  Agency,  §  253  ei  seq.  want  of   skill   of    its   agents   in   con- 

'^  State  V.  Morris,  etc.,  R.  Co.,  3  Zabr.  structing   public    works,  see    City   of 

367  ;  Brokaw  v.  New   Jersey,  etc.,  R.  Dayton  v.  Pease,  4  Ohio  (N.  S.),  80. 

Co.,  33  N.J.  L.  328  ;  Albert  v.  Savings  On  the  subject  of  liability  of  a  cor- 

Bank,  1  Md.  Ch.  407;  Thatcher  v.  Bank,  poration  for  fraud,  negligence  or  mis- 

5  Sandf.  121  ;  Thompson    v.    Bell,  10  takes   of    agents,  see   Salem   Bank  v. 

Exch.   10;    Bargate   v.    Shortridge,  5  Gloucester  Bank,  17  Mass.  1 ;  Glouces- 

H.    L.    Cas.  297;  National   Exchange  ter  Bank  v.  Salem  Bank,  id.  33;  Manhat- 

Co.  V.  Drew,  32    Eng.    L.    &   Eq.    1  ;  tan  Co.  v.  Lydig,  4  Johns.  377  ;  Bank 

Stevens  v.  Boston  R.  Co.,  1  Gray,  277  ;  of  Kentucky  v.  Schuylkill  Bank,l  Pars. 

Blackstock  v.  New  York,  etc.,  R.  Co.,  Sel.Cas.  248;  Ware  v.  Barataria Canal 

1  Bosw.  77.  Co.,  15  La.  168  ;  Union  Bank  v.  McDon- 

As  to  liability  of  municipal  corpora-  ough,    5    id.    63  ;    Johnson    v.    South 

tions    for   injuries    resulting   from   a  Western  R.  Bank,  3  Strobh.  Eq.  263  ; 


Liability  of  Corporations  for  Torts. 


451 


by  its  officers  or  agents  in  the  line  of  their  duty  where  the  gist  of 
the  action  is  maUce,  and  many  conflicting  decisions  upon  this 
question  are  to  be  found  in  the  reports.     But  whatever  may 


Crump  V.  U.  S.  Miu.  Co.,  7  Gratt.  353  ; 
Commercial  Bank  v.  TTnion  Bank,  11 
N.  Y.  203  ;  Beers  v.  Housatouic  R. 
Co.,  19  Conn.  566  ;  Bradley  v.  Boston 
R.  Co.,  2  Cush.  589  ;  Baltimore  K.  Co. 
V.  Woodruff,  4  Md.  242;  Sharrod  v. 
London  R.  Co.,  4  Excli.  .585  ;  Gillen- 
water  v.  Madison  R.  Co.,  5  Ind.  339  ; 
Marlatt  v.  Levee  Steamboat  Cotton 
Co.,  10  La.  583  ;  Memphis  v.  Lasser,  9 
Humph.  757  ;  Green  v.  London  Gen. 
Omnibus  Co.,  7  C.  B.  (N.  S.)  290. 

What  has  been  said  with  regard 
to  fraud  will  apply  with  proper  quali- 
fications to  other  torts.  Corporations 
are  not  created  —  it  is  no  part  of  their 
business  —  to  commit  torts.  Neverthe- 
less courts  of  law  have  decided  that 
they  must  be  held  liable  for  torts  com- 
mitted by  their  agents  and  servants 
acting  within  their  authority  upon 
the  same  principles  and  by  precisely 
analogous  reasoning  as  they  have  been 
made  responsible  for  fraud.  Thus, 
an  action  for  trespass  to  the  person, 
Seymour  v.  Greenwood,  7  H.  &  N. 
355  ;  30  L.  J.  Ex.  327  ;  Limpus  v.  Lon- 
don General  Omnibus  Company,  1  H. 
&C.  526;  Goff  V.  Great  Nortliern  Ry. 
Co.,  30  L.  J.  Q.  B.  148,  or  the  property, 
e.  g.,  trover,  Tattan  v.  Great  Western 
Railway  Company,  29  L.  J.  Q.  B.  184  ; 
Mears  v.  London  and  South  Western 
Railway  Company,  11  C.  B.  (N.  S.)  850 ; 
31  L.J.  C.  P.  220,  will  lie  against  a 
corporation  as  against  an  individual. 
The  agent  of  a  corporation  must,  of 
course,  be  acting  within  his  authority 
and  upon  this  point  difficult  questions 
arise  as  to  tlie  extent  of  the  agent's  au- 
thority and  more  especially  of  his  im- 
plied authority.  In  Edwards  v.  London 
and  North  Western  Railway  Company, 
L.  R.,  5  C.  P.  445,  it  was  decided  that  a 
fireman  porter  in  the  service  of  a  rail- 
way company  who,  in  the  absence  of 
the  station-master,  is  in  charge  of  a 
station,  has  no  implied  authority  to 
give  in  charge  a  person  whom  he  sus- 
pects to  be  stealing  the  company's 
property,  and  consequently  that  if  he 
gives  in  charge  on  such  suspicion  an 
innocent  person,  the  company  are  not 
liable.  In  Allen  v.  London  and  South 


Western  Railway  Company,  L.  R.,  6 
Q.  B,  65,  a  similar  decision  was  come 
to  with  regard  to  the  arrest,  by  direc- 
tion of  a  ticket  distributor,  of  an  in- 
nocent person  whom  he  had  suspected- 
wrongly  of  an  attempt  to  rob  tiie  till. 
The  jury  found  that  the  ticket  dis- 
tributor acted  in  defense  of  the  com- 
pany's property,  but  the  court  unani- 
mously held,  that  he  had  no  implied 
authority  from  the  company  to  order 
the  arrest,  and  that  consequently  tlie 
company  were  not  liable  for  the  same. 
In  this  case,  as  in  the  former, the  court 
thought  that  the  respective  officials 
concerned  had  an  implied  authority 
to  take  such  proceedings  only  as  were 
imperatively  demanded  for  the  imme- 
diate protection  of  the  property  under 
their  charge;  and  that  the  moment  any 
attempt  to  injure  or  steal  sucli  prop- 
erty was  abandoned,  this  implication 
ended  any  steps  that  they  might  then 
direct,  not  being  called  for, for  such  pro- 
tection would  be  of  their  own  motion 
and  at  their  own  peril .  Lex  ita  scrijyta. 
What  a  corporation  cannot  do  ita 
agent  cannot  do  so  as  to  bind  it.  From 
this  it  necessarily  follows  that  there 
can  be  no  authority  to  an  agent,  im- 
plied or  otherwise,  to  take  proceedings 
which  would  be  ^iltra  vires  of  the  cor- 
poration ;  and  that  the  corporation 
cannot  in  any  way  be  made  amen- 
able for  torts  committed  by  one  of 
their  servants  in  the  course  of  such 
proceedings.  This  is  well  shown  by 
the  case  of  Poulton  v.  London  and 
South  Western  Railway  Company,  L. 
R.,  2  Q.  B.  534.  The  facts  were  these, 
the  plaintiff,  who  had  taken  a  horse  to 
an  agricultural  show,  oy  the  defendant's 
railway,  was  entitled,  under  arrange- 
ments advertised  by  the  defendants, to 
take  the  horse  back  free  of  charge  on 
the  production  of  a  certificate.  The 
plaintiff,  accordingly,  produced  a  cer- 
tificate and  the  horse  was  put  into  a 
box  without  payment  or  booking,  and 
the  plaintiff  having  taken  a  ticket  for 
himself,  proceeded  by  the  same  train. 
At  the  end  of  the  journey  the  station- 
master  demanded  payment  for  the 
horse,   and   the   plaintiff  refusing   to 


452 


Private  Cokporations. 


formerly  have  been  the  rule,  it  is  now  well  settled  that  a  corpora- 
tion is  liable  in  that  class  of  actions  as  well  as  an  individual  ^ 


as 


pay,  was  detained  in  custody  by  two 
policemeu  under  the  orders  of  the 
station-master,  until  it  was  ascertained 
by  telegraph  that  all  was  right.  An 
action  having  been  brought  by  the 
plaintift  against  the  defendants  for 
false  iiuprisouuient,  it  was  held,  that 
though  a  railway  company  has  power 
to  apprehend  a  person  traveling  on  the 
railway  without  having  paid  his  own 
fare,  it  can  only  detain  the  goods  for 
non-payment  of  the  carriage,  that  as 
the  defendants  themselves  would  have 
had  no  power  to  detain  the  plaintiff, 
on  the  assumption  that  he  had  wrong- 
fully taken  the  horse  by  the  train 
without  paying,  there  could  be  no  au- 
thority implied  from  them  to  the 
station-master  to  detain  the  plaintifE 
on  this  assumption,  and  that  they 
were,  therefore,  not  liable  for  this  act 
of  the  station-master.  This  case  de- 
cides only  that  no  implied  authority  as 
to  detention  belonged  to  the  station- 
master.  Of  course,  he  might  have  had 
express  authority  to  act  as  he  did,  and 
though  such  authority  would  have 
been  ultra  vires  of  the  company  pur- 
porting to  confer  it,  yet  they  would 
have  been  responsible  for  the  result 
thereof.  Herein  consists  a  great  distinc- 
tion between  tortious  and  contractual 
liability  for  acts  ultra  vires.  It  is  no  de- 
fense to  legal  proceedings  in  tort  that 
the  torts  were  ultra  vires.  If  the  torts 
have  been  done  by  the  corporation,  or 
by  their  direction,  they  are  liable  for 
the  results,  however  much  in  excess  of 
their  powers  such  torts  may  be. 

Other  torts  there  are  with  respect 
to  which  the  liability  of  a  corporation 
may  be  fairly  considered  doubtful. 
Ordinarily  it  is  sufficient  to  render  a 
person  responsible  for  a  tort,  whether 
committed  by  himself  or  his  agent,  if 
only  there  has  been  negligence,  heed- 
lessness or  rashness.  Sometimes,  how- 
ever, the  mental  ingredient ,  becomes 
intention,  actual  or  constructive.  Can 
a  corporation  be  made  amenable  for 
those  torts,  which  require,  on  the  part 

1  N.  0.  R.  R.  Co.  V.  Bailey,  40  Miss. 
295  ;  Goodspeed  v.  East  Haddam  B'k, 
22  Conn.  530  ;  Wheless  v.  Second  Nat. 
Bank,  1  Baxt.  (U.  S.  C.  C.)  469  ;  25 
Am.  Rep.  783  ;  Philadelphia  R.  R.  Co. 
V.  Quigley,  21  How.  (U.  S.)  202  ;  Cop- 


of  the  wrong-doer,  knowledge  or  will- 
fulness ? 

In  Stiles  v.  Cardiff  Steam  Naviga- 
tion Company,  4  N.  R.  483  ;  83  L.  J. 
Q.  B.  310,  it  was  determined  that  a 
corporation  would  be  liable  for  know- 
ingly keeping  a  mischievous  animal. 
Mr.  Justice  Shee  asserted  broadly  in 
reference  to  the  scienter,  that  "  cor- 
porations are,  in  this  respect,  in  no 
different  position  from  private  owners, 
and  if  it  could  be  shown  that  the  mis- 
chievous propensity  of  the  dog  was 
known  to  any  person  having  control 
of  the  business  or  of  the  yard,  or  even 
the  dog,  or  whose  duty  it  would  be  to 
inform  the  company  of  what  the  dog 
had  done,  it  might  do,  but  the  evidence 
fails  on  that  point." 

In  Whitfield  v.  South  Eastern  Rail- 
way Company,  1  E.  B.  &  E.  115  ;  2/  L. 
J.  Q.  B.  229.  See  Lawless  v.  Anglo- 
Egyptian  Cotton  and  Oil  Company,  L. 
R.,4  Q.  B.  262,  it  was  held  that  a  corpo- 
ration was  liable  for  publishing  a  libel 
contained  in  a  telegram  which  passed 
over  their  wires  ;  and  e  converso,  a  cor- 
poration, though  intangible  and  with- 
out personal  incidents, may  sue'for  libel 
upon  it.  Metropolitan  Saloon  Omni- 
bus Company  v.  Hawkins,  4  H.  &  N. 
87;  38  L.  J.  Ex.  201. 

In  respect  of  liability  for  torts  it 
makes  no  difference  whether  the  cor- 
poration is  a  trading  one  making  profits 
out  of  its  undertaking,  or  exists  merely 
for  public  purposes.  In  the  latter 
case,  as  in  the  former,  it  is  equally  un- 
der obligations  to  all  persons  with 
whom  it  may  come  into  contact,  and 
is  bound  so  to  carry  on  its  affairs  as  to 
keep  within  its  powers,  and  not  to 
cause  injury  to  others,  failing  this,  it 
is  liable  for  the  damage  resulting. 
Southampton  and  Itchin  B.  C.  v.  Local 
Board  of  Southampton,  8  E.  &  B.  801 ; 
28  L.  J.  Q.  B.  41  ;  Ruck  v.  Williams,  3 
H.&  N.  308;  Brownlow  v.  Metropolitan 
Board,  16  C.  B.  (N.  S.)  546. 

Under  the  same  circumstances  the 
various  boards  of  commissioners,  and 

ley  V.  Grover  &  Baker  Sewing  Machine 
Co.,  2  Woods.  (U.  S.  C.  C.)494  ;  Vance 
V.  Erie  R.  R.  Co.,  32  N.  J.  L.  334  ; 
First  Nat.  Bank  of  Carlisle  v.  Graham, 
100  U.  S.  699. 


Liability  of  Corporations  for  Torts. 


453 


for    bringing   vexatious   suits/  for   malicious   prosecution/    for 
fraudulent  representations/  for  a  libel/  for  vexatiously  obstruct- 


other  similar  bodies  appointed  to  con- 
duct and  carry  out  public  improve- 
ments, and  deriving  therefrom  no  per- 
sonal advantage  whatever,  will,  in 
their  corporate  or  quasi-corpora.te 
capacity,  unless  expressly  by  statutory 
provision  relieved,  be  responsible  to 
the  parties  injured.  See  the  cases 
cited  above,  and  also  the  Mersey  Docks 
Trustee  v.  Gibbs,  L.  K.,  1  H.  L.  93. 

The  liability  of  corporations  has 
been  extended  to  even  some  varieties  of 
crimes.  The  notion  of  crime,  as  usually 
held,  requires  intent  on  the  part  of 
the  criminal,  but  this  is  not  the  view 
taken  by  our  law.  Many  acts,  which,  if 
productive  of  harm  to  a  single  person, 
are  mere  torts,  become  crimes  when 
they  result  in  damage  to  a  large  num- 
ber of  people,  and  all  proceedings, 
which  are  invasions  of  the  rights  or 
privileges  not  of  some  individual 
specially,  but  of  the  public  at  large, 
or  which  are  detrimental  to  the  general 
well-being  or  to  the  interest  of  the 
state,  similarly  fall  under  the  cate- 
gory of  crimes.  In  such  cases  the  in- 
tent is  notional  and  constructive,  rather 
than  real;  Reg.  v.  Stephens,  L.  R.,  1  Q. 
B.  702 ;  it  suffices  if  the  wrong-doer 
has  caused,  whether  directly  by  his 
own  proceedings  or  indirectly  by  those 
of  his  agents,  the  wrong  in  question. 
Manifestly  a  corporation  can  commit 
such  wrongs,  can  have  such  an  intent, 
and   by  consequence  at   least  to  such 


^  Goodspeed  v.  East  Haddam  Bank , 
ante. 

-  Williams  v.  Planters'  Ins.  Co.,  57 
Miss.  759  ;  34  Am.  Rep.  494  ;  Garter  v. 
Howe  Machine  Co.,  51  Md.  290  ;  Fen- 
ton  v.  Sewing  Machine  Co. ,  9  Phila. 
189  ;  Iron  Mountain  B'k  v.  Mercantile 
B'k,  4  Mo.  App.  505  ;  Edwards  v. 
Midland  Railway  Co.,  6  Q.  B.  Div.  287. 
But  contra,  see  Owlsey  v.  Montgom- 
ery, etc.,  R.  R.  Co.,  57  Ala.  560.  In 
Castro  V.  HoAve  Machine  Co.,  ante,  the 
court  while  holding  that  a  corporation 

^  National  Exchange  Co.  v.  Drew, 
2  Macq.  103;  New  Brunswick,  etc.. 
Railway  Co.  v.  Couybeare,  9  H.  L. 
711. 


extent  render  itself  amenable  to  the 
criminal  law.  Accordingly  it  has  been 
decided  that  a  corporation  may  be  in- 
dicted for  misdemeanors  wliich  are  in 
reality  public  torts,  e.  {/..tor  disobedi- 
ence to  an  order  of  ju^ticf^s  requiring 
them  to  execute  works  pursuant  to  a 
statute,  Reg.  v.  Birmingham  and  Glou- 
cester Railway  Company,  3  Q.  B.  223; 
for  malfeasance  in  cutting  through  and 
obstructing  a  public  highway,  Reg. 
V.  Great  North  of  England  Railway 
Company,  9  Q.  B.  315  ;  Reg.  v.  Long- 
ton  Gas  Company,  2  E.  &  E.  051  ;  Reg. 
V.  United  Kingdom  Electric  Telegraph 
Co.,  2  B.  &  S.  G47,  n.;  3  F.  &  F.  73  ;  for 
non-repair  of  a  highway,  and  the  like. 
Reg.  V.  Mayor,  etc.,  of  Manchester,  7 
E.  &  B.  453  ;  26  L.  J.  Sc.  65. 

The  authorities  have  gone  only 
so  far  as  to  render  them  liable  crimi- 
nally for  a  nonfeasance  or  misfeas- 
ance, where  the  mental  element  is 
negligence.  Whether  this  can  ever  be 
extended  to  felonies  or  misdemeanors, 
the  essence  of  which  is  malice,  willful- 
ness, or  other  such  determinate  fact, 
is  very  doubtful.  Reg.  v.  Great  North 
of  England  Railway  Company,  9  Q. 
B.  315  ;  King  of  the  Two  Sicilies  v. 
Wilcox,  1  Sim.  (N.  S.)  334  ;  19  L.  J. 
Ch.  488.  Being  mere  abstractions, 
they  cannot  have  actually  the  mental 
element  therein  involved,  and  to  raise 
it  by  implication  is  directly  opposed  to 
every  principle  of  criminal  law. 

is  liable  for  malicious  prosecution  by 
its  agents,  yet  held  that  in  order  to 
charge  them,  either  express  authority 
for  the  act  of  its  agent  or  its  subse- 
quent ratification  must  be  shown,  but 
the  tenor  of  modern  cases  is  against 
any  such  requirement  where  the  act 
complained  of  comes  within  the  scope 
of  the  agent's  apparent  authority. 
In  Edwards  v.  Midland  Railway  Co., 
43  L.  T.  (N.  S.)  G94,  Fry,  J.,  said  : 
"  The  question  which  I  have  to  decide 
is  this,  whether  or  no  a  railway  com- 

*  McDermott  v.  The  Evening  Jour- 
nal. 44  N.  J.  L.  488 ;  39  Am.  Rep.  606; 
Philadelphia  R.  R.  Co.  v.  Quigley,  21 
How.  (U.  S.)  202. 


454 


Pkivate^'Coeporations. 


ing  one's  trade,^  for  a  nuisance/  for  false  imprisonment/  and 
generally  for  any  and  all  torts,  whether  malicioxis  or  otherwise^ 
which  are  committed  by  its  agents  or  servants  in  the  line  of  their 


pany  can  be  liable  iu  an  action  for 
malicious  prosecution  ?  The  malice 
which  will  support  a  cause  of  action 
need  not  be  express.  It  may  be  im- 
plied from  a  wrongful  act  being  done 
without  just  cause  or  excuse,  and  it  is 
enough,  therefore,  if  such  malice  can 
be  attributed  to  a  railway  company. 
It  is  obvious  that  great  evils  would 
arise  if,  on  the  ground  that  a  corpora- 
tion can  have  no  mind,  and  therefore 
can  have  no  malice,  a  corporation 
were  able  to  escape  from  that  liability 
which  if  they  were  not  incorporated 
they  would  have  to  bear.  Now  how 
do  the  authorities  stand?  They  stand 
in  this  way.  The  question  came  before 
the  court  of  exchequer  in  Stearns  v. 
Midland  Railway  Co.,  10  Exch.  353, 
and  three  judges  expressed  their 
opinion  in  that  case.  Alderson,  B., 
went  upon  the  proposition  that  in 
order  to  support  the  action  it  must  be 
shown  that  the  defendant  was  actuated 
by  animus  in  his  mind,  and  that  a  cor- 
poration has  no  mind.  The  two 
other  learned  judges,  Platt,  B.,  and 
Martin,  B.,  without  expressly  dis- 
senting from  that  proposition,  declined 
to  enunciate  it,  and  determined  the 
case  upon  the  ground  that  there  was 
not  sufficient  evidence  of  authority  to 
affect  the  defendants,  the  railway 
company.  That  case,  therefore,  so 
far  as  it  bears  upon  the  present  inves- 
tigation, is  the  authority  only  of  the 
very  eminent  judge,  Alderson,  B. 
Now,  has  that  case  been  followed  1 
Mr.  Powell  says  it  has  been  followed 
by  a  case  in  Australia,  in  which  the 
chief  judge,  differing  from  his  two 
learned  brethren,  followed  the  decis- 
ion of  Alderson,  B.  Is  that  decis- 
ion of  Alderson,  B.,  consistent  with 
other  authorities  which  bear  upon  the 
same  question  —  I  mean  the  question 
of  malice  in  a  corporation  ?  Now,  so 
far  back,  I  find,  as  the  great  trial  on 
qiio  warranto  of  Rex  v.  City  of  Lon- 
don, the   point  appears  to  have  been 

1  Green  v.  London  Omnibus  Co.,  7 
C.  B.  (N.  S.)  290. 

'■'  First  Baptist  Church  v.  R.  R.  Co., 
5  Barb.  79  ;    Wood  on  Nuisances. 


considered.  There  it  appears  Saund- 
ers, L.  C.  J.,  allowed  a  demurrer,  ac- 
cording to  the  statement  of  the  plead- 
ings which  I  find  in  a  note  appended 
to  Whitfield  v.  South-Eastern  Rail- 
way Co.  in  1  El.  Bl.  &  Ell.  123,  and 
which  no  doubt,  therefore,  is  correct, 
and  contemplated  the  proposition  that 
a  corporation  aggregate  could  be 
charged  with  maliciously  publishing 
a  libel.  No  doubt  it  may  be  said  that 
that  decision  is  on  some  grounds  not 
of  the  greatest  weight,  that  is  to  say, 
it  was  a  decision  which  is  often  con- 
sidered to  have  been  affected  by  politi- 
cal as  well  as  by  legal  considerations. 
Still  it  was  the  decision  of  a  very  great 
and  very  eminent  judge.  Then,  again, 
the  question  arose  for  decision  in  the 
case  of  Yarborough  v.  Bank  of  Eng- 
land, 16  East,  6.  and  there  Lord  Ellen- 
borough  referred  to  an  earlier  case, 
I  think  in  1871,  of  Argent  v.  Dean  and 
Chapter  of  St.  Paul's.  There  he 
says  the  action  was  '  for  a  false  return 
to  a  mandamus  respecting  an  election 
to  a  verger's  place  in  that  cathedral, 
and  no  objection  was  made  that  the 
action  would  not  lie.  Vidian's  Entries, 
p.  1,  is  an  action  for  a  false  return 
against  the  mayor  and  commonalty  of 
the  city  of  Canterbury,  for  a  false  re- 
turn to  a  writ  of  mandamus  to  restore 
an  alderman  to  his  precedency  of  place, 
etc.  It  states  the  mayor  and  corpora- 
tion as  attached  to  the  answer  and  the 
return  as  falsely  and  maliciously 
made.  The  instances  of  actions  against 
corporations  for  false  returns  to  writs  of 
mandamus,  which  are  so  often  directed 
to  them,  must  be  numberless,  though 
I  have  not  found  many  of  them  in  the 
books  of  entries.'  The  question  again 
came  before  the  court  for  consideration 
in  the  case  of  Whitfield  v.  South-East- 
ern Ry.  Co.,  31  L.  T.  (0.  S.)l]3;  27 
L.  J.  Q.  B.  339  ;  1  Ell.  Bl,  &  Ell.  132, 
where  a  count  against  a  railway  com- 
pany as  a  corporation  aggregate  was 
held  good  on  demurrer,  and  there  Lord 

2  Owlsey  V.  Montgomery,  etc.,  R.  R. 
Co.,57  Ala.  560. 


Liability  of  Corporations  for  Torts. 


455 


duty  and  witliin  the  scope  of  their  apparent  authority,  and  the 
doctrine  of  ultra  vires  has  no  apphcation  in  such  cases.^ 


Campbell  said  :  '  The  demurrer  to 
the  declaration  in  tliis  case  can  only 
be  supported  on  the  ground  that  the 
action  will  not  lie  without  proof  of 
express  malice,  as  contradistinguished 
from  legal  malice.  But  if  we  yield 
to  the  authorities  which  say  that  in 
an  action  for  defamation  malice  must 
be  alleged  (notwithstanding  authori- 
ties to  the  contrary),  this  allegation 
may  be  proved  by  showing  that  the 
publication  of  a  libel  took  place  by 
order  of  the  defendants,  and  was 
therefore  wrongful,  although  the  de- 
fendants had  no  ill-will  to  the  plaint- 
iffs, and  did  not  mean  to  injure  them. 
Therefore  the  ground  on  which  it  is 
contended  that  an  action  for  a  libel 
cannot  possibly  be  maintained  against 
a  corporation  aggregate  fails.  But 
considering  that  an  action  of  tort  or 
of  trespass  will  lie  against  a  corpora- 
tion aggregate,  and  that  an  indictment 
may  be  preferred  against  a  corpora- 
tion aggregate  both  for  commission 
and  omission,  to  be  followed  up  by 
fine,  although  not  by  imprisonment, 
there  may  be  great  difficulty  in  say- 
ing that  under  certain  circumstances 
express  malice  may  not  be  imputed 
to  and  proved  against  a  corporation.' 
He  held,  therefore,  that  it  clearly 
might  be  implied,  and  therefore  in 
certain  cases  express  malice  might  be 
proved.  Then,  again,  in  Green  v. 
London  General  Omnibus  Co. ,  1  L.  T. 
(N.  S.)  95  ;  7  C.  B.  (N.  S.)  3>)0,  a  simi- 
lar question  came  before  the  court  of 
common  pleas.  The  marginal  notes 
to  this  effect :  '  A  corporation  aggre- 
gate may  be  liable  to  an  action  for  in- 
tentional acts  of  misfeasance  by  its 
servants,  provided  they  are  sufficient- 
ly connected  with  the  scope  and  ob- 
ject of  its  incorporation.'  The  alle- 
gation there  was  that  the  placing  and 
driving  of  omnibuses  in  the  manner 
complained  of  was  done  wrongfully, 
vexatiously  and  maliciously,  and  judg- 
ment was  delivered  by  Ehle,  C.  J. 
He  said  :  '  This  is  an  action  against 
the  defendants  for  wrongfully,  vexa- 
tiously and  maliciously  interfering 
with   the  plaintiffs  rights  by  causing 


their  vehicles  to  be  driven  in  such  a 
manner  as  to  obstruct  and  molest  the 
plaintiff  in  the  use  of  the  highway. 
The  declaration  alleges  various  griev- 
ances of  that  general  character.  To 
this  declaration  there  is  a  demurrer 
raising  for  our  decision  the  question 
whether  the  action  will  lie.  The 
ground  of  the  demurrer  is,  that  the  dec- 
laration charges  a  willful  and  inten- 
tional wrong,  and  that  the  defendants, 
being  a  corporation,  cannot  be  guilty  of 
such  a  wrong,  and  therefore  the  action 
will  not  lie.'  1  pause  to  observe  that  to 
my  mind  it  is  equally  absurd  to  sup- 
pose that  a  body  corporate  can  do  a 
thing  willfully,  which  implies  will,  in- 
tentionally, which  implies  intention,  or 
maliciously,  which  implies  malice. 
They  are  all  acts  of  the  mind,  and  one 
is  no  more  capable  of  being  done  by 
a  corporation  aggregate  than  the  other; 
so  if  there  is  absurdity  in  the  one  case 
there  is  equal  absurdity  in  all  the 
others.  The  judgment  proceeds  :  '  But 
the  whole  of  the  acts  that  are  charged 
against  the  defendants  are  acts  con- 
nected with  driving  vehicles,  and  the 
defendants  are  a  company  incorporated, 
for  the  purpose  of  driving  omnibuses 
and  therefore  the  acts  alleged  to  have 
been  done  by  them  are  all  acts  which 
are  within  the  scope  and  object  of 
their  formation.  Unless  the  acts 
charged  were  wrongfully  done  the 
plaintiff  of  course  would  have  no 
ground  of  complaint.  We  are  clearly 
of  opinion  that  the  action  lies,  and 
there  are  abundan  authorities  to 
warrant  that  opinion.  The  whole 
course  of  the  authorities,  from  the  case 
of  Yarborough  v.  Bank  of  England,  16 
East,  G,  down  to  Whitfield  v.  South- 
Eastern  llailway  Co.,  1  Ell.  Bl.  &  Ell. 
115  (which  is  the  case  I  just  now 
referred  to),  which  was  in  reality  an 
action  against  the  Electric  Telegraph 
Company,  shows  that  an  action  for 
a  wrong  will  lie  against  a  cor- 
poration where  the  thing  that  is  com- 
plained of  is  a  thing  done  within  the 
scope  of  their  incorporation,  and  is  one 
which  would  constitute  an  actionable 
wrong  if  committed  by  an  individual. 


'  First  National  Bank  of  Carlisle  v.  Graham, 
Railway  Co.,  1  E.  B.  &  E.  115. 


100  U.  S.  699  ;  Whitfield  v. 


456 


Private  Corporations. 


Sec.  298.     Assault   and  battery  when  committed  in  the  line  of  duty 

of  the  agent.  —  We  have  affirmed  the  proposition  generally,  that 
the  principal  is  responsible  for  all  positive  misconduct,  or  for  any 
neo-lect  or  omission  of  agents  done  or  committed  ^\'hile  acting 
within  the  scope  of  the  authority  conferred  upon  them.  But  it 
'is  sometimes  a  matter  of  difficulty  to  determine  the  extent  of  the 
agent's  authority,  and  whether,  in  the  particular  act  claimed  to  be 
tortious,  the  agent  was  acting  within  the  scope  of  his  authority. 
For  instance,  while  thus  acting,  the  agent  may  commit  an  assault 
and  battery.  If  the  agent  should,  for  the  time  being,  leave  the 
business  of  his  agency,  and  willfully  and  maliciously  conunit  an 
assault  and  battery,  the  principal  evidently  would  not  be  liable.^ 
But  if,  in  the  performance  of  and  within  the  scope  of  his  sup- 
posed duty,  he  inflicts  an  unwarranted  injury  upon  another,  the 
principal  would  undoubtedly  be  liable  thei^efor.  Thus,  if  a 
brakeman  or  other  agent  of  a  railroad  company  should  leave  his 
employment,  and  without  any  connection  with  his  duties  as  such 
should  commit  an  assault  and  battery  upon  another,  it  is  evident 
that  the  railroad  company  would  not  be  responsible  for  the  dam- 


The  doctrine  relied  on  by  Mr.  Gififard 
—  that  a  corporation,  having  no  soul, 
cannot  be  actuated  by  a  malicious  in- 
tention—  is  more  quaint  than  sub- 
stantial.' In  other  words,  I  under- 
stand the  court  of  common  pleas  in 
that  case  to  have  disregarded  as  quaint 
aud  not  substantial  the  ratio  decidendi 
of  Alderson,  B.,  in  the  case  of  Stevens 
V.  Midland  Railway  Co.j  10  Exch.  c!52. 
In  my  judgment,  therefore,  that 
dictum  or  decision  of  his  has  been 
overruled,  or  rather  has  not  been  fol- 
lowed by  a  court  of  co-ordinate  juris- 
diction. Therefore  I  feel  myself  at 
liberty  in  that  condition  of  the  author- 
ities, and  as  at  liberty  I  think  I  am 
bound  to  decide  according  to  wliat  I 
conceive  to  be  the  true  view  of  the 
law.  That  being  so,  it  only  remains 
to  inquire  whether  or  no  this  was  done 
within  the  scope  of  the  incorporation. 
Now  those  great  railway  corporations 
are  bound  to  maintain,  and  in  fact  they 
do  maintain,  jiolice  for  the  purposes 
of  restricting  the  commission  of  crime 
upon  their  railways,  and  the  observ- 
ations in  the  j  udgment  of  Lord  Black- 


burn, then  a  member  of  the  court  of 
queen's  bench,  in  the  case  of  Golf  v. 
Great  Northern  Railway  Co.,  3  L.  T. 
(N.  S.)  850;  30  L.  J.  Q.  B.,  148, 
show  that  in  his  view,  at  any  rate,  a 
company  would  be  responsible  for  the 
arrest  by  their  police  of  persons,  sup- 
posing the  arrest  was  wrongfully 
effected.  Can  it  be  said  that  if  the 
police  whom  they  employ  conduct  a 
prosecution  in  tlie  performance  of 
their  duties  as  oificers  of  the  company, 
it  is  not  done  in  the  scope  of  incorpora- 
tion of  the  company  ?  The  company 
take  to  themselves,  as  a  necessary  part 
of  their  business,  the  protection  of 
property  which  is  intrusted  to  them 
as  common  carriers  and  otherwise. 
In  my  view  it  is  within  the  scope  of 
their  incorporation,  and  is  not  like  a 
thing  entirely  outside  the  objects  of 
their  business.  It  is  a  thing  which, 
taking  into  account  the  nature  of  their 
business,  they  could  not  reasonably 
do  without,  and  do  not  do  without.  If 
so,  it  seems  to  me  I  am  bound  to  hold 
that  the  company  may  be  responsible 
for  malicious  prosecution." 


'  See  Edwards   v.  London,   etc.,    R. 
Co.,  L.  R.,  5   C.  P.  445  ;  L.  R.,  6  Q.  B. 


65  ;  Owsley  v.  Montgomery  R.  Co.,  87 
Ala.  (N.  S.)  560. 


Liability  of  Corporations  for  Torts.  457 

ages  sustained  tliereby ;  but,  if  sucli  agent,  while  acting  for 
such  company,  and  within  the  line  and  ai^parent  scope  of  liis 
duty,  should,  though  without  authority  of  the  company,  unlaw- 
fully assault  and  beat  a  passenger,  the  company  would  be  respon- 
sible for  the  damages  sustained  by  such  passenger.' 

Sec.  299.  Distinction  between  torts  and  contracts  as  to  application  of 
doctrine  of  ultra  vires.  —  x\  distinction  has  been  made  us  to  the  lia- 
bility of  the  principal  between  acts  that  are  tortious,  if  done  in  the 
execution  of  acts  which  are  ultra  vires,  and  mere  contracts,  in  case 
they  are  ultima  vires.  In  the  former  case,  it  has  been  held  that 
corporations  are  liable  if  the  act,  though  ultra  vires,  is  done  by 
its  direction  whereas  in  the  latter  it  would  not  generally  be  liable." 

Sec.  300.  Liability  of  corporations  for  trespasses  to  property.  —  The 
liability  of  a  corporation  for  an  injury  to  the  real  or  pei-sonal 
property  of  another  is  the  same  as  in  case  of  a  natural  j)erson. 
The  only  distinction  between  them  being,  not  in  the  injury  or 
liability  itself,  but  in  the  fact  that,  as  a  corporation  is  merely  an 
imaginary  person,  its  trespasses  must  necessarily  be  committed 
through  its  agents,  while  a  natural  person  may  commit  them  not 
only  by  his  agents,  but  by  his  own  direct  act.  Wherever  an 
injury  may  be  done  through  the  agent,  and  an  action  therefor 
sustained  against  an  individual  principal,  under  like  circumstances 
an  action  will  lie  against  a  corporation. 

Thus,  a  corporation  may  be  liable  in  trover  or  for  the  conver- 

'  Philadelphia,  etc.,  R.  Co.  V.  Derby,  As  to  injury  re.sulting  from  negli- 

14  How.  (U.  S.)  468  ;  Jackson  v.  Second  gence   causing  death,   see  Sbeanu.  «& 

Ave.  R.  Co. ,  47  N.  Y.  274;  Hamilton  v.  Redf.  on  Neg.,  chap.  17,  27,  33.     As  to 

Third  Ave.   R.  Co.  35  N.  Y.  Superior  the  measure  of  damages  in  such  cases, 

Ct.  118;  S.  C.,o3  N.  Y.  25  ;  Moore  v.  see  Field  on   Dam.,   chap.    21,  §  626 

Fitchburgh  R.  Co.,  4  Gray,  465  ;  Rams-  et  seq. 

deu  V.  Boston,  etc.,  R.  Co.,  104  Mass.  As  to  the  general  liability  in  cases 
117;  Coleman  v  New  York,  etc.,  R.  of  trespass  to  the  person,  see,  also, 
Co.,  106  id.  160;  Crocker  v.  New  the  English  capes,  Sevmour  v.  Green- 
London,  etc.,  R.  Co.,  24  Conn.  249  ;  wood,  7  H.  &  N.  355  ;'30  L.  J.  Ex.  327  ; 
Brokaw  v.  New  Jersey,  etc.,  R.  Co.,  32  Limpus  v.  London  Gen.  Omnibus  Co., 
N.  J.  L.  328  ;  Philadelphia,  etc.,  R.  Co.  1  H.  &  C.  526  ;  32  L.  J.  Ex.  34;  Goff 
v.  Wilt,  4  Wbart.  143  ;  Pennsylvania,  v.  Northern  R.  Co.,  30  L.  J.  Q.  B. 
etc.,  R.  Co.  V.  Vandiver,  42  Penn.  St.  148. 

365  ;    Chicago  &  N.  W.  R.  Co.  v.  Wil-  -  First  National  Bank  of  Carlisle  v. 

liams,  55  111.  185  ;    Kline  v.  Central,  Graham,   100     N.    S.  699  ;    Sharp   v. 

etc.,  R.  Co.,  39  Cal.  587;  Evausville,  Mayor,  40  Barb.  273  ;  40   N.   Y.  454; 

etc.,  R.  Co.  V.  Baum,  26  Ind.  70  ;  Jef-  Beach  v.   Fulton   Bank,  7  Cow.  485  ; 

fersonville  R.  Co.  v.  Rogers,  38  id.  116.  Bank  of  U.  S.  v.  Davis,  2  Hill,  451. 

58 


458  Private  Corporations. 

sion  of  personal  property ; '  for  trespass,  in  stopping  water-courses  ; 
or  for  injury  to  property  by  the  construction  and  use  of  canals  ;  by 
blasting  rocks ;  entering  upon  the  premises  of  another  and  carry- 
ino-  away  the  soil,  or  cutting  timber;  for  nuisance;  for  eject- 
ment ;  and  for  negligence  causing  damage  to  person  or  property, 
and  in  all  these  cases  corporations  will  be  liable  to  damages  for 
the  injuries  sustained,  where  the  acts  are  committed  by  their 
agents,  acting  within  the  scope  of  their  authority,  the  same  as 
though  the  actions  therefor  were  against  individuals.''  So  an 
action  may  be  maintained  against  a  corporation  for  a  libel ;  ^  and 
for  false  imprisonment  ;^  for  a  nuisance,  for  which  a  corporation 
may  also  be  indicted  ;  ^  and  also  for  a  malicious  prosecution/ 

Sec.    301.      Rule  in  Vance  v.  Erie  R.  R.  Co.,  as   to  implied  malice. — 

In  a  recent  case  against  a  railway  corporation  for  a  malicious 
prosecution  the  court  say :  "It  must ' appear  that  the  prose- 
cution was  instituted  maliciously  and  without  probable  cause. 
In  a  legal  sense,  any  act  done  willfully  and  to  the  injury  of  an- 
other, which  is  unlawful,  is,  as  against  that  person,  malicious,  and  it 
is  not  necessary  that  the  perpetrator  of  such  act  should  be  in- 
fluenced by  ill-will  toward  the  individual,  or  that  he  entertain  or 
pursue  any  bad  purpose  or  design.  The  proof  of  malice  need 
not  be  direct.     It  may  be  inferred  by  the  jury  from  the  want  of 

1  Tattan  v.  Great  Western  R.  Co. ,  29  514  ;  Bloodgood  v.  Mohawk  R.  Co.,  18 

L   J   Q.  B.  184  •  Mears  v.  London,  etc..  Wend.  9.    See,  also,  Lyman  v.  Bridge 

R.  Co.,  11  C.  B.'  (N.  S.)  850;  31  L.  J.  C.  Co.,  2  Aik.  (Vt.)  255  ;  Watson  v.  Ben- 

P.  220  ;  Yarborough  v.  Bank  of  Eng-  uett,  12  Barb.  196  ;  Lee  v.  Sandy-Hill, 

land,  16  East,  6  ;  Duncan  V.  Surrey  Ca-  40  N.   Y.  442;    Chestnut  Hill  Co.    v. 

nal  Co.  ,3  Stark.  50;  Smith  v.  Birming-  Rutter,  4  S.  &  R.  6  ;  Delaware  Canal 

ham  Canal  Co. ,  1  A.  «&  E.  526  ;  Balti-  Co.  v.  Commissioners,  60  Peun.  St.  367  ; 

more  v.  Norman,  4  Md.  352  ;  Green's  Whiteman    v.    Wilmington,   etc.,    R. 

Brice's   Ultra  Vires,   262;    Brown  v.  Co.,  2  Harr.  514;  Humes  v.  Knoxville, 

South  Kennebec  Ag.  Soc,  47  Me.  275.  1  Humph.  403  ;  Terra  Haute  Gas  Co. 

^  Trespass  will  lie  against  a  corpora-  v.  Teel,  20  Ind.  131. 

tion.     See  Hay  v.  Cohoes  Co.,  2  N.  Y.  ^  pjjiiadelphia  R.  Co.  v,  Quigley,  21 

159  ;  Carman  v.  Steubenville  R.  Co.,  How.  (U.  S.)  202  ;    Whitfield  v.  South 

4  Ohio  St.  399 ;  Barnard  v.  Stevens,  2  Eastern  R.  Co.,  E.  B.  &  E.  115 ;    Law- 

Aikins  (Vt.),  429  ;   Underwood  v.  New-  less  v.  Anglo-Egyptian  Co.,  L.  R.,  4  Q. 

port  Lyceum,  5  B.  Monr.  130  ;  Humes  B.  262;  Western  Bank,  etc.,  v.  Addie, 

V.    Knoxville,  1  Humph.  403;   Craw-  1  H.  L.  Sc.  145. 

fordsville  R.  Co.  v.  Wright,  5  Ind.  252;  ■*  Goff  v.  Great  Northern  R.  Co.,  3  E. 

Hazen  v.  Boston  R.  Co.,  2  Grav.  574  ;  &  E.  672. 

Chicago  R.  Co.   v.  Fell,   22  111.  333;  ^  Delaware  Canal  Co.  v.  The  Cora- 
Same  V.  Whipple,  id.  105  ;  Illinois  C.  monwealth,  60  Penn.  St.  367. 
R.  Co.  V.  Reedy,  17  id.  580 ;  Edwards  «  Vance  v.   Erie  R.  Co.,  32  N.  J.  L. 
V.   Union  Bank,  1  Fla.    136;    White-  334.     See,   also,  Gillett    v.    Missouri, 
man  v.  Wilmington  R.  Co.,  2  Harr.  etc.,  R.  Co.,  55  Mo.  315. 


Liability  of  CoRPORA'noNS  foe  Torts.  459 

probable  cause,  and  involves  nothing  more  than  a  wrongful  act 
intentionally  done.  To  hold  a  corporation  amenable  in  this  par- 
ticular action  is  strictly  in  accordance  with  well-settled  legal 
principles.  The  wrong  for  which  the  action  is  the  appropriate 
remedy  is  susceptible  of  being  committed  by  a  corporation  by 
means  of  its  agents  and  servants.  No  technical  difficulties  are  in 
the  way  of  the  institution  of  the  suit,  and,  at  the  trial,  the  cause 
can  be  conducted  upon  the  established  ndes  of  evidence.  To 
afford  redress  against  a  corporation  for  other  intentional  wrongs 
done  by  them,  aud  deny  it  in  this  case,  is  an  anomaly  which  can 
only  be  justified  because  of  the  interposition  of  insurmountable 
obstacles.  No  such  obstacles  stand  in  the  way  of  the  prosecution 
or  maintenance  of  the  action."  ^  The  liability  in  such  a  case  nmst 
come  within  the  rule,  that  tlie  corporation  has  directly  authorized 
it,  or  the  wrong  must  be  done  and  performed  within  the  scope  of 
the  authority  conferred  upon  the  agent,  as  w^e  have  already 
noticed  or  the  corporation  would  not  be  liable. 

OEC.  302.  Liability  of  corporations  in  case  of  the  negligence  of 
agents.  —  Corporations,  like  natural  persons,  are  liable  for  the  negli- 
gence of  their  officers,  agents  and  servants,  while  engaged  in  the 
business  of  the  corporation,  by  which  others  sustain  a  loss.  The 
general  doctrine  in  reference  to  negligence  is,  "  that  for  all  in- 
juries to  a  person,  resulting  from  the  negligence  of  another,  and 
to  which  the  party  injured  has  not,  by  his  own  act  or  negligence 
materially  contributed,  the  injured  party  may  recover  all  such 
damages  as  directly  and  naturally,  or  necessarily  flow  from  the 
negligence."  ^  Although  the  general  doctrine  is  that  the  principal 
is  not  hable  for  the  willful  and  malicious  torts  of  his  agents,  still, 
corporations  have  frequently  been  made  responsible,  where  it  would 

lOpinioQ  of  Depue,  J.,  in  Vance  v.  W.  R.  Co.,  3  B.  &  S.  106  ;  3  L.  J.  Q. 

Erie  R.  Co.,  supra.     See,  also,  Stevens  B.  67  ;  3  B.  &  S.  119.     A  negligence 

V.  Midland  R.  Co.,  10  Exch.  353;  Mer-  is  the  juridical   cause    of   an   injury, 

rill  V.  Tariff  Manuf.  Co.,  10  Conn.  384 ;  when  it   consists   of   such   an   act  or 

Jeffersonville    R.    Co.    v.    Rogers,   28  omission  on  the  part  of  a  responsible 

Ind.  1.  human  being  [or  a  corporation],  as  in 

'^  Field  on  Dam.,  §  660.     See,  also,  ordinary    natural    sequence    immedi- 

Hill.  on  Torts,  115  et  scq.  ;  Shearm.  &  ately  results  in  such  injury.     Such  in 

Redf.  on  Neg. ,  §  594  ;  Bridge  v.  Grand  fact  we  may  regard  as  the  meaning  of 

Junction  R.  Co.,  3  M.  &  VV.  244;  Ellis  the  term  '  proximate   cause,'  adopted 

V.  London,  etc.,  R.  Co.,  2  H.  &  N.  434  ;  by    Lord    Bacon,    in    his    maxims." 

26  L.  J.  Exch.  549;  Thompson  v.  N.  Whart.  on  Neg.,  §73. 


460  Private  Corporations. 

appear  that  tlie  acts  were  willful  and  malicious,  on  the  ground 
that  the  corporation  has  been  negligent  in  selecting  or  continuing 
such  agent,  knowing  his  habits  or  incompetence,  or  in  subse- 
quently either  directly  or  indirectly  approving  of,  or  indorsing  his 
conduct,  which  is  the  basis  for  the  damages  claimed.  If  the  cor- 
poration, by  its  acts,  holds  out  an  agent  as  competent  and  worthy 
of  coniidence,  in  the  performance  of  the  duties  to  which  he  is 
intrusted,  and  as  fit  to  be  trusted,  it  has  been  held  that  it  thereby 
warrants  his  fidelity,  competency,  and  good  conduct,  in  all  matters 
within  the  scope  of  his  agency.  And  as  a  general  rule  it  will 
not  be  permitted  to  set  up,  in  defense  of  an  action  for  negligence, 
the  intentional  violation  of  duty  on  the  part  of  an  agent  to  whom 
it  has  intrusted  the  performance  of  duties,  if  done  within  the 
scope  of  his  general  authority ;  and  this  rule  might  well  rest  upon 
the  familiar  equitable  doctrine,  that  where  one  of  two  parties 
must  suffer  for  a  loss  sustained,  he  should  sustain  the  loss,  who, 
by  his  conduct,  has  created  a  confidence  which  produced  or  re- 
sulted in  an  injury  or  loss. 

Sec.  303.  liimitation  of  liability  in  case  of  negligence.  —  There  IS 
a  familiar  maxim  of  the  law  that  a  party  guilty  of  a  negligence, 
by  which  loss  is  sustained,  shall  only  be  liable  for  the  proximate 
consequences  of  his  wrongful  act,  causa  proxima  et  non  remota 
spectatur.  But  this  maxim  affords  an  imperfect  guide  in  deter- 
mining the  near  or  even  remote  consequences  of  a  wrongful  act, 
for  which  the  wrong-doer  should  respond  in  damages.  It  is, 
perhaps,  impossible  to  frame  any  rule  of  universal  application  in 
cases  of  negligence,  to  determine  the  question  of  liability  on  the 
ground  of  such  negligence  as  the  proximate  cause.  ^ 

The  question  of  liability  for  losses  more  or  less  remote  has 
been  illustrated  as  follows  :  "  Suppose  through  the  negligence 
of  a  railroad  company  the  house  of  A.  near  a  railroad,  is  set  on 
fire  witliout  his  fault,  by  sparks  and  cinders  escaping  from  the 
locomotive  used  by  the  company,  and  is  consumed,  and  that  the 
adjoining  buildings  of  B.,  C.  and  D.  are  thereby,  and  without  their 

1  Field  on  Dam.,  §§  10,  48  et  seq.;  664  et  seq. 


Liability  of  Coeporations  for  Torts.  461 

fault,  successively  consumed,  is  the  company  liable  to  B.,  C.  and  D. 
respectively?  On  this  question  the  authorities  seem  very  conflict- 
ing. *  *  *  Thus,  it  has  been  held,  that  where,  through  the 
defective  condition  of  a  locomotive  of  the  defendant,  a  railroad 
company,  a  quantity  of  wood  was  ignited  in  one  of  its  sheds, 
and  the  shed  was  consumed,  and  the  fire  therefrom  set  on  fire  and 
consumed  tlie  house  of  the  plaintiff,  about  one  hundred  and 
thirty  feet  distant  from  the  shed,  the  plaintiff  could  not  recover 
of  the  company  for  the  loss  he  had  thereby  sustained.'  So,  where 
a  I'ailroad  company,  through  its  negligence,  set  fire  to  the  house 
of  another,  and  the  tire  therefrom  was  communicated  to  the  house 
of  a  third  party,  whicli  was  consumed  with  its  contents,  it  was 
held  that  the  railroad  company  was  not  liable  for  the  loss  of  the 
last  building  or  its  contents  thus  destroyed.^  *  *  *'  On  the 
other  hand,  in  several  recent  and  well-considered  cases,  it  has  been 
held  that  such  losses  may  be  recovered ;  that  such  damages  are 
not  too  remote  from  the  negligent  cause  ;  that  the  casual  connec- 
tion between  the  negligence  and  the  losses  of  the  respective  par- 
ties is  complete,  and  that  the  question  of  negligence  of  tlie  com- 
pany, and  of  the  other  parties,  should  be  submitted  to  the  jury 
under  all  the  circumstances  of  the  case.  Thus,  in  Illinois,  where 
it  appeared  that  a  locomotive,  belonging  to  the  defendant,  in 
passing  through  a  village  with  a  train  of  cars,  threw  out  great 
quantities  of  unusually  large  cinders,  which  set  on  fire  a  ware- 
house near  the  track,  the  heat  and  flames  from  which  ignited  a 
building  of  the  plaintiff,  which  was  situated  about  two  hundred 
and  fifty  feet  from  the  warehouse,  and  which  was  thereby 
destroyed  ;  it  was  held  that  the  compau}"-  was  not  exonerated 
from  liability  merely  because  the  plaintiff's  house  was  not  imme- 
diately ignited  by  cinders  thrown  from  the  locomotive,  but  by 
the  burning  of  the  warehouse  ;  that  it  was  not  a  conclusion  of 
law,  that  the  fire  sent  forth  by  the  locomotive  should  be  consid- 
ered as  the  remote  and  not  the  proximate  cause  of  injury  to  the 
plaintiff,  but  a  question  of  fact  to  be  determined  by  the  jury  un- 
der the  instructions  of  the  court. 

And  in  a  recent  case,  where  the  action  was  for  damages  caused 

'  Ryan  v.  New  York  Cent.  R.  Co.,  35         °  Pennsylvania    R.   Co.  v.   Kerr,    62 
N.  Y.  210.  Penn.  St.  353. 


462  Private  Corporations. 

by  sparks  emitted  from  the  company's  engine,  kindled  fires  in 
two  different  places  on  lands  not  belonging  to  the  plaintiff,  and 
the  two  fires  spread,  and  finally  uniting  passed  over  the  lands  of 
several  other  parties  and  fijially  reached  the  premises  of  the  plaint- 
iff, "about  four  miles  distant  from  the  point  where  it  first  started, 
and  there  destroyed  the  property  of  the  plaintiff ;  the  court  held 
that  the  loss  was  not  too  remote  to  allow  a  recovery.^  And  the 
same  doctrine  has  been  recently  maintained  in  Wisconsin/ 

Sec.  304.      Rule  in  Illinois  as  to  proximate  cause.  —  The    reasou    in 

support  of  the  decisions  on  this  question  first  above  referred  to 
are  assailed  by  Lawrence,  C.  J.,  of  the  supreme  court  of  Illinois,  as 
follows  :  "  It  has  been  held  by  this  and  various  other  courts, 
that  if  fire  is  communicated  to  the  dried  grass  of  an  adjoining 
field,  through  the  carelessness  of  the  persons  managing  a  railway 
locomotive,  and  spreads  over  the  field,  no  matter  to  what  ex- 
tent, destroying  hay  stacks,  fences  and  houses,  the  company  is 
liable.  *  *  *  But  if  these  two  decisions,  in  New  York  and 
Pennsylvania,'  are  correct  law,  it  must  be  held  that  if  fire  is  com- 
municated from  the  locomotive  to  the  field  of  A.,  and  spreads 
through  his  field  to  the  adjoining  field  of  B.,  while  A.  must  be  reim- 
bursed by  the  company,  B.  must  set  his  loss  down  as  due  to  a  re- 
mote cause,  and  suffer  in  uncomplaining  silence.  Would  there  not 
be  in  such  a  decision  a  sense  of  palpable  wrong,  which  would  shock 
the  public  conscience  and  impair  the  confidence  of  the  community 
in  the  administration  of  the  law  ? "  ^ 

1  Atchison  T.  &  S.  F.  Co.  v.  Stanford,  win,  24  E.  C.  L.  272  ;  Lynch  v.  Nurdin, 

12  Kans.  354 ;  St.  Jo.  &  D.  C.  R.  Co.  v.  41  id.  422  ;  Rigby  v.  Hewitt,  5  Exch. 

Chase,  11  id.  47.                                         '  240;    Greenland    v.   Chaplin,  id.  243; 

^  Kellogg  V.Chicago  &  N.  W.  R.  Co.,  Montoya  v.  London  Ass.  Co., 6  id.  451  ; 

26  Wis.  223.  See,  also,Periey  v.  Eastern  Ins.  Co.  v.  Tweed,  7  Wall.  44  ;  Powell 

R.  Co.,  98  Mass.  415  ;  Hart  v.  West.  R.  v.  Deveny,  3  Cush.  300  ,  Vandenburgh 

Co.,  13  Mete.  99  ;  Annapolis  &  E.  R.  Co.  v.  Truax,  4  Den.  464  ;  Hart  v.  West.  R. 

V.  Gantt,  39  Md.  115  ;  Kellogg  v.  Mil-  Co.,  13  Mete.  99  ;  Perley  v.  Eastern  R. 

waukee  &  St.  P.  R.  Co.,  Cent.  L.  J.,  Co.,  98    Mass.    414;    Cleavelanda    v. 

vol.  1,  278;  Opinions  of  Miller  and  Grand  Trunk  R.  Co., 42  Vt. 449;  Piggot 

Dillon,  JJ.,  U.   S.   C.  C,  Iowa,   May  v.  Eastern,  etc.,  R.  Co.,  54  E.  C.  L.  229  ; 

T.,  1874.  Smith  v.  The  London  &  S.  W.  R.  Co., 

3  Ryan  v.  The  New  York  Cent.  R.  L.  R.,5   C.  P.  98;  Atchison  T.   &    S. 

Co.,  35  N.  Y.  214;  and    The  Pennsyl-  F.   R.  Co.   v.   Sauford,   12  Kans.  354 

vania  R.  Co.  v.  Kerr,  62  Penn.  St.  353  (1874). 

(1869).  In  the  last  case,  which  was  an  action 

*  Fent  V.  Toledo,  P.  &  W.  R.  Co.,  59  for  damages,  for  the  negligent  setting 

111.    349    (1871).     See,    also,    Scott   v.  of  a  lire,  Valentine,  J.,  in  delivering 

Shepherd,    2  Wm.    Black.    892,    the  the  opinion  of  the  supreme  court  of 

famous  squib  case  ;  Illidge  v.   Good-  Kansas,    observes :    "  After  a   careful 


Liability  of  Corporations  for  Torts.  463 

Sec.  305.  Reason  for  rule  as  to  prosiniate  cause.  :—Tlie  reason 
for  holding  a  negligent  party  for  the  continuous,  direct  and 
natural  consequence  of  his  wrongful  act,  though  some  of  the 
losses  sustained  thereby  may,  in  respect  to  the  successive  causes 
and  effects,  be  remote  from  the  first  active  producing  cause, 
has  frequently  been  recognized  and  seems  to  be  based  upon  the 
soundest  reasoning.  It  is  true  that  the  subject  of  causation 
and  tlie  tracing  of  causes  to  results  is,  many  times,  one  of  great 
difficulty.  Every  event  is  the  result  of  certain  causes,  or  com- 
bination of  causes,  more  or  less  remote.  And  there  may  be 
great  difficulty  sometimes  in  tracing,  or  determining  the  legal 
cause  of  a  loss  sustained,  or  in  fixing  a  just  rule  of  liability  in  such 
cases.  The  law  seems  to  permit  the  tracing  back  of  the  causes  of 
an  injury  to  the  party  who  first  set  in  motion  the  dangerous 
element  which  resulted  in  the  damage.^ 

Sec.  306.  Same  continued.  —  According  to  the  reasoning  in 
some  of  the  cases,  a  party  whose  building  is  ignited  directly  by  cin- 
ders, or  fire  sent  forth  by  the  neghgence  of  the  agents  of  a  railroad 
company,  may  recover  therefor ;  but  if  the  fire  thus  caused  con- 
tinues and  burns  another's  buildings  the  company  is  not  liable,  onthe 
ground  that  the  latter  loss  is  not  the  immediate  or  proximate  result 
of  the  first  active  and  producing  cause.  But  suppose  the  building  first 

examination  of  this  question,  we  are  the  proximate  cause,  unless  some  new 
satisfied,  both  upon  reason  and  author-  causes,  independent  of  the  first  cause, 
ity,  that  the  damage  is  not  too  remote  shall  intervene  between  the  first  cause 
to  be  recovered.  We  have  already  and  the  final  injurious  result.  This  is 
decided  that  where  the  fire  has  run  equally  true  where  the  successive 
thirty  rods  from  the  place  where  it  events  are  separated  by  clearer  and 
was  first  kindled,  and  there  does  better  defined  outlines  than  they  are 
damage,  the  plaintiff  may  recover.  St.  in  the  burning  of  ])rairie  grass  or  a 
Jo.  &  D.  C.  R.  Co.  V.  Chase,ll  Kans.  stubble  field.  *  *  *  Why  should 
47.  Now,  if  the  i:)laintiff  may  recover  not  every  person,  whether  far  away  or 
when  the  fire  has  run  thirty  rods,  why  near,  recover  for  the  wrongful  acts  of 
may  he  not  recover  when  the  fire  has  another?  Even  if  it  should  bankrupt 
run  forty  rods,  or  a  mile,  or  four  miles  ?  the  wrong-doer,  would  that  be  any  rea- 
Will  it  be  claimed  that  the  ownership  son  for  not  compensating  an  innocent 
of  the  property  over  which  the  fire  sufferer?  As  a  question  of  ethics  and 
]'uns  can  make  any  difference  ?  *  *  morals,  as  well  as  of  law,  where  a 
*  The  first  efficient  and  adequate  great  loss  is  to  be  sustained  by  some- 
cause,  as  well  as  every  intermediate  body,  who  should  bear  it,  the  innocent 
cause,  necessarily  followed  from  the  or  the  guilty  ?  " 
first  cause,  is  always  held  in  law  to  be 

'See   opinioH   of   Shaw,  Ch.  J.,  in     Wm.  Black.  892  ;  Big.  L.  Cas.,  L.  T., 
Marble  v.  City  of  Worcester,  4  Gray,     note,  p.  608. 
365  ;  Scott  v.  Shepherd,  3  Wils.  403  ;  3 


464  Pkivate  Cokporations. 

ignited  by  the  carelessness  of  a  railroad  company  or  other  person 
is  one  of  a  continuous  row  of  houses  owned  by  A.,  B.,  C.  and  D.,. 
and  that  the  burning  of  the  building  of  A.,  was  througli  the  direct 
act  or  negligence  of  sucli  party,  and  that  the  destruction  of  tlie 
others  by  the  burning  of  the  first  was  unavoidable,  would  B.,  C. 
and  D.  be  deprived  of  the  right  of  recovery  on  the  ground  that 
their  loss  was  not  the  direct  or  proximate  result  of  the  wrongful 
act  of  the  railroad  company  or  its  agents  ?  Or,  suppose  that  one 
party  owns  fifty  feet  of  a  tenement,  and  another  party  owns 
another  fifty  feet  of  the  same,  would  a  destrilction  of  the  property 
of  the  former  by  the  willful  act  or  the  negligence  of  a  party,  and 
the  unavoidable  destruction  of  the  interests  of  the  latter  thereby, 
exempt  the  wrong-doer  from  liability  for  the  latter's  loss,  when  he 
in  no  manner  contributed  to  the  same  and  used  due  diligence  to 
avoid  the  loss  ?  We  think,  both  upon  the  weight  of  authority 
and  of  reason,  that  it  would  not ;  and  'that  the  liability  of  the 
wrong'-doer  in  such  a  case  would  be  the  same  to  the  latter  as  the 
former,  whether  it  was  an  act  of  willful  intention  or  of  mere  neg- 
ligence. He  should  sustain  the  loss,  who  has  set  in  motion  the 
dangerous  element,  or  been  the  active  cause  of  it. 

Sec.  307  Complications  arising  from  successive  negligence.  —  Some 
of  the  most  complicated  questions  arising  from  the  successive 
negligence  of  different  parties  have  been  presented  for  adjudica- 
tion. "Thus,  suppose  that  through  carelessness  of  a  railroad 
company,  in  not  using  a  proper  sj)ark  arrester,  sj^arks  escape  from 
its  locomotive,  which,  falling  on  dry  rubbish,  carelessly  left  by 
another  party  scattered  over  his  premises  near  the  railroad,  and, 
fanned  by  the  wind,  it  takes  fire,  and  fed  by  the  rubbish  it  is 
driven  by  the  wind  to  the  buildings  of  another  party,  which  are 
thereby  consumed,  which  party  is  liable  for  the  loss  ? "  On  this 
question  Mr.  Wharton  says  :  "  Supposing  that  had  it  not  been  for 
the  intervention  of  a  responsible  third  party,  the  defendant's  neg- 
ligence would  have  produced  no  damage  to  the  plaintiff,  is  the 
defendant  liable  to  the  plaintiff  ?  This  question  must  be  answered 
in  the  negative,  for  the  general  reason  that  causal  connection  be- 
tween negligence  and  damage  is  broken  by  the  interposition  of 
independent  responsible  human  action.     I  am  negligent  on  a  par- 


Liability  of  Corporations  for  Torts.  465 

ticular  subject-matter.  Another  person,  moving  independently, 
comes  in,  and  either  negUgently  or  maliciously  so  acts  as  to  make 
my  negligence  injurious  to  a  third  person.  If  so,  the  person  so 
intervening  acts  as  a  non-conductor,  and  insulates  my  negligence, 
so  that  I  caimot  be  sued  for  the  mischief  which  the  person  so 
intervening  directly  produces.  lie  is  the  one  who  is  liable  to  the 
person  injured.  I  may  be  liable  to  him  for  my  negligence  in 
getting  him  into  difficulty,  but  I  am  not  liable  to  others  for  the 
negligence  which  he  alone  was  the  cause  of  making  operative."  ' 
The  question  here  presented  opens  up  to  us  the  consideration 
of  the  vast  problems  of  causation.  The  chain  of  causation, 
viewed  in  the  light  of  philosophy  and  enlightened  reason,  is  end- 
less. All  events  are,  when  contemplated  in  this  light,  the  results 
of  a  combination  of  many  antecedent  causes.  In  the  language  of 
Mr.  Mill,  "  for  every  event  there  exists  some  combination  of 
objects  or  events,  some  given  combination  of  objects  and  events, 
some  given  concurrence  of  circumstances  positive  or  negative,  the 
occurrence  of  which  will  always  be  followed  by  that  phenomenon. 
We  may  not  have  found  out  what  this  concurrence  of  circum- 
stances may  be,  but  we  never  doubt  there  is  such  a  one,  and  that 
it  never  occurs  without  having  the  phenomenon  in  question  as  its 
effect  or  consequence.  *  *  *  It  is  seldom,  if  ever,  between 
a  consequent  and  one  single  antecedent  that  this  invariable 
sequence  subsists.  It  is  usually  between  a  consequent  and  the 
sum  of  several  antecedents,  the  concurrence  of  all  of  them  being 
requisite  to  produce,  that  is,  to  be  certain  of  being  followed  by 
the  consequent.  In  such  a  case  it  is  very  common  to  single  out 
one  only  of  the  antecedents  under  the  denomination  of  cause, 
calling  the  others  merely  conditions."  ' 

Sec.  308.  Rule  of  little  practical  value.— We  may  observe  that 
the  maxim  causa  proxima  et  nan  remota  sjpectatui\  which 
is  frequently  applied  as  a  maxim  to  limit  the  liability  of  parties 
for  injuries  or  losses  sustained,  is  an  imperfect  rule,  and  under 
the  decisions  of  the  courts  is  practically  disregarded  in  deter- 
mining the  limits  of  liability  for  a  wrong  done.  We  find 
the    chain    of    causation    by  successive   links   endless,    and   the 

'  Wliart.  on  Neg. ,  §  134  et  seq.  ^  1  Mill's  Logic  (2d  Lond .  ed.),  398. 

59 


466  Private  Corporations. 

limitation  of  damages  by  the  maxim  to  the  proximate  cause; 
but  we  also  find  the  courts,  disregarding  the  literal  interpre- 
tation of  the  maxim,  have  extended  the  liability  in  numerous  cases 
to  more  remote  consequences  of  a  wrong.  Is  there  a  distinction, 
as  to  approximate  cause,  between  science  and  law  ?  Is  there  prac- 
tically any  line  of  limitation  in  respect  to  the  remoteness  of  the 
consequences  of  a  wrong  for  wliich  a  wrong-doer  is  not  liable  ? 
Or  does  this  depend  upon  the  motives  of  the  wrong-doer,  or  the 
deijrec  or  character  of  the  wrong? 

Take  the  famous  Squib  case,  already  cited,  where  the  defend- 
ant threw  into  the  market  place  on  fair  day  a  squib,  which  differ- 
ent parties,  which  we  may  designate  as  A,,  B.  and  C,  caught  up, 
and  to  avoid  injury  to  themselves,  threw  away,  until  it  struck  and 
destroyed  the  eye  of  the  plaintiff.  The  whole  movement  of  the 
squib  was,  by  a  fiction  of  the  law,  or  in  a  legal  sense,  considered 
the  act  of  the  party  wlio  first  threw  it,  although,  but  for  the  acts 
of  the  other  parties,  the  loss  could  not  have  happened.  Again, 
take  the  ease  of  Atchison,  etc.,  R.  Co.  v.  Stanford, '  where  by  the 
negligence  of  a  railroad  company  sparks  emitted  from  a  locomo- 
tive of  the  railroad  company  set  fire  to  grass,  which  sjDread  over 
the  premises  of  several  parties,  and  finally  caught  and  consumed 
the  property  of  the  plaintiff,  and  where  the  court  held  that  the 
loss  was  not  too  remote,  and  that  the  railroad  company  was  liable." 

Sec.  309.  Same  continued.  —  But  a  larger  rule  ot  liability  has 
sometimes  been  recognized  in  case  of  the  willful  wrong-doing  of 
another,  than  in  case  of  mere  negligence.  Thus,  if  a  party  should 
willfully  set  fire  to  a  building,  he  would  undoubtedly  be  held  to  con- 
template all  the  damages  which  legitimately  followed  therefrom, 
and  be  responsible  for  all  damages  that  resulted  to  any  party,  how- 
ever remote  or  extended  the  result  from  the  original  act.^  And  in 
viewof  this  doctrine  we  have  heretofore  been  led  to  affirm  that  the 
rule  of  extended  liability  in  such  cases  depends  upon  the  motives  of 
the  wrong-doer,  or  the  degree  of  negligence  manifested  in  the  par- 
ticular case ;  *  that  the  subject  is  too  subtle  to  allow  any  definite  line 

1  12  Kans.  354.  3  Allison  v.  Chandler,  11  Mich.  542  ; 

2  See,  also,  Kellogg  V.  Chicago,  etc. ,  Field  on  Dam.,  §§53,  78  Mayne  on 
R.  Co.,  26  Wis.  223  ;  Parley  v.  Eastern     Dam.  25  et  seq. 

R.  Co.,  98  Mass.  415.  *  Field  on  Dam.,  § 53. 


Liability  of  Corporations  for  Torts.  467 

of  liability  to  be  drawn,'  and  that  '"  there  is  a  tendency  to  recognize 
a  rule  on  this  subject  of  liability  for  the  consequences  of  a  wrong 
somewhat  flexible  and  elastic,  varying  in  cases  of  torts,  as  we  shall 
have  occasion  to  notice  more  fully  hereafter,  with  the  motives  of 
the  wrong-doer,  and  covering  more  or  less  extended  and  remote 
consequences  depending  on  the  character,  grade  or  degree  of  the 
wrong  done."  ^  And  it  has  also  been  stated  in  a  legal  proposition 
that,  "in  cases  of  oflicious  interference  with  property,  willful 
wrongs,  frauds  or  gross  negligence,  the  liability  may  extend  to 
remote  effects  and  losses,  even  those  that  are  the  result  of  a  natu- 
ral chain  of  effects,  produced  and  caused  by  the  original  wrong." ' 

Sec.  310.  In  cases  of  the  positive  negligence  of  a  party,  where 
there  is  loss  sustained,  even  though  it  immediately  results  from 
the  passive  negligence  of  an  intervening  party,  it  seems  to  me 
more  consonant  with  principles  of  justice  to  hold  the  party 
responsible  who  set  in  motion  the  dangerous  element,  that,  al- 
though affected  by  intervening  causes,  j^roduced  the  result ;  that 
where,  except  for  the  negligence  of  an  intervening  party,  the 
loss  would  not  have  occurred,  still,  if  the  negligence  of  such 
party  would  not  have  resulted  in  any  loss,  except  for  the  positive 
and  active  negligence  or  willful  act  of  another,  who  set  in  motion 
or  was  the  active  creator  of  causes,  but  for  which  the  passive 
negligence  of  another  would  have  resulted  in  no  injury,  but  by 
which  and  through  such  negligence  or  willful  act  a  loss  finally 
results  to  another,  the  party  negligently  or  willfully  acting  or 
originally  setting  in  motion  the  cause  of  injury,  should  be  held 
responsible  for  all  the  natural,  probable  and  legitimate  conse- 
quences of  such  wrongful  act  and  especially  in  cases  of  willful  and 
intentional  wrong,  for  all  the  consequences  thereof,  however 
remote/ 

Sec.  311.  Damages  generally  in  cases  of  torts.  —  We  have  stated 
that  a  corporation  should  be  liable  to  damages  for  its  torts  the 
same  as  a  natural  person.     The  measure  of  damages  would,  of 

1  Field  on  Dam.,  g  33.  391 ;    Saxton   v.    Bacon,   31   Vt.   540 ; 

2  Field  on  Dam.,  J^  18.  West  v.  Forrest,  23  Mo.  344. 

3  McDaniel  v.  Emanuel,  2  Rich.  (S.  •»  Field  on  Dam.,  s>§  52, 53,  78  ;  Mayne 
C.)  455 ;  Strawbridg-e  v.  Turner,  9  La.  on  Dam.  25  et  seq. 

213;  Powell  v.  Salisbury,  2  Y.  &  J. 


468  Private  Corporations. 

course,  be  the  same ;  but  some  ilhistrations  of  this  subject  may 
be  beneticial  although  it  more  appropriately  belongs  to  a  treatise 
especially  devoted  to  the  law  of  damages.^ 

In  case  of  injury  to  the  person  of  another  from  the  negligence 
of  a  railroad  or  other  corporation,  to  which  the  plaintiff  did  not 
in  any  material  manner  contribute,  the  elements  of  damages  may 
be  summarized  as  follows : 

1.  Loss  of  services  during  the  time  the  injured  party  is  inca- 
pacitated.^ 

2.  Expenses  of  medical,  surgical  and  other  attendance/ 

3.  Bodily  pain  and  mental  anguish/ 

4.  Permanent  disability  which  the  jury  may  take  into  consider- 
ation in  estimating  the  present  damages/ 

5.  Exemplary  damages  where  such  are  allowable  by  the  law  of 
the  locality  where  the  trial  is  had  and  where  the  circumstances  of 
the  case  authorize  it/ 

Sec,  312.  When  injury  is  of  permanent  nature.  —  In  relation  tO 
permanent  injury  as  an  element  of  damages  it  may  be  ob- 
served that  damages  "  although  generally  limited  to  the  in- 
juiy  at  or  before  the  commencement  of  the  suit,  or  to  the 
time  of  trial,  yet  it  frequently  occurs  that  in  determining 
the  present  injury  matters  of  a  prospective  character  must 
also  be  considered,  and  particularly  where  the  injury  is  of  a  per- 
manent character,  damages  for  the  future  injury  should  be  allowed. 
Thus,  where  the  claim  was  for  breaking  a  leg,  it  was  held  proper 
to  show  the  probable  future  condition  of  the  limb  but  not  the 

'  Field  on  Damages,  chap.  20  ;  Sedg.  anofuisli  was  a  proper  element  of  ae- 
on Dam.  99  et  seq.  tual  damages. 

'^  Wade  V.  Leroy,  20  How.  34  ;  Morse  ^  Masters  v.  Warren,  27  Conn  293  ; 

V,  Auburn,  etc.,  R.  Co.,  10  Barb.  621,  Seger   v.    Barkhamstead,  22   id.    290; 

Holyoke  v.  Grand  Trunk  R.  Co.,48N.  Wade   v.    Leroy,  20  How.  34  ;  Curtis 

H.  541.  V.    Rochester,  etc.,  R.    Co.,  18  N.  Y, 

2  Peoria      Bridge       Association    v.  534. 

Loomis,    20    111.   235;    Beardsley    v.  «  vVi^ters  v.  Hannibal, etc,  R.  Co.,  39 

Swann,  4   McLean,   333,  Ransom   v.  Mo.  468  ;  Field  on  Dam., ^^^  614,  667  fit 

New  York,  etc.,  R.  Co. ,  15  N.  Y.  415  ;  seq.,  and  notes;  Mendelsohn  v.  Anaheim 

Moody  V.  Osgood, 50  Barb.  628.  Lighter  Co..  40  Cal.  657  ;  Southern  R. 

*  Ranson  v.  N.  Y.  &  Erie   R.  Co.,  15  Co.  v.  Keudrick,40  Miss.  374;  Atlantic, 

N.  Y.41o;  Curtissv.  Rochester,  etc.,R.  etc.,  R.  Co.  v.  Dunn,  19  Ohio  St.  162  ; 

Co.,  20  Barb.  282  ;  Linsley  v.  Bushnell,  Goddard  v.  Grand    T.   R.  Co.,  57  Me. 

15  Conn.  225  ;  West  v.  Forrest,  22  Mo.  202  ;  Belknap  v.  Boston,  etc.,  R.  Co.,  49 

844  ;  McKinley  v.  The  Chicatro  &    N.  N.  H.  358  ;  Caldwell  v.    N.   J.  Steam 

W.  R.  Co.,  44  Iowa,  314,  where  it  was  B.  Co.,  47  N.  Y.  283. 
held,  among  other  things,  that  mental 


Liability  of  Corporations  for  Torts. 


469 


consequences  of  a  liypothctical  second  fracture.'  In  such  a  case 
it  is  proper  also  to  consider  diiuiiiished  capacity  to  work  at  the 
plaintiffs  trade,  arising  from  the  injury."  " 

Sec.  313.  Exemplary  damages.  —  The  application  of  the  doctrine 
of  exemplary  damages  to  corporations  has  been  attended  with 
much  difficulty.  The  reason  for  allowing  them  assigned  by  its 
advocates  would  hardly  seem  applicable  to  them,  viz. :  that  of 
punishing  the  wrong-doer.  For  wrong  implies  at  least  a  mali- 
cious intent,  but  how  can  it  be  said  that  an  ideal  and  imaginary 
person  can  have  a  mind  which  cherishes  malice,  or  an  evil  or 
wrongful  intent.  The  general  rule  in  reference  to  exemplary 
damages  has  been  thus  stated :  "  For  torts,  under  circumstances 
of  great  aggravation,  the  jury,  in  addition  to  such  actual  damages 
as  they  may  iind  the  injured  party  entitled  to,  *  *  *  may 
fm'ther  allow  for  an  example  to  others  and  a  punishment  of  the 
wrong-doer,  exemplary  or   punitive  damages."  '     The  damages 


1  Lincoln  v.  Saratoga  R.Co.,23  Wend. 
425.  See,  also,  Johnson  v.  Perry,  2 
Humph.  572;  Curtiss  v.  Rochester,  etc., 
R.  Co.,  20  Barb.  282. 

^  Donell  V.  Sandford,  11  La.  Ann. 
645.  See,  also,  Filer  v.  The  N.  Y. 
Cent.  R.  Co.,  49  N.  Y.  43  ;  Toledo, 
etc.,  R.  Co.  V.  Baddeley,  54  111.  19  ; 
Frink  v.  Schroyer,  18  id.  416  ;  Slater 
V.  Rink,  id.  527  ;  Passenger  R.  Co.  v. 
Donahue,  70  Penn.  St.  119 ;  Kansas 
Pac.  R.  Co,  V.  Pointer,  9  Kans.  620  ; 
City  of  Chicago  v.  Langlass,  52  111. 
256;  Fair  v.  Lond.  &  N.  W.  R.  Co.,  21 
L.  T.  (N.  S.)  326  ;  Holyoke  v.  Railway 
Co.,  48  N.  H.  541  ;  Weisenberg  v. 
City  of  Appleton,  26  Wis.  56. 

The  same  doctrine  is  held  applicable 
to  injuries  sustained  by  the  negligence 
of  a  municipal  corporation.  Peoria 
Bridge  Assoc,  v.  Loomis,  20  111.  235  ; 
Hunt  V.  Hoyt,  id .  544  ;  Mason  v.  The 
Inhabitants'of  Ellsworth,  32  Me.  271  ; 
City  of  Ripon  v.  Bittel,  30  Wis.  614; 
Nebraska  City  v.  Campbell,  2  Black. 
590.  See,  also,  Morse  v.  Auburn  &  S. 
R.  Co.,  10  Barb.  621  ;  Rawsou  v.  N.  Y. 
&  Erie  R.  Co.,  15  N.  Y.  415  ;  Keyes 
V.  Devlin,  3  E.  D.  S.  518  ;  Bannon  v. 
Baltimore  &  0.  R.  Co.,  24  Md.  108  ; 
Seger  v.  Barkhamsted,  22  Conn.  290  ; 
Lawrence  x.  Housatonic  R.  Co.,  29 
id.   390;    Fairchilds    v.     Cal.     Stage 


Co.,  18  Cal.  599 ;  Pennsylvania  Canal 
Co.    V.    Graham,    63    Penn.    St.    290 
Smith   V.    Holcomb,    99    Mass.     552 
Holvoke  V.  Grand  T.  R.  Co.,  48  N.  H 
541  ;  Stockton  v.    Frye,    4  Gill,  406 
Matteson  v.  N.  Y.  C.  R.  Co.,  62  Barb 
364;  Smith   v.    Overby,   30    Ga.    241 
Cox    V.    Vanderkleed,    21    lud     164 
McGrew    v.    Stone,  53  Penn.  St.  436 
Ballou  V.  Farnum.ll  Allen,  73  ;  Cald 
well  V.  Murphy,  1  Duer,  233  ;  11  N.  Y 
416  ;  Kinney  v.  Crocker,   18  Wis.  74 
Hanover  R.  Co.  v.  Coyle,  55  Penn.  St. 
396;  Aaron  v.    Second  Ave.  R.  Co.,  3 
Daly,  127  ;  Aldrich  v.  Palmer,  24  Cal. 
513  ;  Wheaton  v.  North  Beach  R.  Co., 
36  id.  590  ;  Illinois  C.  R.  Co.  v.  Barron, 
5  Wall.  90  ;  Page  v.  Mitchel,  13  Mich. 
63  ;  Joslyn  v.  McAllister,  22  id.  300. 

*  Field  on  Dam.,  ^  32.  In  a  note  to 
this  section  it  is  observed  :  '  'Although 
the  author  has  felt  compelled  from  the 
preponderance  of  authority  to  thus 
state  the  rule,  he  would  also  express 
his  convictions  that  the  adoption  of  the 
doctrine  was  a  departure  from  the  true 
principles  of  the  law  of  damages  and 
of  public  policy  and  a  flaw  in  the 
structure  of  our  jurisprudence,  involv- 
ing much  controversy,  and  resulting  in 
confusion  and  uncertainty.  Nor  is  the 
doctrine  by  any  means  so  deeply  rooted 
in  the  common  law,  as  to  be  placed 


470  Private  Cokpokations. 

awarded  are  perliaps  in  most  cases  the  same  whctlicr  the  doctrine 
of  exemplary  damages  as  advocated  by  Mr.  Sedgwick,  or  the  doc- 
trine of  actual  damages  as  maintained  by  Mr.  Greenleaf,  be 
adopted. ' 

Sec.  314.  Same  continued.  —  According  to  the  doctrine  of  actual 
damages  only,  tlie  rule  adopted  would  give  adequate  damages,  not 
only  for  those  pecuniary  losses  sustained  which  may  be  capable  of  a 
certain  and  definite  pecuniary  estimate,  such  as  loss  of  time,  clothing, 
and  expenses  of  medical  and  other  attendance,  necessarily  sustained 
and  incurred  by  reason  of  the  wrong  of  the  defendant,  but  also 
for  those  other  indefinite  and  uncertain  damages  not  capable  of 
definite  pecuniary  estimate,  such  as  injury  to  the  person,  mental 
agony,  lacerated  feelings,  disappointed  hopes,  and  paternal  affec- 
tions. These  elements  of  damages  also  usually  enter  into  the 
estimate  and  determine  the  amount  of  exemplary  damages  allowed 
by  them.  The  general  result,  therefore,  may  be  practically  the 
same  ;  or  we  may  say,  in  the  language  of  Mr.  Justice  Cole  : 
"  The  controversy  on  this  subject  between  Prof.  Greenleaf  and 
Mr.  Sedgwick  may,  perhaps,  after  all  the  attention  and  discussion 
it  has  excited,  be  found  to  be  a  controvers}^  as  to  the  terminology 
of  the  law  rather  than  as  to  the  extent  of  the  right  of  recovery 
or  the  real  measure  of  damages.  Prof.  Greenleaf  holds  that, 
while  the  plaintiff  can  only  recover  compensation,  he  is  not  con- 
fined to  the  proof  of  actual  pecuniary  loss,  but  that  the  jury  may 
take  into  consideration  every  circumstance  of  the  act  which  injuri- 
ously affected  the  plaintiff  not  only  in  his  property  but  in  his  per- 
son, in  his  peace  of  mind,  his  quiet  and  sense  of  security  in  the 
enjoyment  of  his  rights  ;  in  short,  his  happiness.  But  it  must 
affect  his  happiness  and  not  his  neighbor's ;  and  therefore  to  this 
question  alone  the  jury  should  be  restricted.  While  Mr.  Sedg- 
wick holds  that  "  wherever  the  elements  of  fraud,  malice,  gross 
negligence  or  oppression  mingle  in  the  controversy,  the  law^, 
instead  of  adhering  to  the  system  or  even  the  language  of  com- 

beyond  the  bounds  of  controversy."  id.,  ^§  73,  74,76,77.  See,  also.  Fay 
Field  on  Dam.,  §  83,  note  1.     See,  also,     v.  Parker,  53  N.  H.  342. 

'  See  Sedg.  on  Dam.  (3d  ed.)  Appendix  and  note  ;  2  Qreenl.  on  Ev.,  ^S  266, 
267 ;  Field  on  Uam.,  §§  26,  73,  74,  76. 


1 


Liability  of  Coeporations  for  Torts.  471 

pensation,  adopts  a  wholly  different  rule.  It  permits  the  jury  to 
give  what  it  terms  punitory,  vindictive,  or  exemplary  damages  ; 
in  other  words,  blends  together  the  interests  of  society  and  the 
aggrieved  individual,  and  gives  damages,  not  only  to  recomnense 
the  sufferer,  but  to  punish  the  offender."  ^ 

Sec.  315.  Application  of  the  doctrine  to  private  corporations. —  We 
have  already  intimated  that  the  doctrine  of  exemplary  damages 
loses  much  of  its  force  when  it  is  sought  to  apply  it  to  corpora- 
tions ;  for  as  corporate  acts,  whether  tortious  or  otherwise,  must 
be  done  by  agents,  and  the  corporate  body  is  but  an  imaginary  one, 
without  a  physical  or  mental  organization,  it  is  a  mere  fiction  of 
the  law  which  supposes  them  capable  of  a  wrongful  intent.  But, 
notwithstanding  this,  they  are  frequently  held  liable  in  a  civil 
action,  like  natural  persons,  for  the  negligence  and  even  for  the 
wanton  and  malicious  acts  of  their  servants  or  agents,  when  com- 
mitted in  the  line  of  their  employment  or  within  the  scope  of 
their  duty. 

Great  extremes  of  views  are,  however,  held  by  various  decis- 
ions on  the  question  of  liability  of  coi-porations  for  exemplary 
damages.  But  many  cases  which  have  been  assumed  to  sustain 
the  doctrine  are  not  clear  as  to  the  true  basis  of  damages  in  such 
cases ;  and  if  it  is  evident  that  some  of  them  rest  upon  the  gross 
negligence  of  the  agents  or  persons  that  may  be  held  to  represent 
the  corporation  in  employing,  or  knowingly  continuing  incompe- 
tent agents  in  their  employment,  and  the  liability  in  some  cases 
is  made  to  rest  upon  grounds  of  public  policy.^ 

In  others,  the  right  to  exemplary  damages  rests  upon  some 
positive  direction  or  authority  of  the  company,  or  upon  some 
su])sequent  indorsement  or  approval  of  the  acts  of  the  agent,'  and 
in  others  the  doctrine  is  held  to  be  applicable,  even  where  the 
tort  is  neither  authorized  nor  ratified,  as,  unlike  natural  persons, 
corporations  can  be  subject  to  no  other  corrective  influence  than 
pecuniary  loss.* 

'  Hendrickson  v.  Kingsbury, 31  Iowa,  well  v.  N.  J.  Steamboat  Co.,  47  N.  Y. 

379.  282  ;  Hagan  v.  Providence  R  Co.,  3  R. 

''  Field  on  Dam.,  §  87  ;  Sbearm.  &  I.  88  ;  Belknap  v.  Boston,  etc.,  R.  Co., 

Redf.  on  Neg.,  $§  60D,  601,  and  notes.  49  N.  H.  358. 

3  Field  on  Dam.,  §  85  et  seq. ;  Cald-  ■*  Field  on  Dam..  §  85. 


472  Private  Corporations. 

Sec.  316.  Extreme  doctrine  of  liability  for  exemplary  damages. — 
The  application  of  rules  relating  both  to  ordinary  and  exemplary 
damages  against  eoi'porations  are  most  common  in  case  of  the  negli- 
gence of  the  servants  and  agents  of  railroad  corporations.  Their 
servants  and  agents  are  generally  very  numerous,  and  their  duties 
are  frequently  important,  and  require  the  exercise  of  much  care 
and  judgment. 

In  a  recent  case  in  Maine,  where  a  brakeman  grossly  insulted  a 
passenger,  and  the  railroad  company  was  sued  therefor,  the 
supreme  court  of  that  state  held  the  following  extreme  doctrine 
on  this  subject :  "  We  confess  that  it  seems  to  us  that  there  is 
no  class  of  cases  where  the  doctrine  of  exemplary  damages  can  be 
more  beneficially  applied  than  to  railroad  coi-porations,  in  their 
capacity  of  common  carriers  of  passengers,  and  might  as  well  not 
be  applied  to  them  at  all,  as  to  limit  its  application  to  cases  where 
the  servant  is  directly  or  impliedly  commanded  by  the  corporation 
to  maltreat  and  insult  a  passenger,  or  to  cases  where  such  an  act 
is  directly  or  impliedly  ratified,  for  no  such  cases  will  ever  occur. 
A  corporation  is  an  imaginary  being.  It  has  no  mind  but  the 
mind  of  its  servants.  All  of  its  schemes  of  mischief,  as  well  as 
its  schemes  of  public  enterprise,  are  conceived  by  human  minds, 
executed  by  human  hands ;  and  these  minds  and  hands  are  its  ser- 
vants' minds  and  hands.  All  attempts,  therefore,  to  distinguish 
between  the  guilt  of  the  servant  and  the  guilt  of  the  corporation, 
or  the  malice  of  the  servant  and  the  malice  of  the  corporation,  or 
the  punishment  of  the  servant  and  the  punishment  of  the  corpo- 
ration, is  sheer  nonsense,  and  only  tends  to  confuse  the  mind  and 
confound  the  judgment.  Neither  guilt,  malice,  nor  suffering,  is 
predicable  of  this  ideal  existence  called  a  corporation.  And  yet, 
under  cover  of  its  name  and  authority,  there  is  as  much  that  is 
deserving  of  punishment  as  can  be  found  anywhere  else.  And 
since  these  ideal  existences  can  neither  be  hung,  imprisoned, 
whipped,  or  put  in  the  stocks  —  since  no  coercive  influence  can  be 
brought  to  bear  upon  them  except  that  of  pecuniary  loss  —  it  does 
seem  to  us  that  the  doctrine  of  exemplary  damages  is  more  bene- 
ficial in  its  application  to  them  than  in  its  application  to  natural 
persons."  ^ 

1  Walton,  J.,  in  Goddard  v.  Grand  road  Co.  v.  Hurst,  36  Miss.  660 ;  Ptail- 
T.  R.  Co.,  57  Me.  202.     See,  also.  Rail-     road  Co.  v.  Blocher,  27  Md.  277. 


Liability  of  Corporations  for  Torts.  473 

But  the  weight  of  authority,  in  order  to  hold  the  corporation 
liable  for  exeuiplary  or  punitive  damages,  would  seem  to  require 
that  the  corporation  either  consent  to,  or  authorize,  or  ratify 
the  tort  of  the  servant ;  the  same  as  would  be  required,  if  the 
wrong  were  done  by  a  natural  person,  in  order  to  visit  on  him 
exemplary  damages.'  Why  punish  the  principal,  who  has  not 
done  the  injury,  or  had  any  such  purpose,  and  is  personally  free 
from  fault;  and  especially  where  there  are  no  circumstances  indi- 
cating any  want  of  care,  or  any  negligence  in  fact  on  his  part." 
But  it  has  been  held  that  the  corporation  may  be  guilty  of  gross 
negligence,  so  as  to  authorize  the  imposition  of  exemplary  damages 
where  it  knowingly  permits  an  incompetent  or  unfit  agent  to  con- 
tinue in  the  business  of  the  corporation,  and  where  the  injury, 
coming  within  the  class  of  cases  that  authorizes  exemplary  dam- 
ages, was  the  result  of  such  incompetence  and  unfitness.'  In 
the  case  of  Goddard  v.  Grand  Trunk  R.  Co.,  the  decision  might 
perhaps  have  rested  upon  the  doctrine  of  indorsement  of  the  acts 
of  the  agent.''  On  this  subject  the  court  of  appeals  of  New  York 
observe  :  "  For  injuries  by  the  negligence  of  a  servant,  while 
engaged  in  the  business  of  the  master,  within  the  scope  of  his 
employment,  the  latter  is  liable  for  compensatory  damages  ;  but 
for  such  negligence,  however  gross  or  culpable,  he  is  not  liable  to 
be  punished  in  punitive  damages,  unless  he  is  also  chargeable 
with  gross  misconduct.  Such  misconduct  may  be  established  by 
showing  that  the  act  of  the  servant  was  authorized  or  ratified,  or 
that  the  master  employed  or  retained  the  servant,  knowing  that 


•Caldwell  v.  New  Jersey  Steamboat  Co.,  49  N.  H.  358;  Bowler  v.  Lane,  3 

Co.,  47  N.   Y.  282;    Mendelsohn   v.  Mete.  (Ky.)  311. 

Anaheim   Lighter  Co. ,   40   Cal.   657  ;  ^  Field  on  Damages,  g  86  ;  Shearm. 

Turner  v.  North  Beach  R.  Co.,  34  id.  &  Redf.  on  Neg.,  §  601. 

594  ;  Hill  V.  N.  0.,  etc.,  R.  Co.,   11  ^Id.     See,  also,  Shearm.  &  Redf.  on 

La.    Ann.    292;    Milwaukee,  etc.,  R.  Negl.,  g^  600.  601,  and  notes. 

Co.  V.  Finney,  10  Wis.  388;  Boulard  ^See   Field   on    Damages,  §  87  and 

V.  Calhoun,  13  La.  Ann.  445  ;  Hagan  notes.      In  a  more  recent  and  a  more 

V.    Providence    R.    Co.,    3    R.    I.    88;  temperate  opinion,  the  same  learned 

Evansville,  etc.,   R.  Co.  v.  Baura,  26  judge  maintains  the  views  expressed 

lud.  70;   Clark  v.    Newsam,  1   Exch.  in  Goddard  v.  Grand  T.  R.  Co.,  supra. 

131  ;  Ackerson  v.  Erie  R.  Co.,  32  N.  J.  See  opinion  Walton,  J.,  in  Hanson  v. 

L.  254  :  Belknap  v.  Boston,  etc.,  R,  Railroad  Co.,  62 Me.  84. 

60 


474  Private  Corporations. 

he  was  incompetent,  or  from  bad  habits,  unfit  for  the  position  he 
occupied.'-  ^ 

Sec.  317.  Gross  negligence  which  authorizes  exemplary  damages.  — 
In  order  to  authoiizc  exemplary  damages  for  negligence  under 
any  circumstances,  the  negligence  should  be  very  flagrant  and  cul- 
pable, or  the  circumstances  must  show  a  very  reckless  indifference 
to  duty  or  utter  want  of  regard  for  persons  or  their  property, 
from  which  it  has  been  held  that  malice  may  be  well  inferred  or 
imputed  to  the  defendant.'^  Mere  gross  negligence  is  held  not  to 
be  sufficient  to  warrant  exemplary  damages,  even  where  the  gen- 
eral doctrine  is  recognized  ;  but  the  negligence  must  be  so  gross 
as  to  raise  a  presumption  that  the  party  in  fault  is  conscious  of 
the  probable  consequences  of  his  negligence  or  carelessness,  and 
is  indifferent  to  the  injury  likely  to  follow.'  And  the  corporation 
cannot  in  any  case  be  liable  for  punitive  damages  for  the  acts  of 
an  agent  where  the  agent  liim.self  would  not  be  liable,  were  the 
suit  brought  against  the  agent  himself,* 

Sec.  318.    inconsistency  of  the  rule  in  its  application  to  corporations.  — 

The  difficulty  and  inconsistency,  if  not  the  absurdity  of  the  appli- 
cation of  the  doctrine  of  exemplary  damages,  especially  to  cor- 
porations, has  been  frequently  referred  to  and  maintained  by  the 

'Clegliorn  v.  N.   Y.  Cpnt.,  etc.,  R.  etc.,  R.  Co.,  56  N.  Y.  44;  Caldwell  v. 

Co..  56  N.  Y.  44.  N.  J.  Steamboat  R.  Co.,  47  id.  296. 

^  Field   on   Dam.,    §84.     See,  also,  ''Ackerson  v.  Erie  R.  Co.,  3  Vroom, 

Welch    V.    Durand,    36    Conn.     182;  254  ;  Hamilton  v.  Third  Ave.  R.  Co.,  53 

Walker  V.  Erie  R.  Co.,  63  Barb.  260;  N.  Y.  25  ;  Townsend    v.  N.  Y.  Cent. 

Farwell  v.  Warren,  51  111.  467  ;  Green  R.  Co.,  56  id.  295.     See,  also,  further 

V.  Craig,  47  Mo.   90;    New   Orleans,  on  the  subject  of  corporate  liability  for 

etc.,  R.  Co.  V.  Statham,  42  Miss.  607;  exemplary  damages,  Hopkins  v.  A.  & 

Picket  V.  Crook,  20  Wis.  358  ;  Holvoke  St.  R.  Co. ,  36  N.  H.  9  :  Taylor  v.  Rail- 

V.  Grand  Trunk  R.  Co.,  48 N.  H.  544.  way  Co.,  48  id.  304  ;  Bannon  v.  Balti- 

3  Wallace  v.  Mayor,  etc.,  2  Hilt.  440;  more,  etc.,  R.  Co. ,  24  Md.  108  ;  Balti- 

Heil  V.   Glanding,  42  Penu.  St.   493  ;  more,  etc.,   R.  Co.  v.   Blocher,  27  id. 

Caldwell    v.    New    Jersey   Steamboat  277  ;  Vicksburg,  etc.,  R.  Co.  v.  Patton, 

Co.,  47  N.  Y.  282 ;  Cochrane  v.  Miller,  31  Miss.  156  ;  New  Orleans,  etc. ,  R. 

13  Iowa,  128  ;  Brannon  v.  Baltimore  R.  Co.  v.  Hurst,  36  id.  660  ;  Hill  v.  New 

Co.,  47  N.  Y.  280  :  Vicksburg  Railroad  Orleans,  etc.,  R.  Co.,  11  La.  Ann.  445  ; 

Co.  V.  Fatton,  31  Miss.  156.     See,  also,  Jeffersonville,  etc.,  R.  Co.  v.  Rogers, 

the  English  cases,  Emblen  v.  Myers,  6  38  Ind.  116  ;    Atlantic,  etc.,  R.  Co.  v. 

H.  &  N.  54  ;    3  L.  J.   Exch.71  ;  Bell  Dunn,  19  Ohio  St.   162  ;  Frink  v.  Coe, 

V.  Midland,  etc.,  R.  Co.,  9  W.  R.  612 ;  4  Greene  (Iowa).  555  ;  Perkins  v.  Mis- 

10  C.  B.  (N.  S.)  287  ;  3  L.  J.  C.  P.  73.  souri,  etc. ,  R.  Co.,  55  xMo.  201  ;  Sedg. 

See,  also,    Cleghorn  v.   N.   Y.  Cent.,  on  Dam.  SCiQetseq. 


Liability  of  Corporations  for  Torts.  475 

most  conclusive  reasoning.  The  doctrine  is  based  upon  the  sup- 
position of  willful  wrong,  or  wicked  intention.  It  supposes  the 
purpose  to  do  wrong.  And  the  ground  for  the  infliction  of  ex- 
emplary damages  is  in  the  nature  of  a  punishment  for  that  wrong, 
and  also  to  thereby  afford  an  example  to  others.  But  how  can  a 
corporation  be  guilty  of  a  moral  wrong  ?  And  on  what  princi- 
ple can  a  corporation  be  held  for  exemplary  damages  for  the 
moral  wrongs  of  its  servant  to  which  it  has  in  no  way  contrib- 
uted, nor  of  which  it  has  in  no  manner  approved?  In  the  able 
dissenting  opinion  of  Mr.  Justice  Tapley,  in  Goddard  v.  Grand 
Railroad  Company  (from  which  we  have  already  quoted  from 
the  opinion  of  the  majority  of  the  court,  as  given  by  Mr.  Jus- 
tice Walton),  he  observes :  "  The  theory  of  punitive  dam- 
ages is  the  infliction  of  a  punishment  for  an  offense  commit- 
ted. It  presupposes  the  existence  of  a  moral  wrong,  an  infraction 
of  the  moral  code  ;  a  wrong  in  which  the  community  has  some 
interest  in  the  redress  and  in  securing  immunity  from  in  the 
future.  It  presupposes  also  an  offender,  and  designs  to  punish 
that  offender.  To  punish  one  not  an  offender  is  against  the  whole 
theory,  policy  and  practice  of  the  law  and  its  administration. 
*  *  *  The  idea  of  punishing  one  who  is  not  particeps 
criminis  in  the  wrong  done  is  so  entirely  devoid  of  the  first 
principles  and  fundamental  elements  of  the  law,  that  it  can 
never  find  place  among  the  rules  of  action  in  an  intelligent 
community."  ' 

The  absurdity  thus  presented  and,  in  fact,  the  apparent  want 
of  foundation  of  the  doctrine  on  any  sound  principle,  has  recently 
led  to  full  and  exhaustive  consideration  of  the  whole  subject ;  and 
in  a  recent  case  in  ]!^ew  Hampshire,  where  there  had  been  an 
apparent  if  not  a  complete  recognition  of  the  doctrine,  the 
supreme  court  of  that  State  entirely  repudiated  it,  as  unsound 
in  principle  and  entirely  unnecessary  in  the  measm-e  of 
adequate  damages,  even  in  cases  of  the  most  aggravated  torts. 

OEC.   ol9.      Recent  examination  of  the  doctrine  of  exemplsiry  damages. 

—  In  the  case  above  referred  to,  there  was  a  critical  examination 
of  this  doctrine  and  a  review  of  the  authorities  beai-ing  upon  it, 

'  See  dissenting  opinion  of  Tapley,  J.,  in  Goddard  v.  Grand  Trunk  R.  Co., 
57  Me.  203. 


476  Private  Coepoeations. 

and  Mr.  Justice  Nelson,  wlio  delivci-ed  the  opinion,  observes  : 
"  Perhaps  it  would  not  be  erroneous  to  say  that  the  question  has 
not  been  thoroughly  examined  and  very  carefully  considered,  but 
it  has  been  suffered  to  lean  upon  and  sustain  itself  by  the  sup- 
posed weight  of  authorit}',  rather  than  to  stand  upon  principle 
and  inherent  strength.  At  any  rate,  in  view  of  the  more  recent 
cases,  wholly  contradicting  and  irreconcilable  as  we  have  seen 
them  to  be,  *  *  *  we  are  constrained  to  adopt  the  language 
of  Judge  Gushing,  in  Symonds  v.  Carter,  ^  and  to  say,  *  *  * 
'  The  doctrine  in  regard  to  vindictive  damages  seems  to  be  now  in 
such  an  unsettled  condition  as  to  justify  and  call  for  an  examina- 
tion of  the  authorities.'  "  "^  And  after  a  review  of  various  authori- 
ties supposed  to  sustain  the  doctrine,  he  proceeds  to  observe  : 
"  This  review  of  some  of  the  prominent  cases  touching  the  sub- 
ject under  consideration,  it  seems  to  me,  must  compel  the  conclu- 
sion which  has  already  been  indicated,  that  the  modern  erroneous 
idea  of  exemplary  damages  originated  in,  and  is,  in  fact,  the  same 
thing  as  damages  for  wounded  feelings,  as  distinguished  from 
damages  for  an  injury  to  the  person  or  property.  Damages  for 
lacerated  sensibilities,  insulted  honor,  tyrannical  oppression,  and  so 
forth,  being  much  emphasized,  and  often  being  the  principal 
damage  suffered  by  the  plaintiff,  and  language  being  loosely  used 
and  not  preserving  the  true  distinction  carefully,  or  intemperately 
used,  in  the  heat  of  indignation,  which  judges  often  felt  and 
could  not  repress  while  contemplating  an  enormous  outrage,  it 
finally  came  to  be  understood  that  damages  might  be  given  in  a 
civil  suit,  as  a  punishment  for  an  offense  against  the  public,  an 
idea  that  is  certainly  not  plainly  declared  (as  I  think  I  have  un- 
mistakably shown)  in  the  early  cases.  *  *  *  The  result  is, 
that  the  wholesale  doctiine  of  damages  for  mental  pain  and 
wounded  feeling,  expressed  in  inconsiderate  language  vehemently 
announced,  under  circumstances  and  on  occasions  of  judicial 
anger,  irritation  and  excitement,  has  come  to  be  misunderstood 
and  mistaken  for  the  doctrine  of  punitive  damages,  when,  in  fact, 
it  is  but  a  branch  of  the  law  of  compensatory  damages.  *  *  * 
Thus,  the  doctrine  of  compensation  for  the  plaintiff  has  become 
the  doctrine  of    punishment  for  the  defendant,  importing  into 

'  32  N.  H.  458.  •'  Fay  v.  Parker,  53  N.  H.  342. 


Liability  of  Corporations  for  Torts.  477 

civil  suits  that  punishment  which  still  remains  in  criminal  proced- 
ure ;  and  so,  unfairly  and  unconstitutionally,  as  well  as  illogically, 
punishing  an  ofiender  twice  for  the  same  crime.  *  *  '"  What 
is  civ'il  remedy  but  reparation  for  the  wrong  inflicted  to  the  injury 
of  the  party  seeking  redress,  compensation  for  damages  sustained 
by  the  plaintiff  ?  How  could  the  idea  of  punishment  be  deliber- 
ately and  designedly  installed  as  a  doctrine  of  civil  remedies  ? 
Is  not  punishment  out  of  place,  irregular,  anomalous,  exceptional, 
unjust,  unscientific,  not  to  say  absurd  and  ridiculous,  when  classed 
among  civil  remedies?  What  kind  of  a  civil  remedy  for  the 
plaintiff  is  the  punishment  of  the  defendant  ?  The  idea  is  wrong. 
It  is  monstrous  heresy.  It  is  an  unsightly  and  an  unhealthy 
excrescence,  deforming  the  symmetry  of  the  body  of  the  law."  ^ 

Sec.  320.  The  conclusions,  in  the  opinion  of  the  court  in  the 
case  last  referred  to,  are  strongly  supported  by  the  doctrines,  and 
the  principles  and  elements  of  damages,  announced  by  the  early 
writers.  It  was,  for  instance,  affirmed  by  Mr.  Rutherford,  over 
a  hundred  years  ago,  that  damages  was  every  loss  or  diminution 
of  what  was  a  man's  own,  occasioned  by  the  fault  of  another ; 
that  a  loss  or  diminution  of  a  man's  right  to  life,  limbs,  liberty, 
character  and  reputation,  through  the  fault  of  another,  gives  him 
a  right  to  demand  reparation  from  him  by  whose  fault  they  have 
been  lost  or  diminished ;  that  the  person  who  has  been  maimed  has  a 
right  to  enjoy  the  freedom  from  pain  thus  caused,  and  that  he 
has  a  right  to  demand  smart  money,  that  is,  indemnity  in  money 
for  the  smarts  or  pains  caused  by  such  wrongful  act ;  that  he 
should  be  entitled  to  recover  such  money,  for  blemishes  which 
remain  after  the  original  smart  or  pain  is  over ;  that  if  a  person 
has  been  wounded  without  cause,  he  should  recover,  not  only  for 
the  loss  of  time  and  expense  of  cure,  but  for  the  pain  he  has  felt ; 
that  if  he  has  been  beaten,  but  has  sustained  no  loss  of  time,  or 
incurred  no  expense  thereby,  he  is  still  entitled  to  recover  smart 
money,  or  satisfaction  for  the  pain  he  has  suffered  ;  and  that,  if  he 
has  been  unlawfully  imprisoned,  "  the  mere  uneasiness  ai'ising 
from  the  situation  under  which  he  may  include  the  disgrace  at- 
tendino;  it  is  a  damao-e  to  him."  ^ 

1  Fay  V.  Parker,  53  N.  H.  343.  -  See  Rutherford's  Ins.,  B.  l,chap.  17, 

§§1,10. 


478  Private  Corporations. 

Sec.  321.  The  term  '■^  smart  money  "  has  frequently  been  used 
in  modern  decisions  as  synonymous  with  exemphiry  or  punitive 
damages  ;  and  to  indicate  damages  given  to  punisli  the  offender^ 
and  as  an  example  to  others.  But  referring  to  the  meaning  con- 
veyed by  the  term  ''^  smart  money ^''  as  used  by  Mr.  Rutherford, 
we  formerly  observed :  "  We  may  here  discover  tlie  origin  of  the 
term  "  smart  Tnoney^''  which  was  evidently  used  in  England  over 
a  hundred  years  ago,  and  especially  by  this  distinguished  author, 
in  a  different  legal  sense  from  the  one  now  conveyed  by  its  use, 
in  connection  with  damages.  It  was  then  used  to  convey  the  idea 
of  mere  compensation  for  suffering  or  smarts^  physical  or  mental, 
which  an  injured  person  suffered,  and  not  to  indicate  a  punish- 
ment of  the  wrong-doer,  neither  to  make  him  smart  for  his  wrong 
done,  nor  to  deter  others  from  a  repetition  of  similar  wrongs. 
The  doctrine,  even  in  cases  of  aggravated  wrongs,  was  that  of 
reparation  and  compensation,  and  no't  that  of  punishment  or 
example."  ^ 

Sec.  322.  Conflict  growing  out  of  the  diverse  rvdes.  —  Considerable 
conflict  and  inharmony  has  resulted  in  the  adoption  of  different 
views  and  rules  for  the  measure  of  damages.  On  the  grounds 
and  for  the  reasons  to  which  we  have  referred,  against  the  appli- 
cation of  the  doctrine  of  exemplary  damages,  in  general,  its  appli- 
cation to  corporations  seems  unnecessary.  And  the  rejection  of 
mental  suffering,  resulting  from  indignity  to  the  person  or  outrage, 
under  circumstances  of  aggravation,  as  an  element  of  actual  damages 
presents  the  strange  anomaly  of  the  possibility  of  the  most  intense 
and  protracted  mental  suffering,  caused  by  the  wrongful  act  of  an- 
other, without  any  remedy  therefor.  But  where  the  doctrine  of 
mere  compensation  for  the  losses  sustained  is  only  recognized,  this 
is  extended  to  cover  all  those  results  of  injury,  and  incidental  losses, 
such  as  injury  to  the  feelings  and  affections,  wounded  pride,  mental 
agony  and  suffering,  which  are  not  susceptible  of  any  exact  pecun- 
iary estimate  ;  and  which,  where  the  doctrine  of  exemplary  damages 
is  recognized,  is  usually  covered  in  a  general  way  by  an  allowance 
of  exemplary  damages,  notwithstanding  the  jurors  in  estimating 

>  Field   on   Dam.,  §   74.     See,  also,     447  ;  McKinley  v.  The  Chicago  &  N. 
Detroit  Post  Co.  v.  Mc  Arthur,  16  Mich.     W.  R.  Co.,  44  Iowa    [not  published]. 


Liability  of  Corporations  for  Torts.  479 

these,  in  fact,  take  into  consideration  all  the  circumstances  of 
aggravation  and  suffering,  in  determining  the  proper  amount  of 
them. 

After  some  controversy  and  confusion  in  relation  to  this  mat- 
ter, there  seems,  however,  to  be  a  tendency  of  the  courts,  even 
where  the  doctrine  of  exemplary  damages  is  recognized,  to  allow 
mental  suffering  as  an  element  of  actual  damage.^ 

Sec.  323.  Damages  for  injuries  resulting  in  death.  —  The  generally 
recognized  common-law  doctrine,  that  although  a  party  miglit  re- 
cover full  compensation  at  least  for  an  injury  to  his  person,  still,  if 
the  injury  was  so  severe  that  death  ensued,  nothing  could  be  recov- 
ered, has  recently  been  assailed  as  based  npon  a  mere  dictum  of 
Lord  Ellenborough,  and  as  unfounded  in  reason." 

But  not  only  in  England,  but  in  the  various  states,  there  are 
statutes  providing  that  actions  may  be  maintained  by  the  repre- 
sentatives of  deceased  persons,  for  damages  sustained  by  the 
widow,  next  of  kin,  or  estate  of  the  deceased,  or  some  of  them,  by 
reason  of  the  wrongful  act  of  the  defendant  producing  the 
death.^  Under  these  statutes  there  hav^e  been,  on  varions  impor- 
tant questions,  presented  for  adjudication  a  great  uniformity  in  the 
decisions.  For  instance,  in  the  absence  of  special  statutory  regu- 
lations on  the  subject  contained  in  these  statutes,  it  has  uniformly 
been  held  that  only  actual  and  not  exemplary  damages  can  be 
recovered ;  that  nothing  can  be  recovered  for  the  physical  or 
mental  sufferings  of  the  deceased,  or  for  the  sorrow,  suffering  or 
grief  of  the  parties  entitled  to  the  benefit  of  the  statutes  ;  *  that 

'  See  McKinleyv.  The  Chic.  &N.W.  &   N.   653;  S.  C,   Franklin   v.    S.  E. 

R.  Co.,  44  Iowa  [not  published];  Fay  v.  Railway  Co.,  3  H.  &  N.  311  ;  Blake  v. 

Parker,  supra.  Mid.  R.   Co.,  18  Q.  B.  93  ;  Gillard  v. 

'■'See   opinion   of   Lord   Ellenbor-  The  Lancashire,  etc.,  R,  Co.,  13  L.  T. 

OUGH,  in  Baker  v.  Bolton,  1  Camp. 498.  356. 

See  opposing  views, Dillon,  J., in  Sulli-  For  decisions  under  various  statutes 

van  v.UnionP.  R.Co.,3  Dillon, ;J34,  U.S.  of  the  states  see  Pennsylvania,  etc.,  R. 

C.  C.,Dist.  Neb..  Oct.  T.,1874;  1  Cent.  Co.  v.  McCloskey,  38  Penn.  St.  536; 

L.  J.  595  ;  Jones  v.  Perry,  3  Esp.  483:  Same  v.  Zebe,33  id.  318;  Same  v.Kelly, 

Cross  V.  Guthrey,  3   Root  (Conn.),  90.  31   id.  373  ;  Same  v.  Vandever,  36  id. 

Also  discussions  in  1  Cent.  L.  J.  590,  398;  Same  v.  Henderson,  51  id.  315; 

614,  633;  Field  on  Dam.,  §  626.  North   Pennsylvania  R.  Co.  v.  Robin- 

^  For  copies  of  the   various  statutes  son,  44  id.  175  ;  Cleveland,  etc.,  R.  Co. 

relating  to  this   subject,  see  Field  on  v.   Rowan,    66   id.   393;  Whitford  v. 

Dam.,  gi^  337,  338,  399  and  notes.  Panama  R.  Co.,  23  N.  Y.  465  ;  Quinv. 

''See    decisions   under  the    English  Moore,  15  id.  433  ;  Mclntyre  v.  N.  Y. 

statutes,  Duckworth  v,  Johnson,  4  H.  Cent.  R.  Co.,  47  Barb.  515;  Lehman 


480  Private  Corporations. 

damages  can  only  embrace  those  matters  that  are  the  sonrce  of 
pecuniary  injury  to  tlie  persons  for  wiiose  benelit  the  statutes  were 
intended,  but  that  the  jury  have  great  latitude  in  estimating  such 
damages ; '  that  nothing  can  be  allowed  by  way  of  solatium  for 
grief  or  loss  of  society  ;  ^  and  that  the  jury  cannot  consider,  in  an 
action  for  the  death  of  a  wife,  the  loss  of  her  society,  or  the  hus- 
band's mental  suffering,  as  an  element  of  damages.* 

Sec.  324.  Elements  of  damages  in  case  of  death;  what  it  is  compe- 
tent to  show.  —  In  case  of  liability  under  the  statutes  for  the  death 
of  a  person,  it  has  been  held  that  it  was  competent  to  show  the 
value  of  the  life  of  the  deceased  to  the  parties  entitled  to  recover 
therefor ;  *  the  loss  of  personal  care  and  training,  and  intellectual 
and  moral  culture  which  would  have  been  received  had  the 
deceased  lived;  "the  exact  situation,  annual  earnings,  habits, 
health  and  estate  of  the  deceased ;  the  profits  of  his  labor  or  busi- 
ness ;  what  he  would  have  earned  for  the  support  of  those  en- 
titled to  recover,  or  for  the  estate,  as  the  case  may  be,  and  the 
probability  or  reasonable  expectation  of  the  life  of  the  deceased 
at  the  time  of  the  injury,  and  which  may  be  determined  by  refei'- 
ence  to  the  '  Carlisle '  or  other  tables  of  recognized  scientific  accu- 
racy relating  to  the  expectation  of  human  life."  ^ 

V.Brooklyn,  29  id.  234;  State  of  Mary-  45  id.  197;  Chicago  &   Alt.   R.   Co.  v. 

land  V.  Baltimore,  etc.,  R.  Co.,  24  Md.  Shannon,  43  id.  338  ;  City  of  Chicago 

84 ;  Central    R.    Co.  v.  Baches,  55  111.  v.    Major,    18   id.    349 ;   Donaldson    v. 

379  ;  Central  R.  Co.  v.  Weidon,  53  id.  Miss.&  Mo.  R.  Co., 18  Iowa,  280  ;  Telfer 

290  ;  Chicago  &  N.  W.  R.  Co.  v.  Swett,  v.  Northern  R.  Co.,  30  N.  J.  L.  188. 

'  Pennsylvania  R.  Co.  v.  Keller,  67  or  others  on  the  life  of  the  deceased. 
Penn.  St.  300  ;  Tilley  v.  Hudson  R.  R.  Althorpf  v.  Wolfe,  22  N.Y.  355  ;  Hard- 
Co.,  29  N.  Y.  252  ;  Duckworth  v.  John-  ingv.  Towushend,43  Vt.536;  Pittsburg, 
son,  4  H.  &  N.  653  ;  Paulmier  v.  Erie  etc.,  R.  Co.  v.  Thompson,  56  111.  138; 
R.  Co.,  34  N.  J.  L.  151.  Field  on  Dam.,  §  587  et  seq.  and  notes. 

2  Pyne  v.  Great  N.  R.  Co.,  4  B.  &  S.  ^  Field  on  Dam.,  §  631.  See,  also,  in 
396  ;  Jour.  (N.  S.)  199  ;  32  L.  J.  Q.  B.  support  of  the  proposilionsmade.Penn. 
377;  11  W.  R.  922;8  L.  T.  (N.  S.)  R.  Co.v.  Keller,  67  Penn.  St.  300;  Kres- 
734.  ter  v.  Smith,  66  N.  C.  154  ;  Mclntyre  v. 

3  Green  v.  Hudson  River  R.  Co.,  32  N.  Y.  Cent.  R.  Co.,  37  N.  Y.  287  ;  35 
Barb.  25  ;  Blake  v.  Midland  R.  Co.,  18  How.  Pr.  36  ;  Quin  v.  Moore,  15  N.  Y. 
Q.  B.  93;  21  L.  J.  Q.  B.  233.  See,also,  435;  Sherman  v.  West  Stage  Co.,  24 
Donaldson  v.Miss.&  Mo.  R. Co., 18  Iowa,  Iowa,515;  Illinois,etc.,R.Co.  v.  Weidon, 
280.  It  may  be  observed  that  nodeduc-  53  ill.  290  ;  Baltimore,  etc.,  R.  Co.  v. 
tion  from  the  amount  to  which  the  State,  33  Md.  543  ;  David  v.  South  W. 
parties  may  be  entitled  can  be  made  R.  Co.,  41  Ga.  223. 

on  account  of  any  insurance  by  them        ^  Field  on  Dam.,  §  633. 


Suits  at  Law  by  and  against  Corporations.  481 

CIlAPTEll  XIII. 

suits    at    law    by    and    against    C0EP0RATI0N8. 

Sec.  325.  The  riglit  to  sue  and  the  liability  to  be  sued,  common-law  inci- 
dents. 

Sec.  336.     In  what  name  must  sue  or  be  sued. 

Sec.  337.     May  sue  and  be  sued  by  members. 

Sec.  338.     Same  continued. 

Sec.  329.     Where  suit  may  be  brought. 

Sec.  330.     Foreign  corporations  not  citizens. 

Sec.  331.     Same  continued. 

Sec.  333.     Same  continued. 

Sec.  333.     Same  continued. 

Sec.  334.     When  suits  may  be  brought  in  the  federal  courts. 

Sec,  335.     A  corporation  may  be  an  alien  under  the  judiciary  act. 

Sec.  336.  It  may  be  a  citizen  under  the  constitution  of  the  United  States, 
and  the  acts  of  congress  relating  to  judicial  powers  and  the 
jurisdiction  of  the  courts. 

Sec.  337.     Same  continued. 

Sec.  338.  Corporations  considered  as  citizens  under  the  statutes  of  the 
United  States,  for  the  removal  of  suits  from  the  state  to  the 
federal  courts. 

Sec.  839.     Same  continued. 

Sec.  340.     Same  continued. 

Sec.  341.     Same  continued. 

Sec.  343.     Rights  in  courts  under  the  national  banking  law. 

Sec.  343.     Same  continued. 

Sec.  344.     Same  continued. 

Sec.  345.     Parties  to  a  suit. 

Sec.  346.     Process. 

Sec.  347.     Pleadings, 

Sec.  348.  When  a  party  dealing  with  a  corporation  is  estopped  to  deny  the 
corporate  existence. 

Sec.  349.     When  the  corporation  ia  estopped  to  deny  its  existence. 

Sec.  350.     Same  continued. 

Sec.  351.     General  denial. 

Sec.  353.     Proof  of  incorporation. 

Sec.  353.     Same  continued. 

Sec.  354.     Corporate  records. 

Sec.  855.     Same  continued. 

Sec.  356.    Stockholders'  rights  in  equity. 

61 


482  PkIVATE    CoRrOKATIONS. 

Sec.  325.  The  right  to  sue  and  the  liability  to  be  sued  a  common-law 
incident.  —  One  of  the  cominou-law  incidents  of  a  corporation  is 
the  capacity  of  suing  and  being  sued,  the  same  as  a  natural  per- 
son. This  power  is  usually  contained  among  the  specified  powers, 
in  general  incorporating  acts.  It  is  evident  that  not  only  corpora- 
tions, but  natural  persons,  would,  in  many  cases,  be  without 
remedy  for  wrongs  suffered,  if  this  right  did  not  exist.  As  cor- 
porations may  take,  hold  and  convey  property,  make  contracts, 
and  appoint  agents,  and  in  pursuit  of  their  respective  objects  and 
business,  inflict  and  suffer  wrongs  and  injuries,  it  is  but  reason- 
able that  they  should  have  the  capacity,  not  only  to  sue,  but  also 
of  being  sued.^ 

The  remedy  is  quite  as  important  as  the  legal  right,  and  if 
the  law  gives  a  right  it  should  furnish  a  means  to  vindicate  and 
maintain  it ;  lex  semper  debet  remedium^^  He  who  has  a  right 
should  have  a  remedy  ;  ubi  jus  ibi  remedium  /  and  this  is  en- 
forceable only  by  means  of  proceedings  in  courts.  The  right  of 
a  corporation  to  sue,  and  the  liability  to  be  sued  is  not  only  w^ell 
settled  as  an  incident  of  corporate  capacity,  but  rests  upon  the 
soundest  principles  of  justice.  And  this  remedy  includes  the 
right,  not  only  to  ordinary  proceedings  in  courts,  but  all  those 
extraordinary  remedies  provided  by  law,  and  which  natural  per- 
sons may  claim  and  enjoy.  Where  statutes  give  special  or  extra- 
ordinary remedies  to  persons,  this  is  usually  held  to  include  cor- 
porations. And  the  statutes  of  some  of  the  states  of  the  Union 
expressly  provide  that  whenever  the  word  "  person "  is  used  in 
the  statutes  it  includes  corporations.* 

'  And  this  right  exists  even  though  matters,   in   which   case    the   remedy 

the  organization  is  defective.     Heaton'  there  is  exclusive  of  all  others.    Bas- 

V.  Cincinnati,  etc.,  R.   R.  Co.,  16  Ind.  sett  v.  Carlton,  33  Me.  553. 

275;    Holmes  v.  Gilliland,    41    Barb.  '^^ev  Yloxn:,  i.,\n  Ashby  v.  White, 

568  ;  Bangor,  etc.,  R.  R.  Co.  v.  Smith,  2  Lord  Raymond,   953  ;  Winsmore  v. 

47  Me.  34;  South  Bay  Meadow  Dam  Greeubank,  Willes,  577. 

Co.  V.  Gray,  30  id.   547;  Shrewsbury  ^  But  under   the  New  York  act  of 

V.   Brown,    25    Vt.     197;    Baltimore,  18G5,  providing   for  incorporation  for 

etc.,  R.  R.   Co.  V.   Gallahue,  12  Gratt.  certain  purposes,  it  has  been  held  that 

655.       The    rule    being    that,    where  the    capacity  of  suing  and  being   sued 

a  right  is  given,  by  necessary  infer-  is  subject  to  the  qualification,  that  it 

ence  the  right  to  enforce  or  defend  it  is  in  relation  to  some   matter   within 

is   also  given.     Tilden   v.    Metcalf,  2  the  scope  of  the   legitimate  purposes 

Day,  259.  Unless,  as  may  be  the  case,  of    the    organization.      Ancient    City 

the  charter  or  statute  provides  a  special  Club  v.  Miller,  7  Lans.  412. 
tribunal   for   the   settlement  of  such 


Suits  at  Law  by  and  against  Corporations.  483 

Sec.  326.  in  what  name  must  sue  or  be  sued.  —  The  general  rule  is, 
that  a  corporation  can  only  sue  or  be  sued  in  its  coi-porate  name,' 
even  though  the  action  is  upon  a  contract  made  for  it  by  an 
agent,''  or  although  it  is  upon  subscriptions  to  its  stock  in  terms 
made  payable  to  the  commissioners  appointed  to  receive  subscrip- 
tions,^ or  is  upon  a  contract  entered  into  by  and  in  the  name  of 
its  trustees,*  or  its  treasurer.^  But,  where  a  note  or  other  obliga- 
tion not  uegotial)le  is  made  payable  to  an  individual  "  or  his  suc- 
cessor," he  being  the  treasurer  or  other  officer  of  the  corporation, 
and  it  is  really  for  the  benefit  of  the  corporation,  it  has  been  held 
that  the  action  should  be  brought  in  the  name  of  the  individual 
and  not  in  the  name- of  the  corporation."  But  this  is  only  the 
rule  in  cases  where  the  note  or  other  obligation  is  not  negotiable, 
and  therefore  is  put  upon  the  same  footing  as  a  specialty,  the 
legal  title  remaining  in  the  payees  until  they  have  conveyed  it.'' 
If  the  statute  (as  is  sometimes  the  case)  authorizes  the  corporation 
to  sue  in  the  name  of  an  officer  thereof,  as  in  the  name  of  its 
president,  treasurer,  directors,  etc.,  suit  can  be  brought  in  the 
name  of  such  officer  or  in  its  corporate  name,  at  its  election,  un- 
less the  statute  expressly  restricts  it  to  the  former  mode  of  suing.* 
If,  after  a  right  accrues  for  or  against  a  corporation,  its  name  is 
chana'ed,  it  should  be  sued  in  its  new  name.* 

Sec.  327.  May  sue  and  be  sued  by  members.  —  A  corporation  may 
sue  or  be  sued  by  any  of  its  members,  whether  natural  persons  or 
partnerships,  or  other  corporate  bodies  ;  for  its  members  and  con- 
stituent parts  are  not,  in  a  legal  sense,  the  corporate  body.  Though 
it  is  composed  of  these  members,  they  are  but  the  elements  which 
form  the  one  artificial  body.     The  rule  that  a  partner  cannot  sue 

1  Bradley   v.  Richardson,   2  Blatclif.  ^Binney  v.  Plumley,  ante;  Timma 

343  ;  Curtiss   v.  Murry,   20  Cal.   6^3  ;  v.  Williams,  3  Ad.  &  El.  413  ;  Haynes 

Porter  v.  Necerrvis,  4  Rand.  3o9.  v.  Covington,  21  Miss.  408. 

•■^  Binney   v.    Plumley,     5    Vt.    500;  '  Chaplin  v.  Canada,  8  Conn.  286. 

Garland  v.  Reynolds,  20  Me.  45  ;  Com-  «  College  of    Physicians  v.  Lalbas, 

mercial  Bank  v.  French,  21  Pick.  486.  1  Ld.  Raym.  153.   See,  also,  Mauney  v. 

3  Delaware,  etc.,  R.  R.  Co.  v.  Trick,  Motz,  4  Ired.  Eq.  195  ;  Dart  v.  Hun- 

23  N.  J.  L..  321.  ston,  22  Ga.   506  ;  Williams  v.  Beau- 

■*Bundy   v.   Birdsall,  29  Barb.   31  ;  mont,  3  Moore  &  S.  705. 

Leonardsville  Bank  v.  Willard,  25  N.  ^^yfayor,  etc.,  of  Colchester   v.  Sea- 

Y.  574.  ber,    3  Burr,  1866  ;   Madison  College 

^Warner  Academy  v.   Starrett,   15  v.  Burke,  6  Ala.  494. 
Me.  443. 


484  Private  Corporations. 

the  partnership,  or  that  a  person  cannot  be  both  plaintiff  and  de- 
fendant in  the  same  suit,  has  no  application  to  corporations ;  and 
it  is  a  common  practice  not  only  for  a  person  to  sue  the  corpora- 
tion of  which  he  is  a  member,  but  for  corporations  to  sue  their 
members.^  Such  suits  may  be  brought  for  all  the  variety  of 
causes,  and  in  all  the  various  forms,  and  in  the  same  manner  as 
though  the  parties  thereto  were  natural  persons.' 

Sec.  328.  Same  continued. — A  corporation  is  an  imaginary  and 
ideal  person,  and  its  contracts  are  not  the  contracts  of  its  individual 
members.  "  Being  lawfully  assembled,  they  represent  but  one 
person,  and  may,  consequently,  make  contracts,  and  by  their  col- 
lective consent,  oblige  themselves  thereunto."  ^  It  is,  therefore, 
evident  that  the  persons  composing  a  corporate  body  may  sue  or 
be  sued  by  a  corporation,  for  any  cause,  and  under  any  circum- 
stances, the  same  as  natural  persons.  Thus,  it  is  held  that,  in  case 
of  an  incorporated  company  with  a  capital  stock  divided  into  shares 
and  held  by  individuals,  the  corporation  and  the  shareholders  are 
distinct  legal  persons,  and  can  sue  and  be  sued  by  each  other ; 
that  where  the  directors  of  a  corporation  have  misapplied  a  portion 
of  its  funds,  the  stockholders  may  recover  the  amount  thus  mis- 
applied, and  if  such  misapplication  is  threatened  they  may  restrain 
it  by  injunction  ;  that  where  a  corporation  is  threatened  with  an 
injury  which  it  might  restrain  by  injunction,  but  it  refuses  so  to 
do,  a  stockholder  may  maintain  a  bill  in  equity,  for  an  injunction 
to  prevent  the  injury,  in  order  to  protect  his  own  interests  from 
immediate  danger ;  but  it  has  also  been  held  that  where  a  corpora- 
tion has  been  injured  by  a  tort  or  breach  of  contract,  an  individ- 
ual stockholder  will  not  be  permitted  to  come  into  court  and 

'  Connell    v.    Woodward,    6    Miss,  be  sued  on  such  contracts.     Culbertson 

665  ;  Gray  v.  Portland  Bank,  3  Mass.  v.  Wabash  Navigation  Co.,  4  McLean, 

3S5  ;  Bac.  Abr.,  tit.  Corp.  ;  Merricli  v.  554. 

Peru  Coal  Co.,  61  111.  472.  »  AvliflFe's  Civ.  Law,  tit.  35,  B.  2.  p. 

"^  Dill,  on  Corp.,  chap.  33.  A  corpo-  198  ;  1  Bl.  Com.  475  ;  Hayden  v.  Mid- 
ration  may  not  only  contract  with,  but  dlesex  Turnpike  Corporation,  10  Mass. 
sue  its  stockholders,  officials  or  cor-  403;  The  Proprietors  of  the  Canal 
porators,  in  their  individual  capacity.  Bridge  v.  Gordon,  4  Pick.  304  ;  Hart- 
Wausau  Broom  Co.  v.  Plumer,  35  ford  Bank  v.  Hart,  3  Day,  491 ;  Water- 
Wis.  374;  Chicago,  etc.,  R.  Co.  v.  bury  v.  Clark,  4  id.  198;  Ruby  v. 
Howard,  7  Wall.  (U.  S.)  393.  Abyssinian  Soc,  15  Me.  306;  Whee- 

A  corporator  may  not  only  contract  lock  v.  Moulton,  15  Vt.  519  ;  Isham  v. 

with  his  corporation  but  may  sue  or  Bennington  Iron  Co.,  19  id.  249. 


Suits  at  Law  by  and  against  Corporations. 


485 


prosecute  the  cause  of  action,  because  the  corporatioji  fails  or 
refuses  so  to  do.' 


Sec.  329.  Where  suit  may  be  brought. — A  corporation,  being  an 
artificial  person  created  by  the  supreme  authority  of  the  state,  is, 
in  a  legal  sense,  a  citizen  of  the  state  of  its  creation,  and  is  gener- 
ally entitled  to  all  the  rights  and  privileges  in  court,  of  a  citizen 
of  the  state  where  it  is  instituted.  But  a  distinction  has  been  made 
between  a  corporation  and  a  natural  person,  in  respect  to  its  abso- 
lute right  to  sue  in  the  courts  of  a  state  other  than  the  state  creat- 
ing it."  It  is  held  that,  outside  of  the  territory  of  the  sovereignty 
creating  it,  it  can  only  maintain  a  suit  on  the  ground  of  the 
comity  existing  between  states.  But,  unless  prevented  on  the 
ground  of  public  policy,  a  corporation  may  usually  maintain  a 
suit  in  the  courts  of  another  state,  the  same  as  a  natural  person.'' 


'  Samuel  v.  HoUaday,  1  Woolw. 
(C.  C.)400. 

2  Lailirop  V.  Union  Pacific  R.  Co. ,  1 
McArthur,  234. 

3  Thompson  v.  Waters,  25  Mich. 
214  ;  5  Cranch,  289  ;  Second  National 
Bank  v.  Lovell,  2  Ciu.  (0.)  397; 
Henriques  v.  Dutch  West  India  Co.,  2 
Ld.  Raym.  1535;  Chit,  on  Coat.  8(5  ; 
National  Bank  St.  Charles  v.  De  Ber- 
nales,  1  C.  &  P.  5(59  ;  Beverly  v.  Lin- 
coln  Gas-light   Co.,    6   A.   &   E.    829. 

As  the  right  of  a  foreign  corporation 
to  sue  in  the  courts  of  a  state  outside 
the  one  in  which  it  was  created  de- 
pends upon  the  comity  of  the  state  or 
country  where  the  suit  is  brought, 
it  follows  that  this  comity  may  be 
granted  or  denied  in  the  discretion  of 
the  tribunals  of  such  other  states  or 
countries,  especially  where  the  corpo- 
ration was  instituted  for  purposes  hos- 
tile to  the  interests  of  the  state. 
American  Colonization  Society  v.  Gar- 
treil,  23  Ga.  448.  But,  except  where 
prevented  by  statute,  the  courts  will 
not  generally  deny  the  right,  and  it 
may  be  said  that  generally  foreign 
corporations  have  the  same  capacity  to 
sue  or  be  sued  in  the  courts  of  another 
state  as  domestic  corporations,  subject 
to  such  terms  and  conditions  as  are 
imposed  by  the  local  laws.  Persse 
and  Brooks  Paper  Works  v.  Willett, 
4  Abb.  Pr.  119  ;  British  American 
Laud  Co.  V.  Ames,  G  Mete.  (Mass.)  391; 


Fisk  V.  Chicago,  etc..  R.  R.  Co.,  4 
Abb.  Pr.  (N.  S.)  378  ;  Mutual  Benefit 
Life  Ins.  Co.  v.  Davis,  12  N .  Y.  569; 
New  York  Dry  Docks  v.  Hicks,  5 
McLean  (U.  S.  C.  C),  111  ;  Halcomb 
V.  Illinois,  etc..  Canal  Co.,  4  111.  236; 
Hartford  Baak  v.  Barry,  17  Mass.  97  ; 
New  York  F.  Ins.  Co.  v.  Ely,  5  '"'onu. 
605;  Portsmouth  Livery-  Co.  v.  Wat- 
son, 10  Mass.  91.  Since  a  corporation 
created  by  one  state  can  transact  busi- 
ness in  another  state,  with  the  assent, 
expressed  or  implied,  of  the  latter 
state,  a  corporation  acting  in  a  state 
foreign  to  its  creation,  under  a  law  of 
the  latter  state,  which  recognizes  its 
existence  for  the  purpose  of  making 
contracts  within  that  state,  and  being 
sued  upon  them  through  notice  to  its 
contracting  agents  in  that  state,  is 
bound  by  such  statute  ;  and  a  judg- 
ment recovered  against  the  corpora- 
tion upon  a  notice  given  to  its  contract- 
ing agents,  according  to  the  statute,  is 
valid.  Lafayette  Ins.  Co.  v.  French, 
18  How.  (U.  S.)  404.  Where  a  cor- 
poration is  chartered  in  two  separate 
states,  and  exercises  its  franchises  in 
each,  it  may  be  restrained  in  either 
from  expending  its  funds  for  any  other 
than  corporate  purposes  anywhere ; 
and  a  plea  to  the  jurisdiction  of  the 
courts  of  either  state  is  not  tenable, 
on  the  ground  that  part  of  the  corpo- 
rate property  lies  in  a  different  state, 
or  that  it  owes  its  corporate  existence, 


486 


Pkivatb  Coepokations. 


The  laws  or  institutions  of  other  states  will  not  be  regarded  where 
it  is  manifestly  against  the  laws  of  the  state,  or  of  the  pnblic 


in  part,  to  another  state.  State  v. 
Northern  Central  R.  R.  Co.,  18  Md. 
19i}.  The  courts  of  a  state  may  grant 
a  manda7iius  to  reinstate  an  officer  of 
a  foreign  corporation  carrying  on  busi- 
ness within  the  state,  in  the  office  of  the 
corporation  ichieJi  he  was  exercising 
there,  and  from  which  he  had  been 
ousted  by  the  wrongful  act  of  the  di- 
rectors ;  for  the  court  may  recognize 
the  existence  of  a  foreign  corporation, 
and  it  may  determine  the  rights  of 
individuals,  though  it  has  no  jurisdic- 
tion over  the  corporation  itself.  Cur- 
tis V.  McCullough,  3  Nev.  303.  In 
New  York ,  a  foreign  corporation  who 
have  appeared  as  defendants  in  an  ac- 
tion in  the  supreme  court  are  deemed, 
for  the  purposes  of  the  action,  as  much 
within,  and  subjected  to,  the  jurisdic- 
tion of  the  court,  as  if  they  were  a 
corporation  under  the  laws  of  the 
state.  It  is  true,  that  for  the  pur- 
poses of  certain  provisions  of  the  stat- 
ute of  limitations,  they  can  never 
come  within  the  description  of  those 
who  are  called  residents,  so  as  to  allow 
the  statute  to  run  against  them  ;  but 
their  foreign  origin  does  not  prevent 
actions  against  them  for  any  cause, 
when  they  can  be  brought  within  the 
jurisdiction  of  the  court.  Dart  v. 
Farmers'  Bank,  37  Barb.  337. 

A  corporation  having  property  or 
capable  of  being  sued  within  a  state, 
though  created  by  the  laws  of  another 
state,  is  a  corporation  ' '  witbin  the 
state  "  within  the  meaning  of  the  laws 
allowing  attachments.  Libbey  v. 
Hodgdon,  9  N.  H.  394  ;  St.  Louis  Per- 
petual Ins.  Co.  V.  Cohen,  9  Mo.  416  ; 
Vogle  V.  New  Granada  Canal  and  Steam 
Nav.  Co.  of  New  York,  1  Houst. 
394. 

The  language  of  a  statute,  which 
provides  that  "  a  corporation  may  be 
summoned  as  garnishee."  etc.,  is  suf- 
ficiently comprehensive  to  include  for- 
eign corporations  and  render  them 
equally  subject,  with  domestic  corpo- 
rations, to  the  process  of  garnishment, 
in  all  cases,  where  an  original  action 
may  be  commenced  against  them  in 
the  courts  of  the  state  to  recover  the 
debt  in  respect  to  which  the  process 


of  garnishment  is  served.  Brauser  v. 
New  England  Fire  Ins.  Co.,  21  Wis. 
606. 

But  unless  the  statute  authorizes 
the  attachment  of  property  and  pro- 
vides for  service  in  case  of  absent  de- 
fendants, or  provides  for  service  on 
corporations  having  no  existence  un- 
der the  laws  of  the  state,  there  is  no 
way  in  which  a  foreign  corporation 
can  be  brought  within  the  jurisdiction 
of  the  courts  of  another  state.  La- 
tlirop  V.  Union  Pacific  R.  R.  Co. ,  1 
Mc Arthur,  234;  Camden,  etc.,  Co.  v. 
Swede  Iron  Co.,  33  N.  J.  L.  15.  Thus, 
in  New  Hampshire,  a  foreign  corpora- 
tion may  be  sued,  provided  effective 
service  can  be  made  by  the  laws  of  the 
state  upon  the  corporation  or  its  prop- 
erty. Libbey  v.  Hodgdon,  9  N.  H. 
394.  And  in  Vermont  service  may 
be  made  under  the  statute  by  attach- 
ment of  property  if  any  is  to  be  found, 
or  upon  its  general  agent  if  one  has 
been  appointed,  or  if  none  has  been 
appointed,  upon  a  special  agent,  if 
there  is  any  in  the  state.  In  Minne- 
sota service  cannot  be  made  by  publi- 
cation. Sullivan  v.  La  Crosse,  etc., 
Packet  Co.,  10  Minn.  38G.  In  New 
Jersey,  if  a  foreign  corporation,  when 
the  action  is  commenced,  does  not  do 
business,  and  has  no  office  or  place  of 
business  in  that  state,  the  contract 
sued  on  not  having  been  entered  into 
in  this  state,  such  corporation,  except 
by  its  own  consent,  cannot  be  brought 
within  the  jurisdiction  of  this  or  any 
court  of  this  state.  And  if  sued  un- 
der such  circumstances,  the  proper 
remedy  is  by  a  plea  to  the  jurisdic- 
tion. The  act  of  1865,  Pamph.  467, 
simply  appoints  a  method  of  bringing 
corporations  invested  with  a  foreign 
character  into  the  courts  of  this  state 
when  such  courts  have  jurisdiction 
over  them.  It  has  no  scope  beyond 
this.  Camden,  etc.,  Co.  v.  Swede  Iron 
Co.,  33  N.  J.  L.  15.  And  generally  it 
may  be  said  that  a  foreign  corporation 
can  only  be  sued  when  it  can  be 
brought  within  the  jurisdiction  olf  the 
courts  under  the  provisions  of  some 
statute. 


Surrs  AT  Law  by  and  against  Corporations.  487 

polic}'  so  to  do.^  A  corporation  created  in  one  state  of  tlie  Union 
is  considered  as  a  foreign  corporation  in  every  other  state ;  but 
the  doctrine  of  the  comity  of  states,  applicable  in  general  to  the 
riglits  in  courts  of  foreign  corporations,  has  still  stronger  force 
when  such  corporations  bring  suit  in  the  courts  of  a  sister  state  of  the 
Union,  from  the  fact  of  their  natural,  political  and  social,  and  the 
extent  and  intimacy  of  their  commercial  relations/  It  is  evident, 
however,  that  it  is  competent  for  a  state  to  prohibit  a  foreign  corpo- 
ration, not  only  from  doing  business  within  its  territorial  limits,  but 
from  maintaining  suits  in  its  courts.  The  legislature  of  the  state,  in 
that  respect,  is  supreme,  and  could  prohibit  a  foreign  corporation 
from  doing  business  therein,  or  impose  such  conditions  thereon  as 
the  public  policy  may  seem  to  require.  As  the  legislature  may, 
in  the  creation  of  private  corporations,  limit  their  powers  and 
franchises  in  such  a  manner  as  it  may  deem  proper,  it  is,  perhaps, 
reasonable  that  they  should  have  the  power  to  limit  or  restrain 
foreign  corporations  within  the  state.  ^ 

Sec.  330.      Foreign  corporations  not  citizens. — The  constitution  of 
the  United  States  provides  that  "  the  citizens  of  each  state  shall 


'  Id.     Tlie  power  of  the  corporation  S.  C,  1  With.  Corp.  Cas.  581 ;  Holcomb 

of    one   state    to   make   contracts    in  v.    111.,    etc.,   Canal   Co.,    4   111.   228; 

another  state   rests   upon  the  comity  Frazier  v.  Willcox,  4  Rob.  (La.)  518  ; 

between   the   states,  and   the   comity  Bank  of  Edwardsville  v.  Simpson,  1 

thus  extended  is  no  impeachment  of  Mo.  184  ;  Lewis  v.  Bank  of  Kentucky, 

sovereignty,  it  being  the  voluntary  act  12  Ohio,  133  ;  Ely  v.  Fire  Ins.  Co.,  5 

of  the  state  by  which  it  is  offered,  but  Conn.   560  ;    Williamson  v.  Smoot,  7 

inadmissible     when    contrary    to    its  Mart.    (La.)   31  ;    President,    etc.,    of 

policy,  or  prejudicial  to  its  interests.  Lombard  Bank  v.   Thorp,  6  Cow.  46  ; 

Bank  of  Augusta  v.  Earle,  13  Pet.  519.  Hartford  Bank  v.  Barry,  17  Mass.  97  ; 

Mr.  Story,  in  his  treatise  on  the  Con-  Marine,  etc.,  Ins.  Bank  v.  Jauncey,  1 

flict   of    Laws,   observes  :    "There  is  Barb.  486;  Tombigbee,  etc.,  R.  Co.  v. 

then  not   only  no   impropriety   in  the  Koeeland,  4  How.  (U.   S.)  16;  Quaga 

use  of  the  phrase,  '  comity  of  nations,'  Iron  Co.  v.   Dawson,  4   Blackf.    202; 

but  it  is  the  most  appropriate  phrase  Savage   Man.    Co.    v.    Armstrong,    19 

to  express  the  true  foundation  and  ex-  Me.   147.     As    to  the  doclrme  of    the 

tent  of  the  obligation  of  the  laws  of  comity  of  states  relating  to  contracts, 

one    nation   within    the   territories   of  and  the  right  to  enforce  them  by  cor- 

another.     It  is  derived  altogether  from  porations  as  well  as  natural  persons, 

the  voluntary  consent  of   the   latter;  see  id.     See,  also,  Silver  Lake  Bank  v. 

and  is  inadmissible  when  it  is  contrary  North,  4  Johns.  Cli.  370. 

to  its  known  policy,  or  prejudicial  to  ^  Frazier  v.  Wilcox, 4  Rob.  (Tia.)518  ; 

its  interests."  Atterberry  v.    Knox,  4  B.   Monr.  90; 

^  Bank    of    Marietta   v.   Pindall,    3  Marietta  "v.  Pindall,  2  Rand.  465  ;  New 

Rand.  465  ;  Portsmouth  Liverv  Co.  v.  Hope,   etc.,  Co.  v.  Poughkeepsie  Silk 

Wat.son,  10    Mass.  91;   The    State   of  Co.,  25  Wend.  648. 
liOuisiana  v.  Fosdick,21  La.  Ann.  434; 


488  Private  Corporations. 

be  entitled  to  all  privileges  and  immunities  of  citizens  of  the  sev- 
eral states."  ^  Is  a  corporation  within  the  meaning  of  this  pro- 
vision a  citizen,  and  entitled  to  all  the  rights  and  the  remedies  of 
a  natural  person  in  a  state  other  than  the  one  where  it  was  created 
and  has  a  legal  existence?  This  question  has  been  settled  by 
various  adjudications,  and  we  have  already  stated  that  a  state  had 
the  power  to  prohibit  foreign  corporations  from  doing  any  busi- 
ness in  the  state,  or  of  regulating  the  business,  or  of  prohibiting 
it  from  suing  in  its  courts.  And  it  has  been  repeatedly  held  that 
corporations  were  not  citizens  within  the  foregoing  constitutional 
provision,  so  as  to  entitle  them  to  all  the  rights  and  privileges  of 
natural  persons. 

Sec.  331.  Same  continued,  —  The  term  "citizen"  has  different 
meanings  in  different  parts  of  the  constitution  of  the  United  States. 
Where  the  constitution  says  that  "  the  citizens  of  each  state  shall  be 
entitled  to  all  the  privileges  and  immunities  of  citizens  in  the  several 
states,"  the  woi*d  "citizens"  has  a  different  meaning  from  its  use 
in  that  part  of  the  constitution  where  it  says  that  "  the  judicial 
power  shall  extend  to  all  cases  in  law  and  equity,  where  the  con- 
troversy is  between  a  state  and  citizens  of  another  state,  between 
citizens  of  different  states,  between  citizens  of  the  same  state 
claiming  lands  under  grants  of  diffei'ent  states,  and  between  a 
state  or  citizens  thereof  and  foreign  states,  citizens  or  subjects," ' 
and  that  part  of  the  judiciary  act  of  congress  where  jurisdiction  is 
made  to  depend  upon  citizenship  of  one  of  the  parties  in  another 
state,'  and  the  act  providing  for  the  removal  of  suits  from  the 
state  courts  to  the  circuit  courts  of  the  United  States.^ 

Sec.  332.  Same  continued.  —  In  the  former  case  it  is  held  that 
corporations  are  not  citizens  in  the  sense  of  this  constitutional 
provision.'    It  has  been  ably  maintained  that,  although  the  individ- 

'  §  2,  art.  4.  Co.    v.    Letson,  2  id.  497  ;  La  Favette 

«  Art.  3,  §  2.  Ins.    Co.  v.  French,  18  id.  404  ;  War- 

3  Act  Sept.  24, 1798,  Rev.  Stat.  (1874)  ren  Man.   Co.  v.  The  Etna  Insurance 

109.  Co.,  2   Paine,  501  ;  Paul   v.   Virginia. 

*  Rev.  Stat.  (1874)  113,  §  639.  8  Wall.  168;  The  Insurance  Company 

5  Drawbridge   Co.    v.   Shepherd,  20  v.  The  Commonwealth,  5  Bush,  68. 

How  (U.  S.)  227  ;  Louisville,  etc.,  R. 


Suits  at  Law  by  and  against  Corporations.  489 

uals  composing  a  corporation  may  be  citizens  under  tlie  pro- 
vision of  the  constitution  securing  "  the  citizens  of  each  state 
the  privileges  and  immunities  of  citizens  of  the  several  states," 
such  members  of  the  corporation  carrying  on  business  in  the 
corporate  name  are  subject  to  the  liabilities  and  entitled  to  the 
privileges  of  citizens  under  the  constitution,  but  that  this  privi- 
lege could  have  no  application  to  an  invisible,  intangible  and 
artificial  corporate  person  ;  that  where  a  corporation  makes  a 
contract,  it  is  the  contract  of  the  legal  entity,  of  the  artilicial 
being  created  by  the  cliarter,  and  not  the  contract  of  the  mem- 
bers ;  and  that  the  only  rights  tlie  corporation  can  claim  are  the 
rights  conferred  by  the  charter,  and  not  the  rights  which  belong 
to  its  members  as  citizens  of  a  state.* 

This  view  was  recently  ably  maintained  by  Chief  Justice  Breese, 
in  delivering  the  opinion  of  tlie  supreme  court  of  Illinois,  in 
Ducat  V.  The  City  of  Chicago.''  He  says  :  "  Corporations  have  no 
status  in  states,  as  citizens  of  the  state  creating  them,  and  when 
they  come  to  this  state  to  do  business  and  make  profits,  a  discrim- 
ination can  rightfully  be  made  between  them  and  our  domestic 
corporations  of  the  same  character,  and  that  if  it  should  be  deemed 
good  policy  by  the  legislature  they  could  be  so  taxed  or  otherwise 
burdened  as  to  compel  them  to  leave  the  state.  They  may  be 
regarded  as  a  benefit  or  a  nuisance,  according  to  the  caprice  of  the 
legislature,  they  not  being  citizens  in  any  approved  sense  of  that 
term,  which  can  be  correctly  understood  in  no  other  sense  than 
that  in  which  it  was  understood  in  common  acceptation,  when 
the  constitution  was  adopted,  and  as  it  is  universally  explained  by 
writers  on  government,  witliout  an  exception.  A  citizen  is  of  the 
genus  homo,  inhabiting  and  having  certain  rights  in  some  state  or 
district.  Such  a  being,  if  a  citizen  of  New  York,  or  of  any  other 
state  of  this  Union,  is,  for  many  purposes,  a  citizen  of  this  state, 
and  of  all  the  other  states,  and  is  entitled  to  all  such  privileges 
and  immunities  within  the  purview  of  the  constitution,  as  the  cit- 
izens of  those  states  permanently  residing  therein  are  entitled  to. 

'  Bank  of  Augusta  v.  Earle,  13  Pe-  court,  U.  S.,  10  Wall.  410.  See,  also, 
ters.  519.  Corfield   v.    Coryell,  4  Wash.  (C.  C.) 

MS   111.    173;  affirmed  in  supreme     371. 

62 


490  Prtvate  Corpoeations. 

These  are  personal  privileges,  and  attach  to  him  in  every  state 
into  whicli  he  may  enter,  as  to  a  human  being  —  as  a  person  with 
faculties  to  appreciate  them,  and  enjoy  them  ;  not  to  an  intangi- 
bility, a  mere  legal  entity,  an  invisible  artificial  being,  but  to  the 
man  made  in  God's  ovs^n  image.  The  individual  citizen  has  the 
power  to  move  from  place  to  place,  as  his  business  or  his  pleasure 
may  prompt.  He  has  rights  which  are  so  important  as  to.  make 
it  desirable  that  they  should  be  uniform  throughout  this  broad  and 
expanded  Union,  which,  in  order  to  promote  mutual  friendship 
and  free  social  or  business  intercourse  among  the  people  of  the 
several  states,  were  placed  by  this  clause  of  article  four  (of  the 
constitution)  under  the  protection  of  the  federal  government.  In 
the  case  of  corporations  no  such  reasons  exist.  Corporations,  in 
the  states  of  their  creation,  are  not  entitled  to  the  privileges  or 
rights  of  the  citizens  of  such  states.  ,  They  cannot  vote  at  elec- 
tions ;  they  are  ineligible  to  any  public  office ;  thej^  cannot  be 
executors,  administrators  or  guardians.  They  are  artificial  beings, 
endowed  only  with  such  powers,  and  privileges,  and  rights,  as 
their  creator  thought  proper  to  bestow  upon  them.  They  have 
not  the  power  of  locomotion,  and  of  course,  are  not  fit  subjects,  in 
the  view  above  expressed,  of  the  constitutional  clause  on  which 
this  case  turns.  Not  being  able  to  go  into  the  states  of  the  Union 
at  their  corporate  will  and  pleasure,  and  exercise  their  faculties 
therein,  they  cannot,  by  any  reasonable  and  just  view  of  that 
clause,  be  deemed  as  coming  within  its  spirit  or  object."  ' 

'  Liverpool  Ins.  Co.  v.  Massacliii-  tlie  citizens  of  those  states  in  the  ac- 
setts,  10  Wall.  566  ;  Paul  v  The  Com-  quisition  and  enjoyment  of  property 
monwealth  of  Virginia,  8  id.  168.  In  and  in  the  pursuit  of  happiness,  and  it 
tlie  latter  case,  Mr.  Justice  Field,  on  secures  to  them  in  other  states  the 
the  construction  of  this  clause  in  the  equal  protection  of  their  laws.  It  has 
constitution,  observes  ;  "  It  was  un-  been  justly  said  that  no  provision  in 
doubtedly  the  object  of  the  clause  in  the  constitution  has  tended  so  strongly 
question  to  place  the  citizens  of  each  to  constitute  the  citizens  of  the  United 
state  upon  the  same  footing  of  other  States  one  people  as  this.  Indeed, 
states, so  far  as  the  advantages  result-  without  some  provision  of  the  kind, 
ing  from  citizenship  in  those  states  removing  from  the  citizens  of  each 
are  concerned.  It  relieves  them  from  state  the  disabilities  of  alienage  in 
the  disabilities  of  alienage  in  other  other  states,  and  giving  them  equality 
states  ;  it  inhibits  discriminating  legis-  of  privilege  with  citizens  of  those 
lation  against  them  by  other  states  ;  states,  the  republic  would  have  con- 
it  gives  tliem  the  right  of  free  ingress  stituted  little  more  than  a  league  of 
into  other  states,  and  eg-ress  from  states;  it  would  not  have  constituted 
tliem  ;  it  insures  to  theiu^  in  other  tlie  union  which  now  exists.  But  the 
States  the  same  freedom  possessed  by  privileges  and  immunities  secured  to 


Suits  at  Law  by  and  against  Corporations.  491 

Sec.  333.  Same  continued.  —  It  will  be  evident,  from  what  has 
been  said,  tliat  foreign  corporations  have  no  absolute  and  consti- 
tutional rights  other  than  in  the  states  where  constituted,  and  can 
only  claim  such  privileges  in  the  courts  of  a  foreign  state  as  are 
permitted  by  the  coniity  of  states,  and  not  in  derogation  of  the 
express  statutory  or  constitntional  provisions  of  such  states. 

Sec.  334.  When  suits  may  be  brought  in  the  federal  courts.  —  We 
have  observed  that  corpoi'ations  have  usually  the  same  status  as 
natui-al  persons  in  the  courts  of  the  state  creating  them,  and  that 
they  do  not  in  foreign  states  enjoy  the  full  capacity  of  a  natural 
person  ;  that  they  are  not  entitled  to  all  those  privileges  and  im- 
munities which  natural  citizens  of  a  foreign  state  would  be  enti- 
tled to  under  the  constitution  of  the  United  States,  or,  in  other 
words,  that  under  the  provisions  of  the  constitution  referred  to 
they  are  not  citizens.  But  the  term  "  citizen  "  has  a  different  mean- 
ing in  other  parts  of  the  constitution,  and  especially  in  that  part 
of  it  which  limits  the  judicial  power  of  the  courts  of  the  United 
States,  where  the  term  "  citizen  "  is  held  to  include  corporations. 
On  this  subject  the  constitution  provides  that  the  judicial  power 
of  the  United  States  courts  shall  extend  to  all  cases  of  controversy 
between  a  state  and  citizens  of  another  state  and  between  citizens 
of  different  states.^ 

Sec.  335.  A  corporation  may  be  an  alien  under  judiciary  act.  —  The 
judiciary  act  of  congress,  framed  and  adopted  to  carry  into  effect 

citizens  of  each  stale  in  the  several  which  they  confer  must,  therefore,  be 
states  by  the  provision  in  question,  enjoyed  at  home,  unless  the  assent  of 
are  those  privileges  and  immunities  other  states  to  their  enjoyment  therein 
which  are  common  to  the  citizens  in  be  given.  Now,  a  grant  of  corporate 
the  latter  states  under  their  constitu-  existence  is  a  grant  of  special  privi- 
lion  and  laws,  by  virtue  of  their  being  leges  to  the  corporators,  enabling  them 
citizens.  Special  privileges  enjoyed  to  act  for  certain  designated  purposes 
by  citizens  in  their  own  states  are  not  as  a  single  individual,  and  exempting 
secured  in  other  states  by  this  pro-  them  (unless  otherwise  specially  pro- 
vision. It  was  not  intended  by  the  vided)  from  individual  liability.  The 
provision  to  give  to  the  laws  of  one  corporation,  being  a  mere  creation  of 
state  any  operation  in  other  states,  local  law  can  have  no  legal  existence 
They  can  have  no  such  operation,  ex-  beyond  the  limits  of  the  sovereignty 
cept  by  permission,  express  or  implied,  where  created." 
of  those  states.   The  special  privileges 

'Const.,  art.  3,  §2. 


492  Private  Corporations. 

this  provision  of  the  constitution,  gives  the  circuit  court  of  the 
United  States  jurisdiction  "of  all  suits  of  a  civil  nature  at  com- 
mon law  or  in  equity,  where  the  matter  in  dispute,  exclusive  of 
costs,  exceeds  the  sum  or  value  of  five  hundred  dollars  and  an 
alien  is  a  party,  or  the  suit  is  between  a  citizen  of  the  state  where 
the  suit  is  brought  and  a  citizen  of  another  state."  '  In  the  con- 
struction of  this  provision  the  courts  have  held  that  the  term 
"  citizen  "  includes  corporations,  and  that  they  might  sue  or  be  sued 
in  the  circuit  courts  of  the  United  States,  in  all  cases  the  same 
as  a  natural  person. 

Sec.  336.  Corporations  may  be  citizens  under  the  constitution  and 
the  acts  of  congress,  relating  to  judicial  powers  and  jurisdiction  of  the 
courts  of  the  United  States.  —  In  reference  to  citizenship  under  the 
constitutional  provision  and  the  acts  of  congress  relating  to  the 
judicial  powers  and  jurisdiction  of  tTie  United  States  courts, 
which  we  have  referred  to,  it  is  held  that  a  corporation  has  its 
dwelling  ]ilaee  and  residence  in  the  state  of  its  creation  ;  that  as 
an  artificial  legal  person  it  has  no  existence  beyond  the  territory 
of  the  sovereignty  creating  it ;  that  for  the  purpose  of  conferring 
jurisdiction  a  suit  against  a  foreign  corporation  must  be  con- 
sidered as  a  suit  against  a  citizen  of  the  state  creating  it ;  that 
there  is  a  presumption  in  such  cases  that  the  members  of  the  cor- 
poration are  citizens  of  the  state  creating  it,  and  that  no  statute  of 
the  state  where  such  corporation  may  transact  business,  nor  any 
thing  done  by  the  corporation  in  regard  to  the  manner  of  trans- 
acting its  business,  can  defeat  the  right  of  the  corporation  to  sue, 
or  its  liability  to  be  sued  in  tlie  circuit  courts  of  the  United  States, 
as  though  it  were  a  natural  person  and  a  citizen  of  the  state  where 
it  was  legally  created  and  is  located.^  In  a  recent  case  in  the 
supreme  court  of  the  United  States,  where  the  commonwealth  of 
Pennsylvania  sued  a  corporation  in  the  United  States  circuit  court, 
and  the  question  of  jurisdiction  was  presented  under  the  constitu- 

1  Rev.  Stat.  U.  S.  (1875),  §  629;  Bank  2  Manufacturers'   National  Bank  y. 

of  the   United   States   v.   Devaux,    5  Baach,  opinion  by  Blatchford,  J.,  in 

Cranch,  184  ;  Inhabitants  of  Lincoln  v.  the  circuit  court  of  the  United  States, 

Prince,  3  Mass.  544.     See,  also,  Rex  v.  southern  district  of  N,   Y.  ;  1   Witb . 

Gardner,  Cowp.  83  ;   Sparenbufgli    v.  Corp.  Cas.  93. 
Bannatyne,  1  B.  &  P.  163. 


Suits  at  Law  by  and  against  CoKPORA'noNS.  493 

tion  and  the  act  above  referred  to,  the  court  held  tliat  a  state 
might  bring  suit  in  the  circuit  court  of  the  United  States  against 
a  citizen  of  another  state,  but  not  one  of  her  own  citizens ;  that  it 
did  not  sutiiciently  appear,  from  any  averment  in  the  declaration, 
that  the  defendant  was  a  corporation  created  in  Cahfornia ;  and 
that  a  state  cannot  bring  a  suit  in  the  United  States  courts  against 
one  of  its  own  citizens.' 


Sec.  337.  Same  continued.  —  In  an  action  on  certain  bonds,  issued 
by  the  board  of  supervisors  of  Mercer  county,  Illinois,  where  the 
question  of  the  citizenship  of  the  corporation  and  the  jurisdiction 
of  the  circuit  court  of  the  United  States  based  thereon  was  pre- 
sented, on  error  in  the  supreme  court  of  the  United  States,  Chief 
Justice  Chase,  in  delivering  the  opinion  of  the  court,  said  :  "  The 
record  presents  but  one  question  which  has  not  been  heretofore 
fully  considered  and  repeatedly  adjudicated.  That  question  is, 
whether  the  board  of  supervisors  of  Mercer  county  can  be  sued 
in  the  circuit  court  of  the  United  States  by  a  citizen  of  another 
state  than  Illinois.  It  presents  but  little  difficulty.  It  has  never 
been  doubted  that  a  corporation,  all  the  members  of  which  reside 
in  the  state  creating  it,  is  liable  to  a  suit  upon  its  contracts  by  the 
citizens  of  other  states,  but  it  was  for  many  years  much  contro- 
verted whether  an  allegation,  in  a  declaration  that  a  corporation 
defendant  was  incorporated  by  a  state  other  than  that  of  the 
plaintiff  and  established  within  its  limits,  was  a  sufficient  averment 
of  jurisdiction.  And  in  all  cases  prior  to  1844:,  it  was  held  neces- 
sary to  aver  the  requisite  citizenship  of  the  corporators.  Then 
the  whole  question  underwent  a  thorough  examination  in  the  case 
of  the  Louisville,  Cinomnati  <&  Charleston  Railroad  Company 
V.  Letson^  and  it  was  held  that  a  corporation  created  by  laws  of 
a  state  and  having  its  place  of  business  in  that  state,  must,  for  the 
purpose  of  suit,  be  regarded  as  a  citizen  within  the  meaning  of 
the   constitution  giving  jurisdiction  founded   upon   citizenship. 

1  The   Commonwealth   of   Pennsyl-  monwealth  of  Penn.  v.  The  Quicksilver 

vauia  v.  The  Quicksilver  Mining  Co.,  Mining  Company,  supra. 

10  Wall.  55;5.     See,  also,  Railway  Co.  ^  3  How.  497. 
V.    Whitton,    13   id.    270  ;  The    Com- 


494  Private  Corporations. 

This  decision  has  been  since  reaffirmed,  and  must  now  be  taken 
as  the  settled  construction  of  the  constitution."^ 

Sec.  338.  Corporations  considered  as  citizens  under  the  act  of  con- 
gress for  the  removal  of  causes  from  the  state  to  the  federal  courts.  —  It  is 
provided  by  the  lievised  Statutes  of  the  United  States  as  follows: 
"  Any  suit  commenced  in  any  state  court,  wherein  the  amount  in 
dispute,  exclusive  of  costs,  exceeds  the  sum  or  value  of  $500, 
to  be  made  to  appear  to  the  satisfaction  of  said  court,  may  be  re- 
moved for  trial,  into  the  circuit  court,  for  the  district  where  such 
suit  is  pending,  next  to  be  held  after  the  filing  of  the  petition 
for  such  removal  hereinafter  mentioned,  in  the  cases  and  in  the 
manner  stated  in  this  section. 

"  First.  When  the  suit  is  against  an  alien,  or  is  by  a  citizen  of 
the  state  wherein  it  is  brought,  and  is  against  a  citizen  of  another 
state,  it  may  be  removed  on  the  petition  of  such  defendant,  filed 
in  the  said  state  court  at  the  time  of  entering  his  appearance  in 
said  state  court. 

"  Second.  When  the  suit  is  against  an  alien  and  a  citizen  of  the 
state  wherein  it  is  brought,  or  is  by  a  citizen  of  such  state  against 
a  citizen  of  the  same,  and  a  citizen  of  another  state,  it  may  be  so 
removed,  as  against  said  alien  or  citizen  of  another  state,  upon 
the  petition  of  such  defendants,  filed  at  any  time  before  the  trial 
or  final  hearing  of  the  cause,  if,  so  far  as  it  relates  to  him,  it  is 
brought  for  the  purpose  of  restraining  or  enjoining  him,  or  is  a 
suit  in  which  there  can  be  a  final  determination  of  the  contro- 
versy, so  far  as  concerns  him,  without  the  presence  of  the  other 
defendants  as  parties  in  the  cause.  But  such  removal  shall  not 
take  away  or  prejudice  the  right  of  the  plaintiff  to  proceed  at  the 
same  time  with  the  suit  in  the  state  court,  as  against  the  other 
defendants. 

"  Third.  When  a  suit  is  between  a  citizen  of  the  state  in  which 
it  is  brought  and  a  citizen  of  another  state,  it  may  be  so  removed 
on  the  petition  of  the  latter,  whether  he  be  plaintiff  or  defendant, 
filed  at  any  time  before  trial  or  final  hearing  of  the  suit,  if,  before 
or  at  the  time  of  filing  said  petition,  he  makes  and  files  in  said 

'  Cowles  V.  Mercer  County,  7  Wall,  the  members  of  a  corporation  are  citi- 
118  (1868) ;  2  With.  Sel.  Corp.  Cas.  1.  zens  of  the  state  creating  it.  Lathrop 
There  is  a  concluBive  presumption  that     v.  Union  Pac  R.  Co.,  1  Mc Arthur,  234. 


Suns  AT  Law  by  and  against  Corporations.  495 

court  an  affidavit,  stating  that  lie  has  reason  to  believe  and  does 
believe  that,  from  prejudice  or  local  influence,  he  will  not  be 
able  to  obtain  justice  in  such  state  court."  * 

Sec.  339.  Same  continued.  —  Under  these  provisions  it  is  held, 
that  as  a  corporation  is  a  creature  of  the  state  creating  it,  and  has 
no  legal  existence  beyond  the  territory  of  the  sovereignty  by 
which  it  is  created  ;  that  its  domicile  is  within  such  territory  ; 
that  a  suit  against  a  corporation  by  its  corporate  name  is  a  suit 
against  a  citizen  of  the  state  creating  it ;  and  that  for  the  pur- 
poses of  original  jurisdiction  as  well  as  the  removal  of  causes 
from  the  state  to  the  federal  courts,  under  the  act  of  congress 
made  for  that  purj)ose,  there  is  a  conclusive  presumption  that  the 
membei's  of  a  corporation  are  citizens  of  that  state.  And  it  is 
further  held,  that  nothing  done  by  a  corporation  in  regard  to  the 
place  or  manner  of  transacting  its  business,  and  no  statutes  of  a 
state  in  which  it  transacts  such  business  can  deprive  the  corpora- 
tion of  its  right  and  privilege  when  sued  in  a  state  foreign  to  the 
one  in  which  it  was  created,  to  remove  such  action,  in  the  manner 
prescribed  by  the  statutes,  from  the  state  court  to  the  circuit 
court  of  the  proper  district.  But  it  is  further  held,  that  if  the 
foreign  corporation  is  joined  with  other  defendants,  who  are 
residents  of  the  state  where  the  suit  is  brought,  the  suit  cannot 
be  removed  under  the  foregoing  statute,  from  the  state  to  the 
federal  courts,  unless  such  residents  are  merely  nominal  parties  ; 
and  that  when  the  action  is  against  the  corporation  and  its  officers, 
and  no  relief  is  prayed  for  as  to  such  officers,  that  is  not  prayed 
for  as  against  the  corporation,  and  no  relief  is  pi'ayed  for  against 
any  officer  in  his  individual  capacity,  such  officers  are  merely 
nominal  parties,  and  the  action  may  be  removed.' 

1  Rev.  Stat.  U.  S.  (1874;,  §  639,  p.  232  ;  Wormley  v.  Wormley,  8  Wheat. 

113.  421;  Carnea]  v.    Banks,    10   id.  188; 

'2  Hatch  V.  The  Chicago,  Rock  Island  Pomeroy  v.  The  New  York,  etc.,  R. 
&  Pacific  R.  Co.,  6  Blatchf.  (C.  C.)  Co..  4  Blatchf .  (C.  C.)  120 ;  Hobbs  v. 
105  ;  Ward  v.  Arredondo.  1  Paiue  (C.  The  Manhattan  Ins.  Co. ,  56  Me.  417. 
C),  410  ;  Lathrop  v.  Union  Pacific  R.  If  the  defendant  files  a  proper  peti- 
Co.,  1  McArthur,  234;  Bank  of  Angus-  tion  for  removal, it  is  a  matter  of  right 
ta  V.  Earle,  13  Pet.  519  :  Ohio, etc.,  R.  and  the  state  court  cannot  prevent  it. 
Co.  V.  Wheeler,  1  Black,  286;  The  Gordon  v.  Longest,  16  Pet.  97;  Car- 
Louisville,  etc.,  R.  Co.  V.  Letson,2  neal  v.  Banks,  10  Wheat.  188,  where 
How.  497:  Marshall  v.  The  Baltimore,  parties  were  made  defendants  to  a  suit 
etc.,  R.  Co.,  16  id.  314.  The  Coving-  in  equity,  who  were  citizens  of  the 
ton  Drawbridge  Co.  v.  Shepherd, 20  id.  same  state  with  the  plaintiff,  and  there 


496  Private  Cokpokations. 

Sec.  340.  Same  continued. —  Where  tlie  declaration  described  the 
phiiiitifis  as  an  association  of  persons  not  incorporated,  formed 
for  the  purpose  of  carrying  on  the  banking  business  at  Omaha, 
Nebraska,  and  who  were  engaged  in  such  business  at  that  place, 
and  the  defendants,  as  a  foreign  corporation,  formed  under  and 
created  by  the  laws  of  the  state  of  New  York,  and  the  cause  was 
transferred  to  the  circuit  court  of  the  United  States  ;  on  error,  in 
the  supreme  court  of  the  United  States,  it  was  held,  that  although 
there  was  no  direct  averment  that  the  suit  was  between  citizens 
of  different  states,  still  it  was  the  necessary  consequence  of  the 
facts  stated  that  they  were  so ;  that  the  averment  that  the 
plaintiffs  were  a  firm  of  natural  persons,  associated  together  at 
Omaha,  and  were  engaged  in  the  banking  business  at  said  place, 
is  equivalent  to  saying  they  had  their  domicile  there,  as  in  this 
comitry  people  usually  have  their  domicile  where  they  do  busi- 
ness ;  that  this  is  especially  true  of  persons  who  are  engaged  in  a 
business  requiring  capital  and  involving  risk,  at  a  point  remote 
from  the  great  centers  of  trade  and  commerce.  And  it  was  fur- 
ther held  that  the  citizenship  of  the  defendant  was  sufficiently 
averred  ;  that  the  obvious  meaning  of  the  allegation,  that  the 
defendant  was  a  foreign  corj)oration,  formed  under  and  created 
by  the  state  of  New  York  was,  that  the  defendant  was  a  citizen 
of  that  state ;  and  that  the  averments  were  sufficient  to  show 
that  the  plaintiff  and  defendant  were  citizens  of  different  states. 

Sec.  341.  Same  continued — The  opinion  of  Blatchford,  J.,  in 
the  case  of  Hatch  v.  The  Chicago^  etc.^  R.  Co.^  furnishes  a  clear 
exposition  of  the  law  on  this  subject.  He  says  :  "  It  is  settled, 
by  the  decisions  of  the  supreme  court,  that  a  corporation  can 
have  no  legal  existence  out  of  the  bounds  of  the  sovereignty  by 
which  it  is  created  ;  that  it  exists  only  in  the  contemplation  of 

were  defendants,    citizens  of  another  Where  the  cause  of  removal  is  com- 

state,  and  it  was  held  that  the  former  plete,  the  power  of  the  state  court  as 

might  be  dismissed  as  they  were  im-  to  the  cause  is  at  an  end.     Hatch  v. 

properly  made  defendants,   and  that  The   Chicago,    etc.,   R.    Co.,   suprn. 

they  could  not  properly  affect  the  juris-  See,  also,  Ward  v.  Arredondo,  1  Paine 

diction  of  the  court  as  to  the  parties  (C.  C),  410. 
who  were  properly  before  it. 

»  6  Blatchf.  (C.  C.)  105  (1868). 


Surrs  AT  Law  by  and  against  Corpoeations. 


497 


law,  and  by  force  of  tliat  law ;  that  where  that  law  ceases  to 
operate  the  corporation  can  liave  no  existence  ;  and  that  it  must 
dwell  in  the  place  of  its  creation.  It  is  also  settled,  by  like 
decisions,  that  a  suit  against  a  corporation  in  its  corporate  name 
must  be  regarded  as  a  suit  ai^ainst  citizens  of  the  state  which  ere- 
ated  it,  the  legal  presumption  being  that  its  members  are  citizens 
of  that  state,  the  only  state  in  which  the  corporate  body  has  a 
legal  existence;  and  the  legal  presumption,  therefore,  being,  that 
a  snit  against  the  corporation  in  its  corporate  name  is  a  suit 
against  citizens  of  the  state  which  created  it,  no  averment  or  evi- 
dence to  the  contrary  being  admissible  to  withdraw  the  snit  from 
any  jm*isdiction  which  the  court  of  the  United  States  would  other- 
wise have  over  it.  It  follows,  therefore,  that  for  the  purposes 
of  jurisdiction  by  the  courts  of  the  United  States,  these  suits,  so 
far  as  they  are  suits  against  the  company,  are  suits  against  citizens, 
of  the  state  which  created  the  company."  ^ 

Sec.  31:2.   Rights  in  court  under  the  national  banking  lavr. —  The  act 

of  congress  of    June  3,   1864,^  relating  to  national  banks,  pro- 


'  Hatch  V.  Chicago,  etc.,R.  Co.,  supra. 

2  The  Revised  Statutes  of  the  Uuited 
States  (1874),  tit.  62,  chap.  1,  provide  as 
follows  : 

"  Sec.  5133.  Associations  for  carry- 
ing on  the  business  of  banking  under 
this  title  may  be  formed  by  any  num- 
ber of  natural  persons  not  less,  in  any 
case ,  than  five .  They  shall  enter  into 
articles  of  association,  which  shall 
specify  in  general  terms  the  object  for 
wliich  the  association  is  formed,  aud 
may  contain  any  other  provisions,  not 
inconsistent  with  lavv,  which  the  asso- 
ciation may  see  fit  to  adopt  for  the 
regulation  of  its  business  and  the  con- 
duct of  its  affairs.  These  articles 
shall  be  signed  by  the  persons  uniting 
to  form  the  association ,  and  a  copy  of 
them  shall  be  forwarded  to  the  comp- 
troller of  the  currency,  to  be  filed  and 
preserved  in  his  office. 

' '  Sec.  5134.  The  persons  uniting  to 
form  such  an  association. shall,  under 
their  hands,  make  an  organization  cer- 
tificate which  shall  specifically  state  : 

"  First.  The  name  assumed  by  such 
association  ;  which  name  shall  be  sub- 
ject to  the  approval  of  the  comptroller 
of  the  currency. 

63 


"  Second.  The  place  where  its  opera- 
tions of  discount  and  deposit  are  to  be 
carried  on,  designating  the  state,  ter- 
ritory or  district,  and  the  particular 
county  and  city,  town  or  village. 

"  Third.  The  amount  of  capital  stock 
and  the  number  of  shares  into  which 
the  same  is  to  be  divided 

' '  FoartJi.  The  names  and  places  of 
residence  of  the  shareholders,  and  the 
number  of  shares  held  by  each  of 
them. 

"  Fifth.  The  fact  that  the  certificate 
is  made  to  enable  such  persons  to  avail 
themselves  of  the  advantage  of  this 
title. 

"  Sec.  5135.  The  organization  certi- 
ficate shall  be  acknowledged  before 
some  court  of  record  or  notary  public ; 
aud  shall  be,  together  with  the  ac- 
knowledgment thereof,  authenticated 
by  the  seal  of  such  court  or  notary, 
transmitted  to  the  comptroller  of  the 
currency,  who  shall  record  and  care- 
fully preserve  the  same  in  his  office. 

"Sec.  5136.  Upon  duly  making  and 
filing  articles  of  association  and  organ- 
ization certificate  the  association  shall 
become,  as  from  the  date  of  the  exe- 
cution  of  its  organization  certificate,. 


498 


Private  Coeporations. 


vides  that  corporations  sliall  have  power  "  to  sue  and  be  sued,  com- 
plain and  defend,  in  any  court  of  law  or  equity,  as  fully  as  natu- 
ral persons."  It  has  been  held  that  when  a  corporation  organized 
under  this  act  has  been  brought  as  suitor  into  a  court  which  has 


a  body  corporate,  and  as  such,  and  in 
the  name  designated  in  the  organiza- 
tion certificate  it  shall  have  power  ; 

"  Mrst.  To  adopt  and  use  a  corporate 
seal. 

"  Second.  To  have  succession  for  the 
period  of  twenty  years  from  its  organ- 
ization, unless  it  is  sooner  dissolved 
according  to  the  provisions  of  its  arti- 
cles of  association,  or  by  the  act  of  its 
shareholders  owning  two-thirds  of  its 
stock,  or  unless  its  franchises  become 
forfeited  by  some  violation  of  law. 

"  Third.  To  make  contracts. 

"  Fourth.  To  sue  and  be  sued,  com- 
plain and  defend,  in  any  court  of  law 
or  equity,  as  fully  as  natural  persons. 

"Fifth.  To  elect  or  appoint  directors, 
and  by  its  board  of  directors,  to  ap- 
point a  president,  vice-president,  cash- 
ier, and  other  officers  ;  define  their 
duties  ;  require  bonds  of  them  and  fix 
the  penalty  thereof  ;  dismiss  such  offi- 
cers, or  any  of  them,  at  pleasure,  and 
appoint  others  to  fill  their  places. 

"  Sixth.  To  prescribe,  by  its  board  of 
directors, by -laws  not  inconsistent  with 
law,  regulating  the  manner  in  which 
its  stock  shall  be  transferred;  its  di- 
rectors elected  or  appointed ;  its  offi- 
cers appointed  ;  its  property  transfer- 
red; its  general  business  conducted, 
and  the  privileges  granted  to  it  by  law 
exercised  and  enjoyed. 

"  Seventh.  To  exercise  by  its  board  of 
directors,  or  duly  authorized  officers 
or  agents,  subject  to  law,  all  such  inci- 
dental powers  as  shall  be  necessary  to 
carry  on  the  business  of  banking ;  by 
discounting  and  negotiating  promis- 
sory notes,  drafts,  bills  of  exchange, 
and  other  evidence  of  debt  ;  by  re- 
ceiving deposits ;  by  buying  and  sell- 
ing exchange,  coin  and  bullion ;  by 
loaning  money  on  personal  security  ; 
and  by  obtaining,  issuing  and  circulat- 
ing notes  according  to  the  provisions 
of  this  ti  de . 

"  But  no  association  shall  transact  any 
business,  except  such  as  is  incidental 
and  necessarily  preliminary  to  its 
organization,  until  it  has  been  author- 
ized by  the  comptroller  of   the  cur- 


rency  to   commence  the  business   of 
banking. 

"  Sec.  5137.  A  national  banking  asso- 
ciation may  purchase,  hold,  and  convey 
real  estate  for  the  following  purposes, 
and  for  no  others  : 

"  First.  Such  as  shall  be  necessary 
for  its  immediate  accommodation  in 
the  transaction  of  its  business. 

"Fourth.  Such  as  it  shall  purchase 
at  sales  under  judgments,  decrees,  or 
mortgages  held  by  the  association,  or 
shall  purchase  to  secure  debts  due  it. 

"  But  no  such  association  shall  hold 
the  possession  of  any  real  estate, 
under  mortgage,  or  the  title  and  pos- 
session of  any  real  estate  purchased  to 
secure  any  debts  due  to  it,  for  a  longer 
period  than  five  years. 

"  Sec.  5138.  No  association  shall  be 
organized  under  this  title  with  a  less 
capital  than  $100,000,  except  that  with 
a  capital  of  not  less  than  $50,000  it 
may,  with  the  approval  of  the  secre- 
tary of  the  treasury,  be  organized  in 
any  place  the  population  of  which 
does  not  exceed  six  thousand  inhabit- 
ants. No  association  shall  be  organ- 
ized in  a  city  the  population  of  which 
exceeds  fifty  thousand  persons  with  a 
less  capital  than  $100,000- 

"  Sec.  5139.  The  capital  stock  of  each 
association  shall  be  divided  into  shares 
of  $100  each,  and  be  deemed  per- 
sonal property,  and  transferable  on 
the  books  of  tbe  association  in  such 
manner  as  may  be  prescribed  in  the 
by-laws  or  articles  of  association. 
Every  person  becoming  a  shareholder 
by  such  transfer  shall,  in  proportion 
to  his  shares,  succeed  to  all  the  rights 
and  liabilities  of  the  prior  holder  of 
such  shares  ;  and  no  change  shall  be 
made  in  the  articles  of  association  by 
which  the  rights,  remedies,  or  security 
of  the  existing  creditors  of  the  associa- 
tion shall  be  impaired. 
"  Sec.  5140.  At  least  fifty  per  cent  of 
the  capital  stock  of  every  associatiou 
shall  be  paid  in  before  it  shall  be 
authorized  to  commence  business  ;  and 
the  remainder  of  the  capital  stock  of 
such  association  shall  be  paid  in  in- 


Suits  at  Law  by  and  against  Corporations.  499 

jurisdiction  of  the  suit,  it  lias  tlics^une  status,  in  respect  to  its  own 
rights  or  the  rights  of  otliers  against  it,  as  a  natural  person  ;  and 
that  the  presumption  is  that  the  members  of  a  banking  corporation 
organized  under  such  act  are  citizens  of  the  state  in  which  such 
corporation  is  located,  in  all  cases  where  jurisdiction  of  the  court 
depends  upon  citizenship ;  and  that  the  district  court  of  the 
United  States  has  jurisdiction  of  a  suit  brought  against  an 
inhabitant  of  the  district  by  a  national  bank  located  in  another 
state. 

Sec.  343.  Same  continued.  —  In  a  recent  case  under  this  act,  on 
the  question  of  citizenship,  Blackford,  J.,  after  referring  to  vari- 
ous provisions  of  the  banking  act,  observes :  "  It  is  quite  apparent 
from  all  these  statutory  provisions,  that  congress  regards  a  national 
banking  association  as  being  located  at  the  place  specified  in  its 
organization  certificate.  If  such  place  is  a  place  in  a  state,  the  asso- 
ciation is  located  in  the  state.  It  is  indeed  at  but  one  place  in  the 
state ;  but  when  it  is  so  located  it  is  regarded  as  located  in  the  state. 
The  requirement  that  at  least  three-fourths  of  its  directors  of 
the  association  shall  be  residents,  during  their  continuance  in 
ofiice,  in  the  state  in  which  the  association  is  located,  especially 
indicates  an  intention  on  the  part  of  congress  to  regard  the  asso- 
ciation as  belonging  to  the  state.  *  *  *  Where  a  corporation 
is  created  by  competent  authority  —  authority  as  competent,  within 
a  given  state,  to  create  such  corporation  and  to  locate  it  witliin 
such  state,  as  is  the  state  itself,  and  a  location  and  habitat,  within 
such  state  and  not  elsewhere,  is  given  by  the  creating  authority 
to  such  corporation,  there  is  no  reason  why  the  legal  presumption 
should  not  be,  that  the  members  of  such  corporation  are  citizens 
of  such  state,  within  the  meaning  of  the  second  section  of  the 
third  article  of  the  constitution,  and  the  eleventh  section  of  the 
judicial  act  of  1789.  The  presumption  in  the  case  of  a  corpora- 
tion created  by  a  state  is  only  arrived  at  by  presuming  the  mem- 

stdllments  of  at  least  ten  per  centum  commence  business  ;  and  the  payment 

each,  on  the  wliole  amount  of  the  cap-  of  each  installment  shall  be  certified 

ilal,  as  frequently  as  one  installment  to  the  comptroller,  under  oath,  by  the 

at  the  end  of  each  succeeding  month  president  or   cashier  of   the   associa- 

from  the  time  it  shall  be  authorized  tion." 
by  the  comptroller  of  the  currency  to 


600  Petvate  Cokpoeations. 

bers  of  the  corporation  to  be  citizens  of  the  United  States,  and  to 
be  residents  in  the  state,  and  therefore,  under  the  decision  in 
Oassies  v.  Ballon^^  citizens  of  the  state.''  * 

It  seems,  therefore,  from  the  foregoing,  that  a  corporation  is  a 
citizen  of  the  state  where  it  is  created,  in  the  sense  in  wliieh  it  is 
used  in  that  part  of  the  constitution  of  the  United  States  which 
refers  to  the  judicial  powers  of  lier  courts;  and  also  in  the  statutes 
of  the  United  States  providing  for  the  jurisdiction  of  the  circuit 
courts,  as  well  as  the  statutes  providing  for  the  removal  of  causes 
from  a  state  court  to  the  circuit  court  of  the  United  States,  of  the 
district  where  the  suit  is  instituted ;  and  that  the  same  doctrine  as 
to  citizenship  applies  under  the  statute  relating  to  the  national 
banking  law. 

Sec.  344.  Same  continued — Where  a  corporation  is  created  by 
the  laws  of  one  of  the  states  of  the  United  States,  or  under  general 
laws  provided  therefor,  or  under  the  statutes  of  the  United  States, 
where,  by  the  provisions  of  the  statutes,  they  have  a  location 
within  one  of  the  states,  this  constitutes  the  corporation  a  citizen 
of  the  state  where  created,  within  the  meaning  of  the  constitution 
and  the  judiciary  act,  and  the  statutes  providing  for  the  removal 
of  a  suit  from  tlie  state'  court  to  the  circuit  court  of  the  United 
States ;  and  it  will  be  conclusively  presumed  that  the  members  of 
such  a  corporation  are  citizens  of  the  state  where  such  corporation 
is  located.^ 

Sec.  345.  Parties  to  a  suit. — It  is  evident  that  where  a  corpora- 
tion is  a  party  to  a  suit  the  other  parties  should  usually  be  the 
same  as  though  all  were  natural  persons.  But  neither  the  bond- 
holders nor  the  stockholders  of  a  corporation  are  necessary  parties 
to  a  creditor's  bill  seeking  to  subject  assets  of  the  corporation  to 

»6Pet.  761.  Wall.   410;   S.    C,  48   111.   172;  The 

2  Manufacturers'   National  Bank  v.  Liverpool    Ins.  Co.  v.  The   Common- 

Baach,  Blatchf.;   1  With.  Corp.  Cas.  wealth  of  Mass.,  10  Wall.  566(1870); 

93;   Marshall   v,    Baltimore,  etc.,  R.  The  State  of  Louisiana  v.  Fordick,  21 

Co..  21  How.  314.  La  Ann.  434.     And  it  may  hring  suits 

**  The   Commonwealth   of   Pennsyl-  in  the  courts  of  any  other  state.     Park 

vania  v.  The  Quicksilver  Mining  Co.,  Bank  v.  Nichols,  4  Biss.  815  ;  Insurance 

10  Wall.  553  ;  The  Insurance  Compa-  Company  v.  The  C.  D.,  Jr.,  1  Woods, 

nies  v.   The  Commonwealth,  5  Bush,  73(1874). 

68  ;  Ducat  v.  The  City  of  Chicago,  10 


Surrs  AT  Law  by  and  against  Corporations,  501 

the  payment  of  debts,  where  they  are  represented  l)y  other  parties 
before  the  court.^ 

And  wliere  the  property  of  a  corporation  was  conveyed  to  trns- 
tees  to  secure  the  payment  of  debts,  and  it  was  sold  witliout 
judicial  proceedings,  in  the  execution  of  a  power  attempted  to  be 
confeiTed  by  the  terms  of  the  deed,  but  which  was  invahd  because 
of  a  statute  requiring  that  all  such  sales  should  be  made  by  pro- 
ceedings in  court,  it  was  held,  first,  that  the  purchaser  was  answer- 
able for  the  proceeds  of  the  property  ;  second,  that  the  corpora- 
tion was  a  necessary  party  to  any  proceeding  for  its  recovery.* 
So,  also,  wliere  two  directors  of  a  corporation  instituted  an  action 
against  the  corporation  and  a  preferred  stockholder  and  another 
dii-ector,  to  prevent  the  prefei'red  stockholder  from  suing  the  cor- 
poration for  an  accounting  and  for  dividends,  it  was  held  that  the 
plaintiff  could  not  maintain  the  action  ;  that  the  right  to  the  relief 
sought  could  not  be  determined  in  the  suit  by  the  preferred  stock- 
holder ;  that  the  defendants  were  improperly  joined,  they  having 
no  connnunity  of  interest ;  and  that,  if  such  action  was  main- 
tainable at  all,  the  corporation  only  could  maintain  it.^ 

Sec.  3-i6.  Process. — In  considering  the  capacity  and  incident  of 
a  corporation  to  sue  and  be  sued,  it  is  proper  also  to  notice  the 
general  principles  relating  to  process,  pleadings,  and  evidence  in 
such  suits.  In  relation  to  process  it  may  be  observed  that,  in 
modern  practice,  it  is  the  same  as  though  the  parties  were  natural 
persons.  The  statutes  of  the  various  states  generally,  if  not  uni- 
versally, provide  what  the  original  process  shall  contain,  and  how 
it  shall  be  served,  not  only  on  natural  persons  but  on  copartner- 
ships and  corporations.  And  jurisdiction  of  the  person  is  usually 
secured  in  case  of  a  corporation,  by  the  service  of  the  process  on 

1  The  Chicago,  etc.,  R.  Co.  v.  How-  the  corporation  ;  that  if  the  suit  should 

ard,  7  Wall.  392;  S.  C.,  1  With.  Corp.  be  successful  the  property  would  be 

Cas.  1.  absorbed    in    the    payment   of    debts, 

-  Samuel    v.    Holladay,    1    Woolw.  leaving    nothing    to     be    distributed 

(C.  C.)400;  S.  C,  1  With.  Corp.  Caa.  among  its  stockholders,  and  that  the 

139.     In  this  case  the  court  also  held  interest  of  the  plaintiffs,  by  reason  of 

that  where  proceedings  were  instituted  the    small   amount    of   stock  held  by 

by  the  stockholders  in  behalf  of  them-  them,  was  merely  nominal,  they  would 

selves  and  all  others  who  might  come  not  order  the  cause  to  stand  over  for 

in  and  take  part  in  the  litigation,  and  service  on  the  corporation.     lb. 

it   appeared   that   the   bill   had   been  ^  Gould  v.  Thompson,  39  How.  Pr. 

pending  six  years  without  service  on  5. 


502  Private  Coepoeations. 

some  officer  in  the  same  manner  as  tliough  it  were  a  natural  per- 
son. Statutes  usually  provide  tliat  the  original  process  against  a 
private  corporation  may  be  served  in  the  usual  way  of  service,  on 
the  president  or  other  officer,  or  on  any  general  agent  of  such  cor- 
poration, or  upon  some  local  agent  of  the  corporation,  within  the 
jurisdiction  of  the  court  where  the  suit  was  brought ;  especially  is 
the  latter  the  case  if  the  suit  relates  to  matters  growing  out  of  or 
connected  with  the  business  of  the  office  or  agency.* 

Sec.   347.  Pleadings In  relation  to  pleadings,  also,  they    are 

generally  required  to  be  the  same,  in  most  if  not  all  respects,  as 
though  the  parties  to  the  suit  were  natural  persons,  and  the  suffi- 
ciency of  them  must  be  adjudged  as  in  ordinary  cases  between  in- 
dividuals. But  in  certain  proceedings,  owing  to  the  peculiar 
character  of  the  corporate  body,  and  the  extent  or  limit  of  the 
duties  and  powers  of  the  corporation  dependent  upon  the  charter 
or  act  under  which  it  is  instituted,  matters  may  be  required  to  be 
pleaded  that  would  have  no  pertinence  except  that  a  corporation 
was  a  party.  Thus,  in  an  action  by  a  foreign  corporation,  for  an 
alleged  libel  against  it,  on  demurrer  to  the  declaration,  it  was  held 
that  the  charter  should  be  set  out  at  length,  in  order  that  it  might 
be  seen  whether  the  publication  was  false  in  stating  the  mode  in 
which  it  authorized  the  business  of  the  company  to  be  done,  and 
which  was  the  subject  of  the  criticism  which  constituted  the 
alleged  libel. 

On  this  question,  Mr.  Justice  Lawrence,  who  delivered  the 
opinion  of  the  supreme  court  of  Illinois,  observed  :  "  It  would  be 
clearly  against  public  policy  to  treat  as  libelous  an  article  Mdiich 
merely  assumes  that  an  insurance  corporation  proposes  to  do  for 
its  own  advantage,  or  that  of  its  stockholders,  whatever  its  charter 
may  expressly  authorize  it  to  do.     If  a  charter  is  obtained  by  any 

'  Code  of  Iowa  (1873),  §§  2611-2613.  such  person.  Oxford  Iron  Co.  v.  Sprad- 

As  to  service  upon  an  agent,  under  the  ley,  42  Ala.  24  ;  Talladega  Ins.  Co.  v. 

statutes   of     Illinois    (1853),     see  St.  McCullough,  id.  667. 
Louis,  etc.,  R.  Co.  V.   Dorsey,   47   111.         And  where  tlie  statute  provided  for 

288.  service  of    original  notice,   in  certain 

It  must  appear,  in  order  to  sustain  cases,  upon  an  agent  or  clerk,  it  was 
a  default  against  a  corporation,  that  held  that  a  service  made  upon  a  bag- 
service  of  the  requisite  process  and  gage-master,  or  hack-master,  would  not 
papers  was  made  upon  some  person  be  a  good  service.  Richardson  &  Co. 
occupying  a  relation  to  the  corporation  v.  The  Burlington,  etc.,  R.  Co.,  8  Iowa, 
that   they   could   legally   serve   upon  260;  8  How.  Pr.  308. 


Suits  at  Law  by  and  against  Corporations.  503 

corporation  which  seeks  to  secure  for  its  own  emoluments  tlie  con- 
trol of  the  money  of  individuals,  it  is  proper  to  call  the  attention 
of  the  public  to  its  provisions,  and  to  take  it  for  granted  that  the 
incorporation  proposes  to  avail  itself  of  whatever  privileges,  in 
dealing  with  the  public,  it  has  induced  the  legislature  to  bestow. 
A  free  criticism  of  the  character  of  an  insurance  company,  or  of 
any  other  incorporation  which  claims  the  confidence  of  the  public, 
and  seeks  the  possession  of  its  funds,  is  to  be  encouraged  rather 
than  repressed,  as  a  means  of  public  security  ;  and  if  an  insurance 
company  has  procured  a  charter  which  authorizes  it  to  pay  an 
interest  of  thirty  per  cent  per  annum  to  its  stockholders,  before 
laying  by  a  fund  for  the  security  of  its  policy-holders,  we  certainly 
cannot  hold  a  publication  libelous,  merely  because  it  assumes 
that  the  company  will  do  for  the  profits  of  its  stockholders,  that 
which  it  has  obtained  an  express  power  to  do ;  and  because  it 
argues  that  a  company,  organized  under  such  a  charter,  must 
necessarily  be  unworthy  of  public  confidence.  '  This  brings  us  to 
the  precise  question  upon  this  record,  namely :  Does  the  charter 
of  this  company  authorize  it  to  do  what  the  publication  says  it 
proposes  to  do?  If  it  does,  the  publication  cannot  be  considered 
libelous.  It  would  be  merely  a  just  criticism  upon  an  objection- 
able charter,  and  a  proper  caution  to  the  public  against  trusting 
its  money  to  a  corporation  which  has  obtained  a  legislative  right 
so  to  use  that  money  as  necessarily  to  make  the  public  insecure. 
If  the  charter  contains  no  such  authority,  and  the  company  does 
not  propose  to  do  its  business  in  that  method,  the  publication  may 
be  libelous.  Herein  contains  the  fatal  detect  in  the  declaration. 
It  nowhere  purports  to  set  out  the  charter,  either  in  substance  or 
in  liaec  verba.  *  *  *  The  plaintiff  should  have  set  out  the 
charter  at  length,  that  the  court  might  determine  whether  the 
publication  was  false  in  stating  the  mode  in  which  it  authorized 
the  business  of  the  company  to  be  done.  The  declaration,  it  is 
true,  has  the  usual  formula,  to  the  effect  that  the  defendant  falsely 
and  maliciously  wrote,  published,  etc.,  but  in  a  case  of  this  charac- 
ter it  is  not  sufficient."  ^ 

Sec.  348.   Same  continued.  —  As  a  general  rule,  it  is  not  necessary 
for  a  corporation  plaintiff  to  set  forth  in  its  declaration  the  articles, 

'  The  Halinemaunian  Life  Ins.  Co.  v.  Beebe,  48  111.  87  ;  S.C,  1  With.  Corp. 
Caa.  420. 


504  Private  Cokpoeations. 

or  act  of  incorporation,  if  it  be  a  private  one ;  it  is  sufficient  to 
aver  the  fact  and  prove  tlie  same  on  the  trial  if  it  is  controverted.* 

Sec.  349.  When  party  is  estopped  to  deny  the  corporate  existence. — 
"VVlien  the  action  is  brought  by  the  corporation,  on  a  contract  exe- 
cuted by  the  defendant  to  it,  the  general  rule  is  that  the  plaintiff 
need  not  aver  or  prove  tlie  corporate  existence,  and  the  defend- 
ant is  estopped  from  denying  it,  in  the  absence  of  fraud  on  the 
part  of  the  cor2)oration.^  But  where  there  is  fraud,  on  the  part 
of  the  corporation,  in  obtaining  the  contract,  the  party  contract- 
ing with  it  is  not  estopped  from  denying  its  corporate  existence.^ 
Thus,  where  a  bill  in  chancery  was  filed  to  set  aside  a  conveyance 
of  real  estate,  alleged  to  have  been  obtained  by  fraud  and  mis- 
representation of  the  corporation,  it  was  held  that  with  proper 
averments  the  fact  whether  said  corporation  ever  had  a  corporate 
existence,  so  as  to  enable  it  in  its  corpomte  capacity  and  name  to 
take  and  hold  property,  might  be  inquired  into ;  that  if  a  com- 
pany professing  to  have  a  corporate  existence,  which  it  in  fact 
does  not  possess,  acquires  property  for  a  particular  purpose  in  its 
corporate  name,  and  conveys  it  to  another,  the  sufficiency  of  such 
conveyance  or  transfer  may  be  inquired  into  collaterally.*  And 
where  a  party  is  estopped  from  denying  the  existence  of  the  cor- 
poration, at  the  time  he  recognized  it  as  such,  if  he  denies  i;s  ex- 
istence subsequently,  he  must  show  how  it  ceased  to  exist.^     But 

'  Selma,  etc.,  R.  Co.  v.  Tipton,  5  Ala.  ingum  Manuf .  Co.,  4  id.  2G7  ;  Zioa 
787  ;  California  Navigation  Co.  v.  Church  v.  St.  Peter's  Church,  5  Watta 
Wriglit,  6  Cal.  258  ;  Frye  v.  Bank  of  &  8.  215 ;  Lighte  v.  Everett  Ins.  C"o.,5 
Illinois,  10  111.332;  Spangler  v.  Indi-  Bosw.  716;  Union  Mut.  Ins.  Co.  v. 
ana,  etc.,  R.  Co.,  21  id.  276;  Heaston  v.  Osgood,  1  Duer,  707;  Kennedy  v.  Cot- 
Cincinnati,  etc.,  R.  Co.,  16  Ind.  275;  ton,  28  Barb.  59  ;  Lafayette  Ins.  Co.  v. 
United  States  v.  Haskins,  1  Johns.  Cas.  Rogers,  30  id.  491;  Phenix  Bank  v. 
133 ;  Utica  Bank  v.  Smalley,  2  Cow.  Dounell,  41  id.  571 ;  Acome  v.  Am. 
770;  Dutchess  Cotton  Man.  v.  Davis,  Min.  Co.,  11  How.  Pr.  24;  Shoe  and 
14  Jolins.  245;  Bank  of  Michigan  v.  Leather  Bank  v.  Brown,  9  Abb.  Pr. 
Williams,5  Wend.  482;  Grays  v.  Turn-  218;  Howe  Machine  Co.  v.  Snow,  83 
pike  Co.,  4  Rand.  578.  Iowa,  433. 

■^Dutchess    Cotton    Manuf.    Co.    v.  ^  Stoops  v.  Greensburgh.etc,  R.  Co., 

Davis,  14  Johns.   245;  Hanitramck  v.  10   Ind.  47;  Ensey  v.   Cleveland,  etc., 

Edwardsville,    2  Mo.  169;  Hughes  v.  R.  Co.,id,  178;  Fort  Wayne  Turnpike 

Bank  of  Somerset,   5  Litt.   (Ivy.)  47  ;  Co.  v.  Deam,  id.  563. 

Searsburgh  Turnpike  Co.  v.  Cutler,  6  ^  Carey  v.  The  Cincinnati,  etc.,  R. 

Vt.  315  ;  Tar  River  Nav.  Co.  v.  Neal,  Co.,  5  Iowa,  357. 

3  Hawk.  (N.  C.)  520  ;  Bennington  Iron  ^  Ensey  v.  Cleveland,  etc.,  R.  Co.,  10 

Co.   V.   Rutherford,   18  N.  J.  L.  105  ;  Ind.  178;  Fort  Wayne  Turnpike  Co.  v. 

Richardson  v,   St.  Joseph's  Iron  Co.,  5  Deam,  supra. 
Blackf.  (Ind.)  146;  Harrison  v.  Musk- 


Suits  at  Law  by  and  against  Coeporationb. 


505 


it  is  held  that  a  contractor  with  a  corporation  Is  estopped  from 
setting  up  a  fraudulent  organization  of  the  corporation  in  defense 
of  a  suit  brought  by  the  company  against  him.' 

Sec.  350.  When  the  corporation  is  estopped  from  denying  its  corpo- 
rate existence.— It  is  also  a  general  doctrine,  founded  upon  princi- 
ples of  justice  and  equity,  that  a  corporation,  dealing  with  others 
as  such,  is  estopjDed  from  denying  its  corporate  existence,''  and 
this  rule  has  become  a  matter  of  statutory  regulation  and  adop- 
tion in  various  states.* 

Sec.  351.  General  denial.— At  common  law  it  was  well  settled 
that  if,  in  a  suit  brought  by  a  corporation,  the  defendant  plead  to 
the  merits,  he  admitted  the  capacity  of  the  defendant  to  sue ;  and 
that  if  he  merely  made  a  general  issue,  it  dispensed  with  the  ne- 
cessity of  all  proof  of  corporate  existence  and  of  their  right  to  sue.* 


'  State  V.  Bailey,  16  Ind.  46  ;  Jones 
V.  Ciacinnati,  etc.,  R.  Co.,  14  id.  89; 
Hubbard  v.  Chappel,  id.  601 ;  Evans- 
ville,  etc.,  R.  Co.  v.  Evansville,  15  id. 
395 ;  Meikel  v.  German  Savings,  etc., 
Soc,  16  id.  181 ;  Brovvnlee  v.  Ohio, 
etc.,  R.  Co.,  18  id.  68  ;  Commissioners 
V.  Bright,  id.  93;  Washington  College 
V.  Duke,  14  Iowa,  14;  Hamtramck  v. 
Bank  of  Edwardsville,  2  Mo.  169; 
Camp  V.  Byrne,  41  id.  535;  Congre- 
gational Soc.  V.  Perry,  6  N.  H. 
164 ;  Cochran  v.  Arnold,  58  Penn.  St. 
399. 

Neither  can  it  be  sliown  in  defense 
of  an  action  by  a  corporation  that  it 
lias  forfeited  its  rights  by  misuser  or 
nonuser,  as  it  is  the  privilege  of  the 
state  only  in  such  cases  to  secure  a 
judgment  of  forfeiture  by  direct  pro- 
ceedings for  that  purpose.  Cochran 
V.  Arnold.  58  Penn.  St.  399  ;  Center 
Turnpike  Co.  v.  McConaby,  16  S.  &  R. 
140 ;  Lehigh  Br.  Co.  v.  Lehigh  Coal 
Co.,  4  Rawle,  9  ;  Chester  Glass  Co.  v. 
Dewev,  16  Mass.  103 ;  Searsborough 
Turnpike  Co.  v.  Cutler,  6  Vt.  315 : 
Union  Branch  R.  Co.  v.  East  Tenn.  R. 
Co.,  14  Ga.  337 ;  Cleveland  R.  Co.  v. 
Erie,  37  Penn.  St.  380. 

And  a  payment  of  a  portion  of  sub- 
scription to  the  stock  of  a  corporation 
is  sufficient  to  estop  the  subscribers 
from  denying  the  corporate  existence 
in  an   action   to  recover  the  balance, 

64 


Maltby  v.  North  Western  R.  Co.,  16 
Md.  433;  Black  River  R.  Co.  v.  Clarke, 
25  N.  Y.  208. 

2  Dooley  v.  Cheshire  Glass  Co.,  15 
Gray,  494  ;  Merrick  v.  Reynolds  En- 
gine Co. ,  101  Mass.  385. 

*The  Code  of  Iowa,  tit.  9,  chap.  1, 
§  1089,  provides  :  "  No  body  of  men 
acting  as  a  corporation  under  the  pro- 
visions of  this  chapter  [relating  to  cor- 
porations] shall  be  permitted  to  set 
up  the  want  of  a  legal  organization  as 
a  defense  to  an  action  against  them 
as  a  corporation  ;  nor  shall  any  per- 
son sued  on  a  contract  made  with  such 
a  corporation,  or  sued  for  an  injury  to 
its  property,  or  a  wrong  done  to  its 
interests,  be  permitted  to  set  up  a 
want  of  such  legal  organization  in  hia 
defense." 

*  Alderman  v.  Finley,  10  Ark.  433  ; 
Teaton  v.  Lynn,  5  Pet.  331 ;  Mississippi, 
etc.,  R.  Co.  V.  Cross,  20  Ark.  443; 
Phenix  Bank  v.  Curtis,  14  Conn.  437  ; 
Railsback  v.  Liberty,  etc.,  Turnpike 
Co.,  2  Ind.  656;  Jones  v.  Cincinnati, 
etc.,  R.  Co  ,  14  id.  89;  Hardy  v.  Merri- 
weather,  id.  203  ;  Hubbard  v.  Chappel, 
id.  601 ;  Harrison  v.  Martinsville,  etc., 
R.  Co.,  16  id.  505  ;  Carpenter  v.  Mercan- 
tile Bank,  17  id.  253;  Commissioners 
v.  Bright,  18  id.  93  ;  Penobscot  Boom 
Co.  V.  Lamson,  16  Me.  334;  Savage 
Manuf.  Co.  v.  Armstrong,  17  id.  34  ; 
Putnam  Free  School  v.  Fisher,  30  id. 


506  Private  Corpokations. 

This  was,  however,  held  not  to  apply  in  case  of  a  foreign  corpo- 
ration.^ 

Sec.  352.  Proof  of  incorporation.  —  Where,  in  other  cases,  it  be- 
comes necessary  to  prove  an  incorporation  this  may  be  done  by 
an  exemplification  of  the  act  under  which  it  was  constituted  or 
authorized,  and  proof  of  the  acceptance  of  its  provisions.  This 
proof  of  acceptance  may  be  shown  by  the  direct  action  of  the 
corporators,  as  shown  by  the  records  of  the  corporation,  or  by 
acts  of  user  under  it.  We  have  already  considered  what  acts  of 
corporations  will  be  considered  as  an  acceptance  of  a  charter  or 
act  of  incorporation.^  General  statutes  relating  to  incorporation 
may  be  proved  like  any  other  public  and  general  statutes  pub- 
lished by  authority  of  the  legislature,  and  i^rirria  facie^  it  is  suf- 
ficient to  show  that  the  book  containing  such  statutes  purports  to 
have  been  printed  by  public  authority-;  for  it  is  almost  if  not 
the  universal  course  for  the  legislature  of  the  various  States  as 
well  as  the  congress  of  the  United  States,  to  have  the  laws  and 
resolutions  of  each  session  of  them  printed  by  authorized  parties  ; 
and  it  is  also  usually  provided  by  them,  that  certain  competent 
persons  shall  compare  the  copies  to  be  published  as  authority, 
with  the  original  enrolled  acts  of  the  legislature  or  of  congress, 
as  the  case  may  be,  and  it  is  but  reasonable  that  general  laws  and 
statutes  so  purporting  to  be  printed  should,  at  least,  be  received 
as  p?'ima  facie  evidence  that  they  are  authorized  and  correct. 

Sec.  353.  Same  continued.  —  It  is  proper  to  say  that  the  private 
corporations  in  this  country  are  almost  invariably  created  under  such 
general  laws,  and  that  under  the  provisions  of  the  same  it  would  or- 
dinarily be  necessary  only  to  prove  that  the  corporators  had  com- 
plied with  the  statutes  in  that  respect.  This  may  generally  be 
shown  by  the  original  articles  of  incorporation,  signed  by  the 

533;  Roxbury  v.   Huston,   37  id.  43;  Metropolis  v.  Orme,  3  Gill.  443 ;  Whit- 
People  V.  Turnpike  and  Bridge  Co.,  20  tingon  v.  Farmer.s'  Bauls,  5  Harr.  &  J. 
Barb.  518 ;  Orono  v.    Wedgewood,  44  489  ;    Methodist  Episcopal  Church  of 
Me.  49  ;  Rheem  v.  Naugatuck  Wheel  Cincinnati  v.  Wood,  5  Ohio,  286. 
Co..  33   Penn.   St.   356  ;  Bank  of  the 

'  Henriques   v.    Dutch   W.  I.  Co.,  3  United    States    Bank   v.   Stearns,  15 

Ld.  Raym.  1535;  School  District,  etc.,  Wend.  314 ;  Bank  of  Mich.  v.  Williams, 

V.   Blaisdell,    6  id.    198.      See,    also,  5  id.  483. 

Lewis  V.  Bank  of  Ky.,  13  Ohio,  132  ;  *  gge  ante,  §  28  et  seq. 


Suits  at  Law  by  and  against  Corporations. 


507 


original  persons  desiring  to  organize  a  corporation,  and  wliich  is 
usually  required  to  be  filed  and  recorded  in  some  one  or  more 
public  offices,  or  by  a  copy  or  transcript  of  the  same  duly  authen- 
ticated by  the  proper  officer,  having  charge  of  the  records  of  the 
original  articles  or  certificate  of  incorporation.^ 

Sec.  354.  Corporate  records.  —  The  organization  of  a  corpora- 
tion is  of  course  a  matter  which  may  be  proved  by  its  records." 
The  acts  of  a  corporation  may,  as  we  have  seen,  furnish  evidence 
of  acceptance  of  a  corporate  charter,  or  the  provisions  of  a  general 
act  for  incorporating,  and  the  intention  in  this  respect,  as  well  as 
the  positive  and  direct  acceptance  by  the  will  of  the  corporation, 
may  be  most  satisfactorily  shown  by  its  records,  for  neither 
the  private  views  nor  the  public  declarations  of  individual  mem- 


■  Printed  copies  of  legislative  acts 
and  of  reports  of  the  decisions  of  the 
courts,  purporting  to  ba  published 
by  authority,  are  sufficient  prima  fa- 
de evidence  of  the  matters  found 
therein,  and  that  the  publication  is 
authorized.  Young  v.  Bank  of  Alex- 
andria, 4  Cranch,  388;  Biddis  v. 
James,  6  Binn.  321  ;  Eld  v.  Qorham, 
20  Conn.  8  ;  Watkina  v.  Holnian,  16 
Pet.  25.  Acts  of  incorporation  were 
by  the  statutes  of  Massachusetts  to  be 
deemed  public  statutes,  and  may  be 
given  in  evidence  without  specially 
pleading  the  same.  Rev.  Stats.,  chap.  2, 
§  3.  And  in  Ohio  it  is  enacted  that  in 
pleading  a  private  statute ,  or  a  right 
derived  therefrom,  it  shall  be  suffi- 
cient to  refer  to  the  statute  by  its  title 
and  the  day  of  its  passage,  and  the 
court  shall  thereupon  take  judicial 
notice  of  the  same.  Rev.  Stat,  bv 
Curwin  (1854),  vol.  3,  p.  1956.  The 
acts  printed  by  the  king's  printers  are 
always  good  evidence  to  a  jury,  though 
they  may  not  be  good  evidence  upon 
an  issue  of  mil  tiel  record.  Anon.,  2 
Seld.  566,  opinion  by  Holt,  C.  J.  The 
laws  revised  and  adopted  by  the  ter- 
ritorial legislature  of  Michigan  in  1827, 
were  the  statutes  previously  printed. 
It  was  held  that  the  printed  book  con- 
taining these  statutes  was  the  best 
evidence  of  what  the  statute  was,  and 
that  the  original  record  of  the  statutes 
was  not  admissible  in  evidence  to 
show  that  the  revision  was  incorrect, 
especially  where  the  alleged  error  is 


not  discovered  for  a  long  time,  and 
the  statute,  as  printed,  has  been 
treated  and  considered  as  the  actual 
law.  Pease  v.  Peck,  18  How,  (U.  S.) 
595. 

An  act  of  congress,  approved  June 
20,  1874,  providing  for  the  publication 
of  the  Revised  Statutes  and  the  laws 
of  the  United  States,  is  as  follows  : 

"Sec.  2.  That  the  secretary  of 
state  is  hereby  charged  with  the  duty 
of  causing  to  be  prepared  for  printing, 
publication  and  distribution,  the  Re- 
vised Statutes  of  the  United  States, 
enacted  at  tliis  present  session  of  con- 
gress ;  that  he  shall  cause  to  be  com- 
pleted the  head-notes  of  the  several 
titles  and  chapters,  and  the  marginal 
notes  referring  to  the  statutes  from 
which  each  section  was  compiled  and 
repealed  by  said  revision,  and  refer- 
ences to  the  decisions  of  the  courts  of 
the  United  States,  explaining  or  ex- 
pounding the  same,  and  such  decisions 
of  the  state  courts  as  he  may  deem 
expedient,  with  a  full  and  complete 
index  to  the  same.  And  when  the 
same  shall  be  completed,  the  said  sec- 
retary shall  duly  certify  the  same  un- 
der the  seal  of  the  United  States,  and 
when  printed  and  promulgated,  as 
hereinafter  provided,  the  printed  vol- 
ume shall  be  legal  evidence  of  the 
laws  and  treaties  therein  contained  in 
all  courts  of  the  United  States  and  of 
the  several  states  and  territories." 

■^  Duke  V.  Cahawba  I^av,  Co.,  10 
Ala.  83. 


508  Private  Corpokations. 

bers  of  the  corporation  can,  as  a  general  rule,  furnish  evidence  of 
this  fact  or  of  any  corporate  act.'  But  .the  unrecorded  acts  of  a  cor- 
poration, or  of  the  directors,  may  sometimes  be  proved  by  parol, 
unless  otherwise  provided  in  the  charter.''  And  omissions  in  the 
corporate  minutes  may  also  be  supplied  by  parol  testimony.^  And 
Avhere,  on  a  j^rocceding  for  a  mandmiius  to  compel  a  defendant 
to  deliver  np  to  the  relators  certain  account  books  of  the  corpora- 
tors, it  appeared  that  the  defendant  had  acted  as  secretaiy  of  the 
relators  about  two  months  ;  that  he  had  in  his  possession  books, 
in  one  of  which  he  had  written  the  minutes  of  the  proceedings  of 
the  meeting  of  the  corj^orators  and  of  the  stockholders  and 
directors,  and  in  another  were  contained  the  signatures  of  the  sub- 
scribers to  the  capital  and  the  receipts  of  the  relators,  but  that 
each  of  these  books  was  purchased  with  the  defendant's  own  money, 
it  was  held  that  the  books  were  the  property  of  the  relators,  and 
were  so  as  soon  as  the  defendant,  as  secretary,  began  to  put  in 
them  the  records  of  the  relators  ;  that  the  defendant's  possession 
was  the  possession  of  the  company,  and  that  when  he  ceased  to  be 
secretary  he  had  no  right  to  withhold  the  books  from  the  relators.'* 
And  neither  the  bond  nor  stockholders  of  a  corporation  are  neces- 
sary parties  to  a  creditor's  bill  seeking  to  subject  assets  to  the  pay- 
ment of  debts,  where  they  are  represented  by  the  parties  before 
the  court. ^ 

Sec.  355.  Same  continued.  —  It  is  evident  that  the  records  of 
corporations  may  be  imjjortant,  many  times,  as  evidence  both  for 
and  against  them.  On  the  subject  of  such  evidence.  Prof.  Green- 
leaf  remarks  :  "  There  are  other  records  which  partake  both  of  a 
public  and  private  character,  and  are  treated  as  one  or  the  other,  ac- 
cording to  the  relation  in  w^iich  the  applicant  stands  to  them.  Thus, 
the  books  of  a  corporation  are  public  with  respect  to  its  members, 
but  private  with  respect  to  strangers.^  In  regard  to  its  members, 
a  rule  for  inspection  of  the  writings  of  corporations  will  be  granted, 

>  Bartlet.t   v.  Kinsley,  15  Conn.  327.  Co.,  7   Hare,  131  ;  Holyoke   Bauk   v. 

^  Langsdale  v.  Bonton,  12  Ind.  467.  Manufacturing  Co.,  9  Cush.  576  ,  Hall 

s  Vicksburgli  Co.  v.  Ouchita,  11  La.  v.  Railroad,  21  L.  R.  138  ;  1  Redf .  on 

Ann.  649.  Railways,  578  ;  Boon  v.  Chiles,  8  Pet. 

*  State  V.  Goll.  32  N.  J.  L.  285.  532 ;  Story  v.  Livingston,  13  id.  359. 

'  The  Chicago,  etc.,  R.  Co.  v.  How-        «  Greenleaf  on  Ev.  116. 
ard,  7  Wall.  392  ;  Bagshaw  v.  Railway 


Suits  at  Law  by  and  against  Corporations.         509 

of  course,  on  their  application,  where  such  inspection  is  shown  to 
be  necessary  in  regard  to  some  particular  matter  in  dispute,  or 
where  the  granting  of  it  is  necessary  to  prevent  the  applicant 
from  suiiering  injury,  or  to  enable  him  to  perform  his  duties ; 
and  the  inspection  will  then  be  granted,  only  so  far  as  is  shown  to  be 
essential  to  that  eud.^  But  a  stranger  has  no  right  to  such  rule, 
and  it  will  not  be  granted,  even  where  he  is  defendant  in  a  suit 
brought  by  a  corporation."  *  In  this  class  of  records  are  enume- 
rated "  parish  books,  transfer  books  of  the  East  India  Company, 
public  lottery  books,  the  books  of  incorporated  banking  com- 
panies, a  bishop's  registry  of  presentations,  and  some  others  of  the 
like  kind." ' 

Sec.  356.  stockholder's  rights  in  equity.  —  To  warrant  a  stock- 
holder to  institute  a  suit  in  equity  in  his  own  name,  against  a 
wrong-doer  whose  acts  operate  to  the  prejudice  of  the  interests  of 
the  stockholders,  such  as  diminishing  their  dividends  and  lessen- 
ing the  value  of  their  stock,  application  must  first  have  been 
made  to  the  directors  of  the  company  to  institute  a  suit  in  its 
own  name,  and  they  must  have  refused.  Such  refusal  is  essential 
to  give  the  stockholder  any  standing  in  court,  in  case  the  charter 
confers  upon  the  directors  the  general  management  of  the  busi- 
ness of  the  company.^  But  we  shall,  in  the  following  chapter, 
consider  the  subjects  of  suits  in  equity  by  and  against  corpora- 
tions and  other  parties. 

1  Rex  V.  Merchant  Tailors'  Co. ,  3  B.  Farmer,  1  Str.  646  ;  Brace  v.  Ormond, 

&   Aid.    115;  The    People  v.  Throop,  1  Merv.  409;  Union  Bank  v.   Knapp. 

13  Wend.  183.  3    Pick.    96;   McKavlin   v.  Bresslin,  8 

-1    Greenl.   Ev.,  §   474.     See,  also,  Gray,  177;  Mortimer   v.   McCallan,  6 

Bank  of  Utica  v.  Hillard,  5  Cow.  419  ;  M.  &  W.  58 ;  Rex  v.  Bp.  of  Ely,  8  E. 

S.  C,  6  id.    63  ;  Imperial   Gas   Co.  v.  &  C.  113  ;  Finch  v.  Same,  3  M.  &  Ry. 

Clarke,  7  Bing.  95  ;  Rex  v.  Justice  of  137. 

Buckingham,  8  B.  &  C.  375.  ■»  Memphis   v.  Dean,  8  Wall.  64  ;  18 

sGeeryv.   Hopkins,  3   Ld.    Raym.  How.  (U.  S.)  331. 
851  ;  S.  C,  7  Mod.   139  ;  Shelling  v. 


510  Private  Cokpoeations. 


CHAPTER    XIY. 

SUITS  IN  EQUITY  BY  AND  AGAINST  COKPORATIONS  AND   DIRECTORS. 

Sec.  357.  Remedy  iu  equity  by  and  against  corporations. 

Sec.  358.  Rights,  liabilities  and  remedies  of  various  parties. 

Sec.  359.  Rights  and  liabilities  of,  and  remedies  against,  directors. 

Sec.  360.  Same  continued. 

Sec.  361.  Same  continued. 

Sec.  303.  Same  continued. 

Sec.  363.  Stockholders'  liability  in  equity. 

Sec.  364.  Rights  of  stockholders  to  restrain  acts  ultra  vires. 

Sec.  365.  Creditors'  rights  iu  equity  for  a  misappropriation  of  the  corporate 

fund. 

Sec.  366.  Same  continued. 

Sec.  367.  Doctrine,  generally,  as  to  parties  in  -equitable  proceedings. 

Sec.  368.  Same  continued. 

Sec.  369.  Same  continued. 

Sec.  370.  Where  an  injunction  will  be  granted. 

Sec.  371.  Where  an  injunction  will  not  be  granted. 

Sec.  372.  Specific  performance  —  right  of  way. 

Sec.  35T.  Remedy  in  equity  by  and  against  corporations.  —  We  have 
already  treated  of  suits  at  law  by  and  against  private  corporations 
as  a  common-law  incident,  and  shown  where,  under  our  laws  and 
the  federal  constitution,  the  suits  may  be  brought ;  the  rights  of 
corporations  as  citizens ;  their  rights  in  court  under  the  national 
banking  law ;  the  proper  parties  to  such  suits  ;  and  referred  to  the 
subject  of  parties,  process,  pleadings,  evidence,  etc.,  in  connection 
therewith.  But  we  propose  in  this  chapter  to  discuss  those  reme- 
dies in  equity  which  parties  may  possess,  growing  out  of  their 
relations  with  corporations.  It  will  be  evident  that  the  mere 
legal  abstract  rights  of  parties,  as  frequently  stated  in  the  books, 
would  be  of  little  consequence  were  it  not  for  provisions  made 
to  secure  the  enforcement  of  them.  Hence  the  maxim,  "  that 
wherever  the  law  gives  any  thing  to  a  person  it  also  gives  a 
remedy  for  an  injury  thereto  ;  lex  semper  debet  remedium  /  that 
there  is  no  wrong  without  a  remedy ;  uhi  jus  ihi  rev%edium,. 
If  a  person  has  a  right,  he  must  have  a  means  to  vindicate  and 
maintain  it,  and  a  remedy  if  he  is  injured  in  the  exercise  and 
enjoyment  of  it." 


Suits  in  Equity  by  and  against  Corporations,  etc.      511 

Sec.  358.  Rights,  liabilities  and  remedies  of  various  parties.  —  From 
what  has  already  been  said  it  will  be  apparent  that  not  only  the 
corporation  has  a  right  to  sue  and  is  subject  to  suit  by  members 
and  other  persons,  whose  rights  may  l)e  infringed  l)y  it,  but  also 
that  other  parties  related  to  the  corporation  as  director,  stock- 
holder, bondholder,  trustee,  or  creditor  may  have  rights  and  be 
subject  to  liabilities  growing  out  of  the  corporate  relation,  which 
requires  a  particular  consideration. 

Sec.  359.  Rights  and  liabilities  of,  and  remedies  against,  directors. — 
It  must  be  apparent  that  one  of  tlie  most  important  relations 
with  private  corporations  for  pecuniary  profit  is  that  of  directors. 
They  usually  have,  under  the  constating  instruments,  full  jiower 
in  most,  if  not  all  respects,  to  act  for,  if  not  as,  the  corporate 
body,  and  to  control  and  manage  all  tlie  corporate  business. 
Hence,  this  authority  cannot  be  controlled,  nor  their  rights  in 
this  respect  infringed  by  the  Corporation.  If  the  constating  in- 
struments have  conferred  on  the  directors  the  power  to  control 
and  manage  the  coj'porate  affairs,  the  corporate  body  have  no 
right  to  interfere  with  this  management,  nor  can  a  majority  of 
the  corporators  require  the  board  of  directors  to  act  in  matters 
left  to  their  discretion,  contrary  to  their  judgment.' 

On  the  other  hand,  the  directoi'S  are  the  primary  agents  of  the 
corporation,  and,  as  we  have  already  noticed,'''  the  relation  of  trus- 
tee and  cestui  que  trust  may,  and  usually  does,  exist  between 
them  on  the  stock  and  bondliolders  and  creditors,  and  the  fiduciary 
character  of  this  relation  requires  of  them  the  highest  and  most 
scrupulous  good  faith  in  their  transactions  for  the  corporation  and 
these  stock  and  bondholders  and  creditors.  "  The  company  have 
a  right  to  the  services  of  their  directors  whom  they  remunerate 
by  considerable  payments  ;  they  have  a  right  to  their  entire 
services ;  they  have  a  right  to  the  voice  of  every  director,  and  to 
the  advice  of  every  director  in  giving  his  opinion  upon  matters 
which  are  brought  before  the  board  for  consideration,  and  the  gen- 
eral rule  that  no  trustee  can  derive  any  benefit  from  dealing  with 
those  funds  of  which  he  is  a  trustee  applies  with  still  greater 

'  Dana  v.  Bank   of  the  U.  S.,  5  W.     Henry  Iron  Co.,  12  Barb.  27  ;  State  v. 
&  S  247  ;  Commonwealth  v.  St.  Mary's     Bank  of  La.,  6  La.  745. 
Church,  6  S.  &  R.  508  ;  Conro  v.  Port        « See  chap.  6. 


512 


Pkivate  Corporations. 


force  to  the  state  of  things  in  whicJi  the  interest  of  the  tnistee 
deprives  the  company  of  thebenelit  of  his  advice  and  assistance."  ' 

Seo.  3G0.  Same  continued. —  One  of  the  niost  effoctnal  remedies 
in  such  cases  is  by  injunction  to  restrain  the  unlawful  acts  of  the 
directors,  or  in  case  of  the  proposed  execution  of  a  contract  xiltra 
vires,  to  restrain  the  execution  of  the  same  by  the  directors  as 
the  agents,  of  the  corporation.  'A  shareholder  may  restrain  any 
mismanagement  on  the  part  of  directors  of  a  corjjoration  as  for  a 


1  Lord  Chancellor  Hatherley  in  Im- 
perial, etc.,  Association  v.  Coleman,  L. 
R.,  6  Ch.  567.  See.  also,  Flint,  etc.,  R. 
Co.  V.  Dewey,  14  Mich.  477  ;  ante,  ^  169 
et  seq. ;  Dodge  v.  Woolsey,  18  How. 
(U.  S.)  331.  In  the  case  last  cited  the 
plaintiff  was  a  stockholder  in  a  bank 
incorporated  and  doing  business  in 
the  state  of  Ohio.  The  defendant,  a 
collector,  was  about  to  collect  ^y  dis- 
tress certain  illegal  taxes  from,  the 
bank,  and  the  plaintiff  requested  the 
bank  to  take  legal  steps  to  prevent 
this  proceeding,  which  it  refused  to  do. 
The  supreme  court  of  the  United 
States  on  these  facts  held  that  the 
plaintiff  could  maintain  his  suit 
against  the  collector  for  an  injunction, 
the  bank  being  inade  a  party. 

In  Samuel  v.  Holladay,  1  Woolw.  (U. 
S.  C.  C.)  400,  Justice  Miller,  in  com- 
menting on  this  decision,  observes  : 
"  I  think  I  am  correct  in  stating  that 
the  propositions  supposed  by  the  court 
to  be  established  by  this  examination 
may  be  stated  thus  : 

"1.  That  in  the  case  of  an  incorpo- 
rated company  with  a  capital  stock  di- 
vided into  shares  and  held  by  individ- 
uals the  corporation  and  the  share- 
holders are  distinct  legal  persons,  and 
can  sue  and  be  sued  by  each  other. 

"  2.  When  the  directors  of  a  cor- 
poration have  misapplied  a  portion 
of  its  funds  to  which  a  shareholder 
has  a  distinct  right,  as,  for  instance,  a 
dividend,  he  may  in  an  action  recover 
the  amount  misapplied,  and  when 
such  misapplication  has  not  been  ef- 
fected, but  is  threatened,  he  may,  by 
bill  in  equity  for  an  'injunction,  pre- 
vent it. 

"  3.  When  a  corporation  or  its  rights 
of  property  are  threatened  with  an  in- 
jury of  such  a  nature  as  the  court  will 
enjoin,  but  it  refuses  to  take  any  legal 
Steps  to   protect   itself,  a  stockholder 


may  maintain  a  bill  in  equity  against 
the  party  threatening  the  mischief  and 
the  corporation,  to  restrain  by  injunc- 
tion the  commission  of  the  act,  in  or- 
der thereby  to  protect  his  interest 
from  immediate  danger. 

"  But  no  case  is  cited,  nor  does  any 
dictum  in  the  opinion  of  the  court  go 
to  the  length  of  asserting,  that  when 
a  corporation  has  been  injured  by  a 
tort  or  a  breach  of  a  contract,  or  has 
any  right  of  action,  legal  or  equitable, 
against  a  party,  an  individual  share- 
holder can  come  into  court  and  prose- 
cute that  cause  of  action  because  the 

corporation  fails  or  refuses  so  to  do. 
*     *    * 

"  Again,  the  court  says,  that  the  ju- 
risdiction at  the  instance  of  a  share- 
holder is  to  apply  preventive  remedies, 
by  injunction,  to  restrain  those  who 
administer  the  affairs  of  the  corpora- 
tion from  doing  acts  which  would 
amount  to  a  violation  of  the  charter, 
etc.  It  also  extends  to  inquiring  con- 
cerning, and  enjoining,  as  the  case 
may  require,  individuals,  in  whatever 
character  they  may  assume  to  act, 
from  prosecuting  any  course  of  con- 
duct which  is  in  violation  of  a  corpo- 
rate franchise,  or  in  denial  of  a  right 
growing  out  of  it,  when,  for  the  in- 
jury which  will  result,  there  is  no  ade- 
quate remedy  at  law.  We  see  here, 
that  where  other  parties  are  concerned, 
the  jurisdiction  is  limited  to  cases  in 
which  the  preventive  remedies  are  ef- 
ficient for  the  protection  of  rights  en- 
dangered by  the  neglect  of  the  direc- 
tors, and  the  threatened  aggressions  of 
others.  It  would  be  a  doctrine  at- 
tended with  very  serious  consequences 
if  every  individual  shareholder,  as- 
suming the  place  of  the  corporation, 
could  decide  for  it  when  actions  should 
be  brought  to  vindicate  its  supposed 
right." 


Suits  in  Equity  by  and  against  Corporations,  etc.    513 

misappropriation  of  the  corporate  fimds.^  And  he  may  com- 
mence an  action  in  equity  for  himself,  and  all  others  having  a 
common  interest  with  him,  to  restrain  unlawful  acts  of  the  direc- 
tors by  injunction,  or  to  require  such  parties  to  account  for  funds 
of  such  corporation,  which  have  been  misappropriated  by  such 
directors  to  their  own  use,  even  though  such  action  may  be  op- 
posed by  all  the  other  stockholders."  For  although  the  general 
doctrine  is  that  the  corporation  is  the  proper  party  to  institute  a 
suit  for  an  injury  to  corporate  rights,  and  to  protect  the  stock- 
holders, yet  where  the  corporation  refuses  to  sue,  and  the  interests 
of  a  stockholder  require  it,  or  where  the  wrong  is  done  by  the 
directors,  who  are  the  primary  agents,  and  may  in  some  cases  be 
considered,  so  far  as  their  acts  are  concerned,  as  the  corporation 
itself,  or  at  least  as  having  control  of  the  corporate  interests,  a 
stockholder  may,  in  case  of  their  refusal  to  act,  or  in  some  cases 
without  such  refusal,  as  we  shall  hereafter  notice,  institute  a  suit 
on  behalf  of  himself  and  of  all  other  stockholders,  where  the 
protection  of  their  rights  require  it,  but  in  which  case  it  would 
usually  be  proper,  if  not  necessary,  to  make  the  corporation  itself 
a  defendant.  ^ 

'  Kean  V.    Johnson,    1    Stockt.  401;  ever  character  they  may  profess  to  act, 

Simpson  v.    Westminster,  etc.,  R.  Co.,  if  the  subject  of  complaint  is   an   im- 

8  H.  L.  717;  Ernest  v.  Nicholls,  6  id.  plied  violation  of  a  corporate  franchise, 

401.  or  the  denial  of  a   right   growing  out 

^  On  this  subject  it   is  observed  by  of  it,  for  which  there  is   not   an   ade- 

the  court  in  Dodge  V.  Woolsey,  18  How.  quate  remedy   at   law."      See,    also, 

(U.  S.)  381,  as  follows  :   "  It  is  now  no  Davenport    v.  Dower,  18   Wall.    626; 

longer  doubted,  either  in   England  or  Hersey    v.  Veazie,  24    Me.   9;  Smith 

the  United  States,  that  courts  of  eqitity  v.  Hurd,  12  Mete.  871  ;  Allen  v.  Curtis, 

in  both  have  a  jurisdiction  over  corpo-  26    Conn.     456  ;    Western   R.    Co.    v. 

rations,  at  the  instance  of  one  or  more  Nolan,  48  N.  Y.  513  ;  March   v.  East- 

of  their  members,  to  apply  preventive  ern   R.    Co.,   40   N.   H.  548  ;  Same  v. 

remedies  by    injunction,    to    restrain  Same,  43  id.  515  ;  Lauman  v.  Lebanon, 

those  who  administer  them  from  doing  30  Penn.  St.  46. 

acts  which  would  amount  to  a  violation        -  See  Dodge  v.  Woolsey,  18  How.  (U. 

of  charters,  or  to  prevent  any    misap-  S.)  331  ;  Samuel  v.  Holladay,  1  Woolw. 

plication    of  their  capitals  or  profits,  400;    Heath  v.  Erie  R.  Co.,  8   Blatchf. 

which  might  result    in    lessening  the  347  ;  Brewer  v.  Proprietors,  etc.,    104 

dividends  of  stockholders  or  the  value  Mass.  378  ;  Brown  v.  Vandyke,  9  N.  J. 

of    their    shares;    as    either   may  be  Eq.  795;  Butts  v.    Woods,  37  N.   Y. 

practiced  by  the  franchises  of  a  cor-  817  ;     Green's     Brice's    Ultra   Vires, 

.poration,  if  the    acts   intended   to   be  183,  where  it   is   said:    "They  —  the 

done  create  what  is  in  the  law  denom-  members  complaining — cannot  bring- 

inated  a  breach  of  trust,  and  the  juris-  a  suit  either  individually  or  as  a  class, 

diction  extends  to  inquiry  into  and   to  or  in  the  name  of  some   one   or  more 

enjoin,  as  the  case  may  require,  any  on  behalf  of  themselves,  etc.,  unless, 

proceedings  by   individuals,  in  what-  indeed  the  corporation — that  is  to  say, 

65 


514 


Private  Corporations. 


Sec.  361.  Same  continued.  —  The  protection  of  the  rights  of 
shareholders  in  incorporated  companies  against  the  improper  and 
illegal  action  of  other  shareholders,  or  of  the  officers  of  the  com- 
pany, is  a  favorite  branch  of  the  jurisdiction  of  equity  by  injunction. 
And  it  may  be  asserted  as  a  general  rule  that  courts  of  equity  will 
enjoin,  on  behalf  of  the  stockholders  of  an  incorporated  company, 
any  improper  alienation  or  disposition  of  the  corporate  property 
for  other  than  corporate  purposes,  and  will  restrain  the  commis- 
sion of  acts  wliich  are  contrary  to  law  and  tend  to  the  destruction 
of  the  franchises,  as  well  as  the  improper  management  of  the 
business  of  the  company,  or  a  wrongful  diversion  of  its  funds. 
And  in  such  a  case  equity  will  grant  relief  at  the  suit  of  a  single 
stockholder.^ 


majority  —  are  acting  fraudulently  to- 
ward the  members  complained,  by  re- 
fusing to  the  institute  the  necessary 


proceedings."     Citing  At  wood  v.  Mer- 
ryweather,  L.  R.,  5  Eq.  464,  n. 


'  Kean  v.  Johnson,  1  Stockt.  401  ; 
Manderson  v.  Commercial  Bank,  etc., 
28  Penn.  St.  379 ;  Sears  v.  Hotchkiss, 
25  Conn.  171  ;  Bagshawv.  Eastern, etc., 
R.  Co.,  7  Hare,  114  ;  Colmau  v.  Same, 
10  Beav.  1  ;  Central,  etc.,  R.  Co.  v. 
Collins.  40  Ga.  582  ;  Simpson  v.  West- 
minster,  etc.,  8  H.  L.  717;  GiflFord  v. 
New  Jersey,  etc.,  2  Stockt.  171. 

It  was  held  in  Heath  v.  Erie  R.  Co., 
8  Blatchf.  347, that  where  the  acts  com- 
plained of  are  ultra  vires,  application 
to  and  a  refusal  of  the  directors  to  in- 
stitute a  suit  is  not  essential  in  order 
to  authorize  a  suit  by  a  stockholder. 
In  this  case  it  is  said  ;  "  Now  so  far 
as  the  bill  sets  out  acts  ultra  mres,  in 
issuing  stock,  and  breaches  of  trust, 
which  are  frauds  on  the  stockholders, 
such  acts  and  breaches  of  trust  are 
beyond  the  power  of  the  corporation 
or  its  directors  to  affirm,  or  sanction, 
or  make  good  ;  and  in  such  case, 
the  authorities  agree  that  the  reason 
for  the  rule  for  an  application  to  the 
corporation,  or  its  board  of  directors, 
to  bring  the  suit  does  not  exist.  Such 
reason  is,  that  while  the  stockholder 
is  prosecuting  his  suit,  the  corporation, 
through  its  board  of  directors,  may 
affirm  and  make  good  the  acts  com- 
plained of.  But  the  rule  ceases  when 
the  reason  ceases." 


In  French  v.  GiflFord,  30  Iowa,  148, 
Day,  J.,  observes  :  "  The  doctrine  best 
sustained  by  authority,  and  most  in 
consonance  with  reason  and  justice, 
seems  to  be,  that  courts  of  equity, aside 
from  statutory  provisions,  do  not  exer- 
cise a  jurisdiction  over  a  corporation 
as  over  a  partnership, to  dissolve  it  and 
distribute  its  assets  ;  but  that  it  will 
aflFord  a  stockholder  relief  from  the 
malfeasance  of  those  intrusted  with 
the  management  of  the  corporate  busi- 
ness." 

Again,  in  Wright  v.  Oroville  M.  Co., 
40  Cal.  20,  the  court  say :  "  The  cor- 
porate authority  is  considered  to  have 
been  conferred  by  the  stockholders 
upon  the  trust  and  confidence  that  it 
will  be  exerted  at  least  with  a  view  to 
advance  the  interest  of  the  stockhold- 
ers, and  not  with  a  purpose  to  injure 
and  destroy  that  interest  ;  and  it  is 
settled  tha't  courts  of  equity  in  this 
country  will,  at  the  instance  of  a  stock- 
holder, control  a  corporation  and  its 
officers,  and  restrain  them  from  doing 
acts  even  within  the  scope  of  corporate 
authority,  if  such  acta,  when  done, 
would,  under  the  particular  circum- 
stances, amount  to  a  breach  of  the  very 
trust  upon  which,  as  we  have  seen,  the 
authority  itself  has  been  conferred." 


Suits  in  Equity  by  and  against  Corpokations,  etc.    515 

Sec.  362.  Same  continued.  —  In  case,  also,  of  an  attempt  on  the 
part  of  tlie  majority  of  the  stockholder:^,  some  of  whom  are  direct- 
ors, to  unlawfully  divest  the  corporation  of  its  funds,  or  to  fraudu- 
lently mismanage  the  business,  a  minority  or  undoubtedly  a  single 
stockholder  wg>uld  be  entitled  to  an  injunction  to  prevent  the 
same,  provided  he  is  diligent  in  tlie  assertion  of  the  right. ^  And 
it  seems  now  generally  conceded,  both  in  this  country  and  in  Eng- 
land, that  any  stockholder  is  entitled  to  an  injunction  to  prevent 
a  violation  of  a  corporate  franchise  ;  and  that  he  may  also  main- 
tain a  bill  in  equity  against  the  directors,  and  compel  the  company 
to  refund  any  of  the  profits  improperly  applied." 

Sec.  363.  stockholder's  liability  in  equity.  —  We  have  already 
noticed  that  the  stockholders  of  a  corporation  are  liable  in  equity 
to  account  for  dividends  received  on  shares  of  capital  stock,  where 
creditors  remain  unpaid.^  The  doctrine  on  this  subject  now  uni- 
versally recognized  is,  that  the  stockholders  are  not  entitled  to 
dividends  of  profits  upon  the  capital  stock,  where  there  are  exist- 
ing creditors  of  the  corporation ;  and  that  such  creditors  may,  in 
equity,  pursue  the  consideration  in  the  hands  of  the  stockholders, 
and  compel  them  to  contribute  pro  rata  toward  the  payment  of 
the  claims  of  creditors,  out  of  the  money  or  property  so  received.* 

Sec.  36-i.  Bight  of  stockholders  to  restrain  acts  ultra  vires. —  The 
right  of  stockholders  to  restrain,  not  only  the  directors,  but  the 
corporation  as  a  body,  from  acts  ultra  vires  is  generally  recog- 
nized. For  although  either  the  corporation  or  body  of  directors 
may,  unless  restrained  by  the  constating  instruments,  manage  the 
affairs  of  the  corporation  as  they  please,  so  long  as  they  act  hona 
fide,  and  within  the  powers  conferred  upon  them,  still,  if  they 


'  Manderson  v.  Commercial,  etc. ,  28  400.     See,  also,  Walker  v.  Devereaus, 

Penn.  St.  379  ;  Sears  v.  Hotclikiss,  25  4  Paige,  229. 

Conn.  171,  where  it  was  held  that  the        ^  Story's  Eq.  Jur.  (9th  ed),  §  1252  ; 

fact  that  a  remedy  at  law  exists  by  an  Mumma   v.  Potomac  Co.,  8  Pet.  286  ; 

action  on  behalf  of  the  corporation  or  Wood  v.  Dummer,  3  Mason,  308  ;  Vose 

of  the  ao^grieved  stockholders,  against  v.  Grant,  15  Mass.  522  ;  Spear  v.  Grant, 

the  wrong-doers,  constitutes  no  bar  to  16  id.  14  ;  Curran  v.  Arkansas, 15  How. 

an  injunction  in  such  a  case.  (U.  S.)307  ;  Railroad  Company  v.  How- 

2  Dodge  V.  Woolsey,  18  How.  (U.  S.)  ard,  7  Wall.  392. 
331;  Samuel   v.  Holladay,   1  Woolw. 


516  Private  Cokporations. 

attempt  to  exceed  such  j^owers,  they  may  be  restrained  at  the  suit 
of  a  stockholder  or  creditor.  ^ 

Thus  where  the  officers  of  a  bank  do  acts  contrary  to  law,  and 
esj^ecially  if  it  endangers  the  rights  of  the  corporation  under  the 
charter ;  or,  where  the  majority  of  the  stockholders  attempt  to 
fraudulently  mismanage  the  business  or  divert  the  funds  from  the 
legitimate  purposes  for  which  the  corj^oration  was  created,  a  stock- 
holder may  ask  the  aid  of  a  court  of  equity  and  enjoin  such  acts." 
As  to  every  act  which  is  ultra  vires,  any  stockholder  has  a  right 
to  restrain  and  to  prevent  a  repetition  of  it,  though  every  other 
member  may  be  arrayed  against  him.^ 

"  It  is  a  settled  rule  of  equity  law,"  observes  Mr.  E-edfield, 
"  that  a  majority  of  the  shareholders  in  a  joint-stock  corporation 
may  maintain  a  suit  to  restrain  the  directors  of  a  company,  or  a 
majority  of  the  shareholders,  from  entering  into  a  stipulation 
whereby  the  business  of  the  company  is  changed  and  directed 
into  channels  and  enterprises  wholly  diverse  from  those  originally 
contemplated  and  entered  upon,  and  from  which  their  emoluments 
had  been  derived.  But  the  court  will  not  interfere  to  enjoin  the 
majority  of  the  shareholders  from  applying  surplus  funds  in  the 
hands  of  the  corporation  to  an  extension  of  the  business  within 
its  powers,  because  a  minority  dissent  from  such  extension.  So, 
also,  the  court  will  not  enjoin  the  minority  of  the  shareholders 
from  extending  the  business  of  the  corporation  to  kindred  enter- 
prises, beyond  those  contemplated  in  the  charter,  but  sanctioned 
by  express  legislative  grant,  and  the  vote  of  a  majority  of  the 
shareholders."  * 

'  Kerngbam  v.  Williams,  L.  R. ,  6  Eq.  43G  ;  Colinan  v.  Eastern,  etc. ,  R.    Co., 

228  ;  Brice's  Ultra   Vires,  215  ;  Attor-  10  Beav.  1  ;  Salomons  v.  Laing,  12  id. 

ney-General  v.  Eastlake,  11  Hare,  205;  339  ;  Fish  v.  Chicago,  etc.,  R.  Co.,  53 

Same  V.  Norwich,  etc.,  16    Sim.    225-  Barb.  513;    Simpson    v.    Denison,  10 

21  L.  J.  Ch.    141  ;  Zabriskie   v.  Cleve-  Hare,  62  ;  Munt  v.    Shrewsbury,  etc., 

laud,  etc.,  R.  Co.,  23  How.  381 ;  Mem-  13  Beav.  1  ;  Stevens  v.  South,  etc.R. 

phis  V.  Dean,  8  Wall.  64  ;   Belmont  v.  Co.,  id.  49. 

Erie  R.  Co..  52  Barb.  637  ;  Bliss  v.  An-  ^  Brice's  Ultra  Vires,  593  ;  Hoole  v. 

derson,  31  Ala.  (N.   S.)   613;  Kean  v.  Great  W.  R.   Co.,  L.   R.,  3   Ch.    262; 

Johnson,  9  N.  J.    Eq.    401  ;  Black   v.  Menier  v.  Hooper's  Tel.  Works,  L.  R., 

Delaware,  etc.,  R.  Co.,  22  id.   130;  S.  9  Ch.  350;  Bird  v.  Bird's  Patent,  etc., 

C,  9  id.  455  ;  Zabriskie  v.  Hackenaack,  S.  Co.,  id.    358.     See,    also,  Allen   v. 

etc.,  R.  Co.,  3   id.    178  ,  Brice's   Ultra  Curtis,  26  Conn.  456  ;  McAleer  v.  Mc- 

Vires,  79-83,   and   notes :    Balfour  v.  Murray,  58  Penn.  St.  126. 

Ernest,  5  C.  B.  (N.  S.)  601  ;  28  L.  J.  C.  •»  2  Redf.  on  Rail.,  ^  211,  p.  9.     See, 

P.  170.  also,  Kean  v.  Johnson,  9  N.  J.  Eq.401  ; 

•2  Mayor,  etc.,    v.    Groshon,  30   Md.  March  v.  Eastern  R.  Co.,  40  N.  H.  548; 


Suits  in  Equity  by  and  against  Corporations,  etc.    517 


Sec.  365.  Creditor's  rights  in  equity  for  misappropriation  of  corporate 
funds.  —  It  is  a  familiar  principle  in  ecpiity,  to  which  we  iiavc 
already  referred,  that  the  property  of  a  corporation  is  held  in  trust 


Pratt  V.  Pratt,  33  Conn.  446  ;  Durfee 
V.  Old  Colony  &  F.  «.Co.,  5  Allen,  230. 

In  Bissell  v.  Tlie  Michigan,  etc.,  R. 
Co.,  23  N.  Y.  258,  Selden,  J.,  after 
referring  to  the  two  classes  of  cases 
of  ultra  vires,  viz.  :  wliere  the  act  is 
in  excess  of  the  corporate  powers,  and 
where  it  is  in  excess  of  the  power  of 
the  agent,  observes  as  follows  : 

"  In  all  the  cases  belonging  to  the 
first  class,  the  object  of  the  action  has 
been  to  protect  the  private  rights  of 
the  shareholders ;  upon  the  ground 
that  the  action  of  the  directors  sought 
to  be  restrained  would,  if  permitted,  be 
a  breach  of  trust.  It  would  no  doubt 
be  a  bar  to  any  relief  upon  this 
ground,  if  it  appeared  that  the  parties 
seeking  such  relief  had  themselves 
assented  to  what  the  directors  were 
about  to  do.  They  clearly  could  not 
be  entitled,  for  their  own  sake,  to  pro- 
tection against  acts  which  they  had 
themselves  authorized.  But  the  courts, 
in  cases  of  this  kind,  have  uniformly, 
and  no  doubt  properly,  acted  upon  the 
presumption  that  the  shareliolders 
liad  not  assented  to  a  violation  of  the 
charter,  aud  have  interfered,  if  at  all, 
for  the  purpose  of  protecting  them 
from  a  breach  of  trust  on  the  part  of 
the  directors. 

"  Still  it  has  been  repeatedly  said, 
even  in  cases  of  this  class,  that  there 
was  a  question  of  public  policy  in- 
volved, which  would  be  sutRcieut  of 
itself  to  induce  the  courts  to  interfere. 
The  case  of  Coleman  v.  The  Eastern 
Counties  Railway  Company,  10  Beav. 
1,  decided  in  1846,  was  one  of  this 
class.  It  was  an  equity  suit  brought 
by  a  shareholder  in  behalf  of  himself 
and  the  other  shareholders,  against 
the  corporation  and  its  directors,  to 
prevent  the  latter  from  entering  into  a 
certain  agreement  with  the  Harwich 
Steam  Packet  Company.  The  bill 
prayed  for  a  declaration  that  it  would 
be  a  breach  of  trust  on  the  part  of  the 
directors  to  make  the  proposed  con- 
tract, and  for  an  injunction.  Relief 
was  granted.  Lord  Langdale,  be- 
fore whom  the  case  was  heard,  speak- 
ing of  the  extensive  powers  of  railway 
companies,  said  :  '  We  are  to  look  upon 


their  powers  as  given  to  them  in  con- 
sideration of  a  benefit,  which,  notwith- 
standing all  other  sacrifices,  is  on  the 
whole  hoped  to  be  attained  by  the  pub- 
lic.^ Again  he  says :  '  In  the  absence 
of  legal  decisions,  I  look  upon  the  ac- 
quiescence of  shareholders,  in  these 
circumstances,  in  these  transactions, 
as  affording  no  ground  whatever  for 
the  presumption  that  they  may  be,  in 
themselves,  legal.'  Here,  then,  in  one 
of  the  earliest  cases  on  the  subject,  in 
the  English  courts,  we  have  the  very 
doctrine  for  which  t  contend,  distinctly 
recognized  aud  asserted,  viz.,  that  the 
object  of  every  grant  of  corporate 
powers  is  to  obtain  a  public  benefit ; 
and  that  the  powers  granted  are  the 
consideration  which  the  public  pays 
for  the  benefit  received  or  expected  ; 
aud  we  also  have  the  inevitable  conse- 
quence stated,  that  every  excess  of 
power  by  the  corporation  is  illegal  al- 
though acquiesced  in  by  every  share- 
holder. 

"  Three  vears  afterward  the  case  of 
Cohen  v.  Wilkinson,  12  Beav.  125  ;  13 
Jurist,  641,  came  i)efore  the  same 
judge.  The  complainant  was  a  share- 
holder in  the  Direct  Portsmouth  Rail- 
way Company,  and  the  object  of  the 
suit  was  to  restrain  the  directors  from 
proceeding  to  construct  a  portion  only 
of  the  road  authorized  by  the  charter, 
without  any  preparation  or  intention  to 
construct  the  whole.  The  judge  said  : 
'  If  it  were  established  that  the  com- 
panies of  this  sort  had  authority,  with- 
out a  view  to  the  whole,  or  for  the 
purpose  of  performing  the  whole,  to 
complete  such  part  only  as  they  please, 
or  are  able,  of  that  which  has  been 
called  their  contract  or  bargain  tdth 
the  public,  I  think  the  consequences 
would  be  very  dangerous  to  the  public 
and  to  the  shareholders,  and  probably 
productive  of  very  extensive  deception 
and  fraud.'  In  a  similar  case  which 
arose  shortly  afterward,  viz.,  Salomons 
V.  Laing,  12  Beav.  33!),  Lord  Laxg- 
DALE  said  :  '  Any  application  of,  or 
dealing  with,  the  capital,  or  any  funds 
or  money  of  the  company,  which  may 
come  under  the  control  or  management 
of  the  directors,  or  governing  body  of 


518 


Pkivatb  Corporations. 


for  the  payment  of  its  debts,  and  that  creditors  may  pursue  it  in 
case  of  a  fraudulent  transfer,  into  the  hands  of  all  persons,  except 
those  of  hona  Jide  purchasers :  that  directors  have  no  right  to 


the  company,  in  any  manner  not  dis- 
tinctly authorized  by  the  act  of  par- 
liament, is,  in  my  opinion,  an  illegal 
application  or  dealing.' 

"  Thus  we  find  Lord  Langdale,  on 
three  different  occasions,  asserting,  in 
controversies  between  the  sharehold- 
ers and  the  corporation,  that  all  acts 
and  dealings  of  the  officers  of  such 
corporation  which  were  unauthorized 
by  their  charters,  were  to  be  regarded, 
not  simply  as  breaches  of  trust,  but  as 
illegal  and,  therefore,  void.  But  Lord 
Langdai.e  is  not  the  only  English 
judge  who  has  held,  in  cases  of  this 
class,  that  the  unauthorized  contracts 
of  corporations  are  illegal  and  void,  as 
against  public  policy.  In  the  case  of 
Beman  v.  Rufford,  6  Eng.  liaw  &  Eq. 
106,  which  was  an  action  brought  by 
a  shareholder  in  a  railway  company, 
to  restrain  the  directors  from  carrying 
into  effect  a  certain  agreement  made 
by  them.  Lord  CliANWORTH,  vice- 
chancellor,  after  stating  his  reasons 
for  thinking  the  contract  unauthor- 
ized, said  :  '  And  if  that  be  the  correct 
view  of  the  law,  I  am  clearly  of  opin- 
ion, on  all  the  authorities  and  all 
principle,  that  it  is  the  province  of  this 
court  to  prevent  such  an  illegal  con- 
tract from  being  carried  into  effect;  be- 
cause, on  the  principle  that  has  been  so 
often  laid  down, this  court  will  not  tole- 
rate that  parties  having  the  enormous 
powers  which  those  railway  com- 
panies have  obtained,  shall  lay  out 
one  farthing  of  the  funds,  out  of  the 
way  in  which  it  was  provided  hy  the 
legislature  that  they  should  be  ap- 
plied.' 

"  Now  I  understand  those  who  differ 
with  me  on  this  subject  to  concede  the 
principle  of  this  case  ;  that  is,  they 
admit,  that  for  the  directors  to  enter 
into  a  contract  which  their  charter 
does  not  authorize  would  be  a  viola- 
tion of  their  duty  to  the  shareholders, 
and  that  the  latter  may  apply  to  a 
court  of  equity  and  obtain  an  injunc- 
tion restraining  the  directors  from  car- 
rying the  contract  into  effect.  It 
would  be  difficult  to  deny  this.  For 
if  we  take  the  same  view  of  the  na- 
ture of  a  corporation  which  they  lake, 
and  consider  the  directors  merely  as 


the  agents  of  the  shareholders,  and 
the  charter  as  nothing  more  than  their 
power  of  attorney  from  the  corpora- 
tors, the  latter,  as  the  principals, 
would  have  a  right  to  repudiate  and 
prevent  the  execution  of  a  contract, 
made  in  their  behalf  by  their  agents, 
without  authority  ;  inasmuch  as  every 
person  dealing  with  such  agents  must, 
as  is  well  settled,  be  presumed  to  know 
the  extent  of  the  powers  which  the 
charter  confers. 

"  The  position  then  occupied  by 
some  of  my  associates  is  this  :  They 
admit  that  the  shareholders  in  a  cor- 
poration have  a  right  to  restrain  its 
directors  or  managers,  as  their  trus- 
tees or  agents,  from  entering  into  any 
contract  not  authorized  by  the  charter, 
or  from  carrying  such  contract  into 
effect  if  made  ;  and  yet  they  hold  that 
the  directors  are  liable,  not  in  their 
individual,  but  their  corporate  charac- 
ter, to  the  party  with  whom  the  con- 
tract is  made,  for  not  carrying  it  into 
effect.  It  is  difficult  to  see  how  these 
two  propositions  can  stand  together. 
The  directors  are  the  mere  representa- 
tives of  the  corporators.  The  latter 
constitute  tlie  corporation.  Hence,  by 
the  two  propositions  just  stated,  it  is 
maintained  that  the  corporators  have 
a  legal  right  to  enjoin  their  represent- 
atives against  the  performance  of  a 
contract  which  they  themselves  are 
legally  bound  to  perform  ;  in  other 
words,  they  are  liable  for  damages 
because  their  representatives  have  not 
performed  a  contract  which  they  had 
a  right  to  restrain  those  representa- 
tives from  performing.  This  can 
hardly  be.  It  would  seem  to  be  a  le- 
gal impossibility.  One  or  the  other 
of  these  propositions  must,  I  think,  be 
false.  Either  it  must  be  denied  that 
the  shareholders  can  invoke  the  aid  of 
a  court  of  equity  to  prevent  the  per- 
formance of  a  contract  entered  into  by 
the  directors,  which  the  charter  does 
not  authorize, —  a  principle  established 
by  numerous  authorities, —  or  it  must 
be  admitted  that  they  are  not  liable 
for  the  refusal  or  neglect  of  the  direct- 
ors to  perform  it.  It  might  be  otlier- 
wise  if  it  could  be  shown  either  that 
persons  dealing  with  corporations  are 


Suits  in  Equity  by  and  against  Corporations,  etc.    519 

make  any  dividend  of  the  profits  of  a  corporation  among  the 
stockholders  nntil  all  its  debts  are  paid  ;  and  that  in  case  of  such 
dividends,  or  a  sale  of  the  capital  stock  and  a  division  of  the 
proceeds  among  the  stockholders,  it  will  not  defeat  the  rights  of 
creditors ;  but  that  they  may  pursue  the  proceeds,  if  necessary 
to  secure  their  rights,  into  the  hands  of  such  stockholders,  and 
compel  them  to  contribute  jyro  rata  to  the  payment  of  the  corpo- 
rate debts  out  of  tlie  proceeds  so  received.  In  a  recent  case  in- 
volving this  question,  Mr.  Justice  Miller  observes:  "Equity 
regards  the  property  of  a  coi-poration  as  held  in  trust  for  the  pay- 
ment of  the  debts  of  the  corporation,  and  recognizes  the  right  of 
creditors  to  pursue  it  into  whosesoever  possession  it  may  be  trans- 
ferred, unless  it  has  passed  into  the  hands  of  a  hona  fide  pur- 
chaser; and  the  rule  is  well  settled  that  stockholders  are  not 
entitled  to  any  share  of  the  capital  stock  nor  to  any  dividend  of 
the  profits  until  all  the  debts  of  the  corporation  are  paid.  Assets 
derived  from  the  sale  of  the  capital  stock  of  the  corporation,  or 
of  its  property,  become,  as  respects  creditors,  the  substitutes  for 
the  things  sold,  and  as  such  they  are  subject  to  the  same  liabilities 
and  restrictions  as  the  things  sold  were  before  the  sale,  and  while 
they  remained  in  the  possession  of   the  corporation.     Even  the 

uot  presumed  to  know  the  extent  of  "  I  shall  cite  but  one  additional  case 
the  powers  conferred  by  the  charter,  belonging  to  the  first  of  the  above 
or  that  the  corporators  can  be  pre-  classes,  viz. ,  Winch  v.  The  Birken- 
sumed  to  have  authorized  the  directors  head,  Lancashire  and  Cheshire  Junc- 
to  transcend  those  powers.  But  the  tion  Railroad  Company,  13  Eng.  Law 
contrary  is  the  rule  in  respect  to  both.  &  Eq.  506.  That  was  a  suit  in  equity 
"  It  would  seem  to  follow  that  if  we  brought  by  a  shareholder  to  restrain 
look  upon  the  unauthorized  contracts  the  corporation  from  entering  into  an 
of  corporate  officers  as  mere  breaches  agreement  which  amounted  to  a  lease 
of  trust,  and  nothing  more,  the  corpo-  of  the  defendants'  road  to  the  Loudon 
ration  is  not  bound  by  them.  This,  and  Northwestern  Company.  The 
however,  is  not  the  ground  upon  which  vice-chancellor,  Sir  J.  Parker,  in  dis- 
I  have  been  endeavoring  to  maintain  posing  of  the  case,  used  the  following 
that  corporations  are  exempt  from  language  :  '  It  seems  to  me  that  it  is 
liability  upon  their  contracts  which  not  a  question  of  simple  incapacity  on 
&TQ  ultra  vires;  nor  is  it  the  ground  the  part  of  the  Loudon  and  North west- 
upon  which  such  defenses  have  in  gen-  ern  Railway  Company  to  undertake 
eral  been  sustained  in  suits  brought  the  working  of  this  line,  but  that  it  is 
by  third  persons  against  corporations  against  the  policy  oi  these  &cisoi  parlia- 
upon  such  contracts.  I  shall,  there-  ment,  and  I  think,  therefore,  that  the 
fore,  proceed  further  to  show  from  the  agreement  for  making  over  this  prop- 
authorities  that  such  contracts  are  erty  to  them  is  an  agreement  savoring 
illegal  and  void  for  public  reasons,  of  illegalit}/,  which  any  shareholder 
entirely  irrespective  of  the  fact  that  in  the  Birkenhead  Company  has  a 
they  constitute  breaches  of  trust  right  to  come  to  the  court  to  re- 
to  ward  the  shareholders.  strain.'" 


620 


Private  Corporations. 


sale  of  the  entire  capital  stock  of  the  company  and  the  division 
of  the  proceeds  of  the  sale  among  the  stockholders  will  not 
defeat  the  trust  nor  impair  the  remedy  of  the  creditors,  if  any 
debts  remain  unpaid,  as  the  creditors  in  that  event  may  pursue 
the  consideration  of  the  sale  in  the  hands  of  the  respective  stock- 
holders, and  compel  each  one,  to  the  extent  of  the  fund,  to  con- 
tribute ^ro  rata  toward  the  payment  of  debts  out  of  the  moneys 
so  received,  and  in  their  hands."  ^ 

The  general  doctrine  in  such  cases  is,  that  the  property  of  the 
corporation  is  a  trust  fund  :  first,  for  the  payment  of  its  debts ; 
secondly,  for  division  among  its  shareholders. 

And,  "if  the  capital  stock,"  observes  Mr.  Story,  "should  be 
divided,  leaving  any  debts  unpaid,  every  stockholder  receiving  his 
s^iare  of  the  capital  stock  would,  in  equity,  be  held  liable  jpro  rata 
to  contribute  to  the  discharge  of  such  debts  out  of  the  fund  in  his 
own  hands." 


'  Story's  Eq.  Jur.,  §  1252.  See,  also, 
Vose  V.  Grant,  15  Mass.  505  ;  Wood  v. 
Dummer,  3  Mason,  308  ;  Spear  v.' 
Grant,  16  Mass.  9  ;  Carson  v.  African 
Co.,  1  Vt.  121 ;  S.  C,  Skinner,  84.  In 
the  case  of  Spear  v.  Grant,  supra,  the 
defendant  was  a  stockholder  in  a 
bank,  and  withdrew  from  the  bank 
his  stock,  when  the  bank  was  indebted 
on  bills  previously  issued,  some  of 
which  came  into  the  hands  of  the 
plaintiff,  and  the  bank  failed,  and  the 
corporation  was  dissolved.  The  action 
was  on  the  case,  and  the  court  held 
that  they  were  unable  to  discover  any 
mode  by  which,  at  common  law,  one 
creditor  could  compel  any  stockholder 
to  pay  him  the  amount  of  his  stock, 
unless  there  was  a  fraud  on  the  part 
of  the  person  sued.  But  Justice 
Jackson  observed  :  "  In  the  case  of 
this  bank  a  court  of  chancery  would 
probably  sustain  a  bill  by  one  or  more 
creditors  of  the  bank  in  behalf  of  all 
who  should  choose  to  come  in  against 
all  the  stockholders.  In  such  a  case 
new  plaintiffs  and  new  defendants 
m.ight  be  added  after  the  commence- 
ment of  the  suit,  as  might  be  found 
necessary  ;  and  the  rights  of  all  con- 
cerned, on  both  sides,  might  be  con- 
sidered at  once .  It  could  then  be  ascer- 
tained how  much  was  due  in  the  whole, 
to  all  who  should  choose  to  adopt  this 
remedy,  and  what  has  been  received 
by    each     stockholder.      The     latter 


might  then  be  compelled  to  pay  each 
one  his  proportion  of  the  whole  debt, 
provided  it  did  not  exceed  the  amount 
of  his  dividend  ;  and  the  money  thus 
paid  might  be  divided  among  the 
plaintiffs  in  proportion  to  their  re- 
spective claims.  If  any  of  the  stock- 
holders had  become  insolvent,  it 
would  be  determined  upon  the  same 
principles  as  in  a  like  case  in  a  court 
of  common  law,  whether  loss  arising 
from  that  circumstance  should  be 
borne  by  the  stockholders  or  creditors, 
and  this  point  being  settled,  the  court 
of  chancery  would  proceed  to  appor- 
tion the  loss  accordingly  among  the 
respective  parties.  It  might  also  be 
ascertained,  whether  any  of  the  pres- 
ent holders  of  the  bills  had  purchased 
them  at  a  greater  discount,  and  at  a 
later  period  ;  and  if  this  circumstance 
ought  to  have  any  influence  in  esti 
mating  the  amount  of  the  debt,  or 
in  distributing  the  money  to  be 
paid  by  the  defendants,  that  the 
court  would  be  competent  to  make 
the  distribution  accordingly."  See, 
also,  Cooper  v.  Frederick,  9  Ala.  742 ; 
Dudlev  v.  Price,  10  B.  Monr.  84  ;  Bank, 
etc.,  V.  Chambers,  8  Sm.  &  M.  49  ; 
State  V.  La  Grange  R.  Co.,  4  Humph. 
488;  Banks,  etc.,  v.  St.  John.  25  Ala. 
566;  Johnson  v.  State  Marine  Hosp., 
2  Cal.  319  ;  Scott  v.  Eagle  Fire  Co., 
7  Paige,  198. 


Suits  in  EQurrr  by  and  against  Corporations,  etc.    521 

Sec.  366.  Same  continued.  —  If  a  stockholder  has  not  fully  paid 
the  amount  stipulated  for  the  shares  he  has  subscribed  for,  the 
Sinn  remaining  due  may  be  reached  by  a  creditor  of  the  corpora- 
tion if  necessary  to  secure  tlie  amount  due  him  from  the  corpora- 
tion. All  such  creditors  may,  when  their  interests  require  it,  ask 
that  the  fund  on  which  they  rely  shall  really  exist  in  money  and 
not  merely  on  paper,  and  to  be  held  sacred  to  the  discharge  of 
such  corporate  liabilities.' 

Sec.  367.  Doctrine  as  to  parties  plaintiff  generally,  in  equitable  pro- 
ceedings, relating  to  corporations.  —  We  have  sufficiently  shown  that 
a  stockholder  or  creditor  may,  under  certain  circumstances,  main- 
tain a  suit  not  only  for  an  injnnctiou  but  for  an  account ;  but  such 
stockholder  must,  in  fact,  be  one  and  not  simply  a  person  having 
an  inchoate  right  of  membership,^  "  And,  therefore,  a  person 
who  has  sold  his  shares,  even  though  he  may  still  remain  under 
disabilities,  cannot  institute  proceedings."  '  But  it  has  been  held 
that  an  equitable  owner  of  shares,  or  a  scrip  or  policy-holder  of  an 
insnrance  company,  may  sue."  And  it  has  been  claimed  that  a 
trustee  cannot  sue,  as  "he  is  not  actually  concerned  in  the  com- 
pany." ^ 

Sec.  36S.  same  continued.  —  The  general  doctrine,  however,  is, 
that  policy-holders  cannot  interfere  with  the  management  of  the  in- 
ternal affairs  of  the  insurance  company  issuing  the  same,  or  with 
the  business  policy  of  the  company,  whether  wise  or  unwise,  as  to 
allow  such  interference  would  be  extremely  mischievous;  but  they 
could  undoubtedly  interfere  to  restrain  waste  or  a  breach  of  trust.* 
So,  a  shareholder,  although  allowed  to  enjoin  the  doing  of  acts  en- 
tirely or  materially  different  from  the  objects  and  purposes  of  the 
incorporation,  and  therefore  ^clt7'a  vires  /  yet  he  will  not  be  per- 
mitted to  enjoin  the  doing  of  acts  to  carry  out  the  objects  of  its  crea- 
tion, although  they  may  be  injurious  to  the  party  complaining  in 

'  Wood  V.  Pearce,  2  Dis.  (O.)  411.  ^  Doyle  v.  Muntz,  5  Hare,  509. 

-  Brice's  Ultra  Vires,  589,  and  notes.  «  Aldebert  v.    Leaf,  12  W.  R.  462  ; 

^  Id.  :  Doyle  v.  Muntz,  5  Hare,  509  ;  2  N.    R.    455  ;  In  re  State  Fire  Ins. 

Scaith  V.  Chad  wick,  14  Jur.  300.  Co.,  id.    565;    34    L.  J.   Ch.   436  ;  1 

■*  Great  W.   R.  Co.    v.  Rushout,  5  H.  &  M.  457;  1  DeG.,  J.  &  S.  634; 

DeG.  &  Sm.  290  ;  Baeehaw  v.  Eastern  In  re  International  L.  &  A.  Soc,  L. 

U.  R.  Co.,  7  Hare,  114  ;  2  McN.  &  G.  R.,  5  Ch.  424. 
389. 

66 


522  Private  Corporations. 

another  capacity  than  that  of  stockholder,  and  although  the  public 
generally  may  be  injuriously  affected  thereby.^ 

Where  there  are  several  owners  of  bonds  secured  by  a  con- 
veyance by  mortgage  or  trust  deed  to  trustees,  the  question 
whether  the  bondholder  may  maintain  an  action  in  his  own 
name  has  been  the  subject  of  judicial  controversy  and  investiga- 
tion. The  general  rule  deducible  from  the  authorities  is,  that 
such  individual  stockholders  cannot,  independently  of  the  trustees, 
maintain  the  action,  unless  in  case  such  trustee  refuses  to  bring 
suit  after  a  request  from  such  bondholder  who  is  entitled  to  such 
remedy  ;  or  in  case  of  fraud  or  violation  of  duty,  or  conduct,  on 
the  part  of  such  trustees,  prejudicial  or  inimical  to  the  rights  of 
the  cestui  que  trust^^ 

Sec.  369.  Same  continued.  —  On  this  Subject  of  parties  it  has  been 
appropriately  observed  :  "  Where  there  has  been  a  waste  or  mis- 
application of  the  corporate  funds  by  the  officers  or  agents  of  the 
company,  a  suit  in  equity  may  be  brought  by  and  in  the  name  of 
the  corporation,  to  compel  them  to  account  for  such  waste  or  mis- 
application, the  directors  being  regarded  as  trustees  of  the  stock- 
holders, and  subject  to  the  obligations  and  disabilities  incidental 
to  that  relation.  But  as  a  court  of  equity  never  permits  a  wrong 
to  go  unredressed  merely  for  the  sake  of  form,  if  it  appears  that 
the  directors  of  a  corporation  refuse,  in  such  case,  to  prosecute,  by 
collusion  with  those  who  had  made  themselves  answerable  by 
their  negligence  or  fraud,  or  if  the  corporation  is  still  under  the 
control  of  those  who  must  be  the  defendants  in  the  suit,  the  stock- 
holders, who  are  the  real  parties  in  interest,  will  be  permitted  to 

'Baltimore,   etc.,   v.    Wheeling,   13  "  The  appointment  of  new  trustees 

Gratt.   40.     See,   also.    High  on    Inj.,  is   an   ordinary   remedy,  enforced   by 

§  774.  courts  of  equity   in    all    cases    where 

2  Coal    Co.  V.   Blatchford,  11    Wall,  there  is  a  failure  of  suitable  trustees 

172  ;  Galveston  v.  Cowdrey,  id.  459  ;  to  perform  the   trust,  either  from  ac- 

Knapp   V.   Railroad    Co.,   20  id.    117  ;  cideut  or  from  the  refusal  of  the  old 

Alexander  v.  Central  R.  R.  Co.  (U.  S.  trustees  to  act,  or  from  their  original 

C.  C.  Iowa)  1  Cent.  L.  J.  545;  Van  Doren  or  supervenient  incapacity   to  act,  or 

V.  Robinson,  16  N.  J.  Eq.   256  ;  Wil-  from  any  other    cause."     Story's  Eq. 

liamson  v.  N.  J., etc.,  R.  Co., 10  id.  1  ;  Jur.,  §  1287.     See,  also,  Ellison  v.  El- 

Coe  v.  Columbus,  etc.,  R.  Co.,  10  Ohio  lison,  6  Ves.  663  ;  2  Fonbl.  Eq.,  B.  2, 

St.  410  ;  Western  R.  Co.  v.  Nolan,  48  ch.  7,  §  1,  and  note  ;  Lake  v.  De  Lam. 

N.  Y.  518  ;  Sturges  v.  Knapp,  31  Vt.  1 ;  bert,  4'id.  592  ;  2  Madd.  Ch.  Pr.  133  ; 

Shaw   v.  Norfolk   Countv    R.   Co.,    5  Millard  v.  Eyre,  2  Ves.  94  ;  Buchanan 

Gratt.  162 ;   Ashton  v.  Atlantic  Bank,  v.    Hamilton,   5  id.   722 ;    Hibbard  v. 

3  Allen,  217.  Lambe,  Amb.  309. 


Suits  in  Equity  by  and  against  Cokpoeations,  etc.     523 

file  a  bill  in  their  own  names,  making  tlie  corporation  a  party  de- 
fendant. And  if  the  stockliolders  are  so  numerous  as  to  render 
it  impossible  or  very  inconvenient  to  bring  them  all  before  the 
court,  a  party  may  file  a  bill  in  behalf  of  themselves  and  all  others 
standing  in  the  same  situation."  ' 

The  general  doctrine  in  equity  is  that  where  the  parties  hav- 
ing common  interests  are  very  numerous,  and  it  is  impractical^le 
to  bring  all  of  them  before  the  court,  one  or  more  may  maintain 
a  suit.  "  The  like  doctrine,"  observes  Mr.  Story,  "  has  been  ap- 
plied to  a  case  where  a  bill  was  brought  by  some  shareholders  iii 
a  joint-stock  company  (the  stock  of  which  was  divided  into  six 
thousand  shares),  on  behalf  of  all  the  shareholders,  to  compel  the 
directors  of  the  company  to  refund  moneys  improperly  withdrawn 
by  them  from  the  stock  of  the  company,  and  applied  to  their  own 
use.  Upon  the  objection  being  taken  to  the  want  of  proper  par- 
ties, the  coui't  overruled  it,  upon  the  ground  that  justice  would, 
be  unattainable  if  all  the  shareholders  were  requii'ed  to  be  made 
parties  to  the  suit ;  and  that  a  separate  bill  by  each  shareholder, 
to  recover  his  portion  of  the  money,  would  produce  enormous  in- 
convenience and  multiplied  litigation,  and  that  the  shareholders 
had  one  common  right  and  one  common  interest  to  be  subserved 
by  the  suit." ' 

Sec.  370.  Where  an  iiyunction  will  be  granted.  —  An  injunction 
will  always  be  granted,  as  we  have  seen,  at  the  instance  of  a 
stockholder  or  creditor  where  the  corporation  or  its  directors  at- 
tempt acts  ultra  vires^  as  where  it  proposes  to  exceed  the  legiti- 
mate scope  of  its  authority,  or  in  going  beyond  any  power  con- 
ferred upon  it."  So,  corporations  may  be  restrained  from  any 
use  of  their  powers  which  must  result  in  the  injury  of  individu- 
als, especially  where  the  authority  claimed  by  the  corporation  is 
doubtful,  and  where  the  authority  if  exercised  must  place  others 

'  Ang.  &  Am.  on  Corp.,  §  312.     See,  Congreve,  4  Russ.  562  ;  Crease  v.  Bab- 

also,  Robinson  v.  Smith,  3  Paige,  233  ;  cock,  10  Mete.  532. 

Baj-less  v.  Orne,  1  Freem.  (Mass.)  Ch.  As  to  when  the  corporation  is  a  nec- 

173;  Hodges  V.  New  Eng.  Screw  Co.,  1  essary  party,  Lyman  v.  Bonney,   101 

R.  I.  312;  Hersev  v.   Veazie,  24  Me.  Mass.  562. 

12  ;  Neall  v.  Hill,"l6  Cal.  145  ;  Cumber-  ^  Lane  v.  Scliomp,  20  N.  J.  Eq.  82  ; 

land    Coal     k.     Sherman,    30     Barb.  Union   Pacific  R.   R.    Co.   v.    Lincoln 

553 ;  Butts  v.  Wood,  31  id.  181  ;  37  N.  County,  3  Dill.  (U.  S.  C.  C.)  300. 

y.  317.  K'olman  v.  Eastern,  etc.,  R.  Co.,  10 

2  Story's  Eq.  PI.,  §  109  ;  Hicljens  v.  Beav.  1 ;  Salomons  v.  Laing.  12  id.  339. 


524  Pbivate  Corpokations. 

in  great  peril.  ^  And  even  when  a  remedy  at  law  may  exist  for 
the  fraudulent  mismanagement  of  the  business  on  the  part  of  the 
directors,  or  a  majority  of  them,  this  may  not  always  constitute  a 
bar  to  a  claim  for  an  injunction.*  And  where,  by  the  fraudulent 
or  improper  conduct  of  stockholders  or  directors,  certain  shares 
have  been  transferred  to  them  for  the  purpose  of  enabling  them- 
selves to  retain  office,  an  injunction  will  be  granted  to  prevent 
them  from  voting  on  such  stock. "*  So,  a  contemplated  diversion 
of  the  corporate  funds  to  other  purposes  than  those  provided  for 
or  contemplated  by  the  constating  instruments,  or  for  which  the 
corporation  was  organized,*  or  attempts  to  misapply  the  funds  to 
carry  out  any  radical  change  of  the  purposes  of  the  organization, 
will  entitle  a  stockholder  or  creditor  to  an  injunction  to  prevent 
it.*  So,  an  injunction  will  be  issued  to  restrain  an  unjust  or 
unlawful  election,  or  the  casting  of  improper  votes  at  such 
election,  or  indeed  from  the  gross  abuse  of  any  of  its  powers, 
when  the  acts  will  result  in  such  mischief  as  the  stockholders  or 
parties  seeking  relief  ought  not  to  be  subjected  to.* 

And  this  exercise  of  the  equitable  jurisdiction  of  the  courts  has 
been  disgracefully  prostituted  in  some  cases  to  the  enjoining  by 
one  court  of  the  exercise  of  this  power  by  another  court  of  co- 
ordinate jurisdiction.'' 

Sec.  371.  Where  an  injunction  will  not  be  granted.  —  It  has  been 
held  that  an  injunction  should  not  be  granted  to  restrain  the 
directors  of  a  foreign  corporation  from  the  payment  of  a  dividend 
at  the  suit  of  one  to  whom  the  corporation  is  not  indebted,  and 
where  the  only  ground  for  the  injunction  is  that  the  directors 
have  committed  a  mistake  in  making  the  dividend,  as  in  such  a 
case  the  remedy  should  be  in  the  state  of  its  creation.* 

1  Mayor,   etc.,    v.    Qroslion,  30  Md.  ^  minois,  etc.,  v.  Cook,  29  111,  237. 

436.  ^  Laue  v.  Scliamp,  ante  ;  Watson  v. 

'  Sears  V.  Hotclikiss,  25Conn.  171.  Harlem  Navigation  Co.,  52  How.   Pr. 

3  Hilles  V.  Parrish,  13  N.  J.  Eq.  380.  348  ;  Matthews   v.    Trustees,  7  Phila. 

And  the  bill  is  not   demurrable,  if  270. 
the  party  to  whom  a  fraudulent  sale  ■"  See  article  entitled  "  The  Erie  Bail- 
is  to  be  made  is  not  a  party.    Abbot  v.  road  Row,"  3  Am.  L.  Rev.  41  (October, 
American,  etc.,  4  Blatchf.  489.     See,  1868);    ante,    §    245,    and   authorities 
also,  4  Nev.  138.  cited. 

■»  Kean  v.  Johnson,  9  N.  J.  Eq.  401  ;  ^Howell  v.  Chicago,  etc.,  R.  Co.,  51 

Smith  V.  Bangs,  15  111.  399  ;  Sears  v.  Barb.  378. 
Hotchkiss,  25  Conn.  171. 


SriTS  IN  Equity  by  and  against  Cokporations,  etc.      525 

And  where  some  of  the  stock  issued  by  the  directors  is  legal, 
and  some  not,  they  can  only  be  restrained  from  using  the  proceeds 
of  such  of  the  stock  as  is  illegally  issued. "^  Nor  will  equity  relieve 
by  injunction  where  the  appropriate  remedy  is  by  action  in  the 
nature  of  quo  loarranto^^  nor  where  the  ground  of  relief  is  for 
fraud  in  the  election  of  officers/  nor  where  the  object  of  the  suit 
is  the  appointment  of  a  receiver  for  the  management  of  the  affairs 
of  the  corporation,  will  the  directors  or  other  officers  be  enjoined 
from  acting  in  their  official  capacity  where  this  is  not  necessary 
to  accomplish  the  purposes  of  the  suit/  nor  where  it  appears  that 
the  proceedings  of  a  stockholder  are  not  for  the  protection  of  his 
own  interests  but  to  aid  others/  nor  to  restrain  a  stockholder  from 
voting  upon  an  alleged  excess  of  stock  in  his  possession,  where  no 
steps  have  been  taken  by  the  company  to  cancel  the  excess,"  nor 
where  a  shareholder  who  claims  to  be  defrauded  by  the  issue  of 
stock  seeks  to  restrain  the  corporation  from  disposing  of  its  prop- 
erty leaving  insiifiicient  to  indemnify  him  for  his  loss,  as  he  stands 
in  no  better  position  than  a  general  creditor.'' 

A  party  may  also  waive  his  rights  to  an  injunction  and  be 
estopped  from  such  proceedings  by  his  conduct.  "  Thus,  where 
a  depositor  in  a  savings  bank  has  consented  that  his  deposit  may 
be  converted  into  stock,  as  a  security  for  the  debts  of  the  corpo- 
ration, and  his  conduct  has  been  such  as  to  amount  to  a  voluntary 
dedication  of  his  stock  for  the  purpose  of  securing  the  debts,  he 
is  regarded  as  estopped  from  claiming  relief  in  equity,  and  an 
injunction  will  be  refused."  *  Nor  will  a  corporation  be  enjoined 
from  acting  in  its  corporate  capacity  for  the  purpose  of  securing 
legislative  authority  to  change  its  objects  and  powers.*  But  an 
injunction  may  be  properly  allowed  in  such  a  case  where  there  is 
an  attempted  use  of  corporate  funds  for  defraying  the  expense  of 

1  Fisk  V.  Chicago,  etc.,  58  Barb.  513.         ^  Keid  v.  Jones,  6  Wis.  680  ;  High  on 
See.   also,  O'Brien   v.   Same,  id.  568;     Inj.,g779. 

Blatchford  v.  Ross,  54  id.  42.  ''  Whelpley  v.  Erie  R.  Co.,  6  Blatchf. 

2  Hartt  V.  Harvey,  32  Barb.  55  ;  Mick  -    271 . 

les  V.  Rochester,  etc,  R.  Co.,  11  Paige,        ^Maryland,  etc.,  v.  Schroeder,  8  G.  & 
lis.  J.  93.     See,  also,  Gravestine's  Appeal, 

3  Id.  49  Penn.  St.  310. 

^  Stevens  v.  Davison,  18  Gratt.  819.         »  Ware  v.  Grand,  etc.,  R.  Co.,  2  R.  & 
5  Sparhawk  v.  Union,  etc.,   R.  Co.,     M.  470;  Stevens  v.  South,  etc.,  R.  Co., 
54  Penn.  St.  401.  13  Beav.  49. 


526  Private  Corporations. 

procuring  an  extension  of  corporate  powers  beyond  the  legitimate 
objects  for  which  tlie  corporation  was  instituted/ 

Sec.  372.  Specific  performance  —  right  of  waj'.  —  A  corporation 
may  be  compelled  by  a  court  of  equity  to  specifically  perform  a 
contract  entered  into  by  it,  in  all  instances  where  ecpiity  and  good 
conscience  require  that  it  should  specifically  perform  it/  in  the 
same  manner  and  to  the  same  extent  that  performance  may  be 
decreed  against  an  individual."  Where  a  party  agreed  under 
seal  to  permit  a  railroad  corporation  to  construct  a  road  over 
his  land,  and  to  convey  a  right  of  way  therefor  for  a  cer- 
tain sum,  after  the  railroad  should  be  definitely  located,  with  a 
condition  in  the  deed  of  conveyance,  that  the  deed  should  be  void 
when  the  road  should  be  discontinued,  it  was  held,  that  specific 
performance  of  such  an  agreement  should  be  decreed  after  the 
road  was  constructed  over  it,  although  the  corporation  did  not 
expressly  bind  itself  to  take  or  pay  for  the  land.  And  it  was  also 
held  in  such  a  case,  that,  where  the  corporation  located  the  road 
over  the  land  and  continued  to  use  the  same,  and  was  in  actual 
possession  of  it  for  more  than  three  years,  a  bill  filed  by  it  for  a 
specific  performance  of  the  agreement  would  not  be  dismissed  on 
the  ground  of  unreasonable  delay  in  filing  it.*  But  the  same  rules 
])revail  as  to  the  specific  enforcement  of  contracts  against  corjjora- 
tions  as  against  individuals,  and  being  a  matter  resting  in  the 
sound  discretion  of  the  court/  it  will  not  exercise  this  jurisdiction, 

'  Munt  V.  Shrewsbury,  etc.,  R.  Co.,  Loveless,  21  Ala.  371  ;  Hudson  v.  Lay- 

13  Beav.  1  ;  Stevens  v.  South.,  etc.,  R.  ton,  5  Harr.  74  ;    Auter  v.    Miller,  18 

Co.,  id.  49  ;  High  on  Inj.,  §  772.    See,  Iowa,  405  ;   Waters  v.  Howard,  8  Gill 

also.  Ward  v.  Society,  etc.,  1  Coll.  370.  (Md.),  262  ;  Smoot  v.  Rea,  19  Md.  398; 

^  Inge  V.  Birmingiiam,  etc.,  itailway  Hester  v.  Hooker,  15  Miss.  768  ;  Tobey 

Co.,  23   Eng.  L.   &  Eq.  601;  Marshall  v.    County   of   Bristol,  3   Story,    800; 

V.  Queenborough,  1  Sim.  &  S.  520.  Pickering'v.  Pickering,   38  N.  H.  400  ; 

3  Kay  V.  Johnson,  2  H.  &  M.  118.  Young  v.  Daniels,  2  Iowa,  126;  Rudolph 

''Western    Railway   v.   Babcock,   6  v.    Covell,   5   id.    126;     Humbard  v. 

Mete.  (Mass  )  346.  Humbard,  3  Head,  100.   It  is  not,  how- 

*  Roundtree  v.   McLain,  1  Hempst.  ever,  dependent    upon   the    arbitrary 

245;  Lloyd  V.  Wheatley,  2  Jones' Eq.  pleasure  of  the  court,  but    regulated 

267;  Duvall  v.  Myers,  2  Md.  Ch.  401  ;  by   rules  and   principles.     Rogers  v. 

Wads  worth   v.    Manning,  4  Md.  59;  Saunders,  16  Me.  92  ;  Griffith  v.  F'reder- 

Clarke  v.  Rochester,  etc.,  R.  R.  Co.,  ick   County    Bank,   6   Gill  &  J.    424; 

18  Barb.  350.     The  enforcement  of  the  Pigg  v.  Corder,  12  Leigh,  69  ;  Meeker 

specific  execution  of   a   contract   in   a  v.  Meeker,  16  Conn.  403;  Seymour  v. 

court  of  equity  is  not  a  matter  of  right,  Delancey,  3  Cow.  445  ;    6   Johns.    Ch. 

but  a  matter  of  sound,  reasonable  dis-  (N.  Y.)  222 ;  King   v.    Morford,  1  N. 

cretion  in  the  court .     Blackwilder   v.  J.  Eq.274;    Anthony  v.    Leftwick,  3 


Suits  in  Equity  by  and  against  Coepokations,  etc.      527 

when  adequate  redress  can  be  had  at  law,"  nor  particularly  in 
the  case  of  corporations  where  it  is  grossly  improvident,'  or  in  ex- 
cess of  the  powers  of  the  agent's  or  officer's  j)ower3  to  make.  In 
England  it  has  been  held  that  a  contract  to  build  a  railroad  is  not 
one  of  which  equity  will  compel  a  specific  performance.^ 


Rand.  238  ;  Prater  v.  Miller,  3  Ilawka, 
629;  Turner  v.  Clav,  3  Bibb,  52; 
Frisby  v.  Ballance,  5  111.  287  ;  Broad- 
well  V.  Broadwell,  G  id.  599  ;  McMur- 
trie  V.  Bennett,  Harr.  134  ;  Dougherty 
V.  Hampston,  2  Blackf.  273  ;  St.  Jolin 
V.  Benedict,  6  Johns.  Ch.  Ill;  Mc- 
Whorterv.  McMahan,  1  Clark  (N.  Y.), 
400  ;  Henderson  v.  Hays,  2  Watts, 
148  ;  Perkins  v.  White,  3  Ear.  &  M. 
324;  Leigh  v.  Crump,  1  Ired.  Eq.  299; 
Gould  V.  Womack,  2  Ala.  83  ;  Pulliam 
V.  Owen,  25  id.  493  ;  Ash  v.  Daggy,  6 
Ind.  259;  Howard  v.  Moore,  4  Sneed, 
317.  A  bill  in  equity,  for  the  specific 
performance  of  a  contract,  is  an  appli- 
cation to  the  sound  discretion  of  the 
court,  which  withholds  or  grants  re- 
lief, according  to  the  circumstances  of 
each  particular  case  ;  and  in  the  exer- 
cise of  its  extraordinary  jurisdiction  in 
such  cases,  the  court,  though  not  ex- 
empt from  the  general  rules  and  prin- 


ciples of  equity,  acts  with  more  free- 
dom than  when  exercising  its  ordinary 
powers.  The  plaintiff  who  seeks  the 
enforcement  must  make  out  a  stronger 
case  than  he  who  resists  the  decree. 
Tyson  v.  Watts,  1  Md.  Ch.  13.  Where, 
on  a  bill  by  a  vendor,  it  appeared  that 
by  the  contract  the  vendee  had  the 
right  to  relieve  himself  from  the  pur- 
chase by  paying  a  stipulated  sum, 
held,  that  the  right  to  come  into  equity 
for  specific  performance  being  clear, 
the  court,  in  refusing  that  decree, 
might,  under  the  rule  that  if  jurisdic- 
tion in  equity  once  attaches,  the  court 
may  go  on  to  do  complete  justice,  de- 
cree the  payment  by  the  vendee  of  the 
stipulated  sum  to  the  vendor,  although 
the  vendor  might  have  recovered  the 
same  at  law.  Cathcart  v.  Robinson, 
5  Pet.  363 ;  Stevenson  v.  Buxton,  4 
Abb.  Pr.  414. 


'  Wadsworth  v.  Manning,  ante. 

'  Shrewsbury,  etc.,  R.  R.  Co.  v. 
London,  etc.,  Railway  Co.,  6  H.  L. 
Cas.  113. 


^  Heathcote  v.  North  Staffordshire, 
etc.,  Railway  Co.,  6  Eng.  Rv.  Cas. 
658;  20  L.  J.  Ch.  82. 


528  Private  Cokporations. 

CHAPTER  XV. 

EXECUTION   AND   THE   APPOINTMENT   OP  RECEIVERS. 

Sec.  373.  The  common-law  doctrine  in  reference  to  execution. 

Sec.  374.  Where  the  same  doctrine  provides  for  a  sale  on  execution. 

Sec.  375.  Doctrine  as  to  the  subjection  of  stocks  to  execution. 

Sec.  376.  Statutes  generally  provide  for  the  garnishment  of  stockholdera. 

Sec.  377.  Appointment  of  receivers. 

Sec.  378.  Judgment  creditor's  right  to  a  receiver. 

Sec.  379.  Same  continued. 

Sec  380.  Same  continued. 

Sec.  381,  Functions,  rights  and  duties  of  a  receiver  of  a  corporation. 

Skc.  373.    The    common-law    doctrine  in  reference  to  execution An 

execution  is  said  to  be  the  end  and  fruit  of  the  law  ;  exeoutio  est 
finis  et  fructiis  legis.  It  makes  the  Judgment  effective,  and 
usually  all  property  and  pecuniary  interests  of  the  defendant,  not 
exempt  from  execution,  is  subject  to  satisfaction  of  the  judgment. 
But,  in  reference  to  corporations,  there  is,  at  common  law  and  in 
the  absence  of  any  special  statutory  provisions  on  the  subject,  a 
further  exception,  viz.:  that  the  franchises  of  a  corporation  as 
well  as  the  means  necessary  to  the  existence  and  execution  of  the 
corporate  powers,  and  to  carry  out  the  purposes  for  which  it  was 
instituted,  are  not  the  subject  of  levy  and  sale  on  execution.^ 
Mr.  Herman  observes :  "  Corporations  are  not  formed  or  created 
by  an  execution  sale,  and  until  the  proper  and  necessary  steps  are 
taken  by  the  state  to  forfeit  its  charter  and  terminate  its  existence 
it  still  possesses  the  power  granted  it ;  the  lands,  easements  or 
works  appurtenant  or  essential  to  the  practical  use  and  occupation 
of  the  franchise  cannot  be  sold  separate  from  the  franchise,  so  as 
to  impair  its  value  or  impede  its  use."  ^ 

Keither  are  the  tolls  or  products  of  the  franchise  subject  to  such 

1  Hatcher  v.  T.  W.  &  W.  R.  Co.,  63  man  v.  Railroad  Co.,  65  Penn.  St.  278  ; 

111.  477  ;  Bruffett  v.  G.  W.  R.  Co.,  35  Western  Railroad  Co.  v.  Johnston.  59 

id.  353;  Stewart  v.  Jones,  40  Mo.  140;  id.  295  ;  Canal  Co.  v.  Bonham,  9  W.  & 

Thomas    v.    Armstrong,    6  Cal.    280  ;  S.  27 ;  Gue  v.  Canal  Co.,  24  How.  263. 

Munroe  v.  Thomas,  5  id.  470  ;  Wood  '^  Herman  on  Executions,  551  ;  Amant 

v.  Turnpike  Co.,  24  id.  474  ;  James  v.  v.  Turnpike  Co.,  13  S.  &R.  210  ;  Canal 

Plank  R.  Co..  8  Mich.  91  ;  Coe  v.  Rail-  Co.   v.  Bonham,  9  W.  &  S.  37  ;  Coe  v. 

road  Co.,  10  Ohio  St.  372  ;  Seymour  v.  Railroad  Co.,  10  Ohio  St.  372  ;  Atkinson 

Turnpike  Co.,  10  Ohio,  476  ;  Atkinson  v.   Railroad    Co.,   15  id.  31;  Common- 

T.  Railroad  Co.,  15  Ohio  St.  21  ;  Young-  wealth  v.  Company,  5  Cush.  509;  Young. 


Execution  and  the  Appointment  of  Reoeivers.       529 


levy  and  sale,  so  as  to  prevent  the  company  from  demanding  and 
receiving  the  same,  or  so  as  to  divest  it  of  its  right  of  ownership 
and  possession.' 


man  V.  Railroad  Co..  65  Penn.  St.  278; 
Plymouth  R.Co.v.  Colwell,39  id.  337. 
Where  a  corporation,  like  a  bridge 
or  turnpike  company,  has  no  tangible 
property  that  can  be  subject  to  execu- 
tion, and  it  has  nothing  but  a  mere 
franchise  or  easement  from  which  its 
incoi»e  and  revenue  are  derived,  there 
is  nothing  that  can  be  levied  on  or 
taken  by  the  otBcer  in  satiwfaction  of 
the  writ  ;  in  such  cases,  where  no  levy 
can  be  made,  the  equitable  powers  of 
the  courts  in  those  states  where  they 
have  abolished  the  distinctions  be- 
tween law  and  equity,  and  in  others, 
where  the  distinctions  still  prevail,  a 
court  of  equity  will  grant  relief  to  the 
creditor  in  the  appointment  of  a  re- 
ceiver, to  take  possession,  charge  and 
control  of  the  franchises  and  revenues, 
who  as  the  officer  of  the  court  accounts 
to  it,  and  under  its  direction  satisfies 
the  claim  or  judgment  of  the  creditor. 
Herm.  on  Execu.,  §361.  See,  also, 
Covington,  etc.,  R.  Co.  v.  Shepherd,  21 
How.  112  ;  Macon,  etc.,  R.  Co.  v.  Par- 
ker, 9  Qa.  393.  In  the  case  of  Gue  v. 
Canal  Co.,  supra,  the  United  States 
marshal  for  the  district  of  Maryland 
seized  and  advertised  for  sale,  under 
an  execution,  a  house  and  lot,  sundry 
canal  locks,  a  wharf,  and  sundry  lots, 
which  belonged  to  the  defendant.  An 
injunction  was  obtained  against  the 
sale,  which  was  made  perpetual  ;  and 
on  appeal  from  the  United  States 
circuit  court  for  Maryland,  was  in  the 
supreme  court  of  the  United  States 
made  perpetual.  The  court  observes: 
"  Now  it  is  very  clear  that  the  franchise 
or  right  to  take  toll  on  boats  going 
through  the  canal  would  not  pass  to 
the  purchaser  under  this  execution. 
The  franchise,  being  an  incorporeal 
hereditament,  cannot,  upon  the  settled 
principles  of  the  common  law,  be 
seized  under  &  fieri  facias.  If  it  can 
be  done  in  any  of  the  states  it  must  be 
done  under  a  statutory  provision  of 
the  state  of  Maryland,  changing  the 
common-law  rule  in  this  respect. 


"  Indeed,  the  marshal's  return  and 
the  agreement  of  the  parties  show  it 
was  not  seized,  and  connequently,  if 
the  sale  had  taken  place,  the  result 
would  have  been  to  destroy  utterly  the 
value  of  the  property  owned  by  the 
company,  while  the  creditor  himself 
would,  most  probably,  realize  scarcely 
any  thing  from  the  useless  canal  locks 
and  lots  adjoining  them.  The  record 
and  proceedings  before  us  show  that 
there  were  other  creditors  of  the  cor- 
poration to  a  large  amount,  some  of 
whom  loaned  money  to  carry  on  the 
enterprise.  And  it  would  be  against 
principles  of  equity  to  allow  a  single 
creditor  to  destroy  a  fund,  to  which 
other  creditors  had  a  right  to  look  for 
payment,  and  equally  against  the 
principles  of  equity  to  allow  a  single 
creditor  to  destroy  a  fund  to  which 
other  creditors  had  a  right  to  look  for 
payment,  and  equally  against  the 
principles  of  equity  to  permit  him  to 
destroy  the  value  of  the  property  of 
the  stockholders  by  dissevering  from 
the  franchise  property  which  was 
essential  to  its  useful  existence.  In 
this  view  of  the  subject  the  court  do 
not  deem  it  proper  to  express  any 
opinion  as  to  the  right  of  this  creditor 
in  some  other  form  of  judicial  proceed- 
ing to  compel  a  sale  of  the  whole 
property  of  the  corporation,  including 
the  franchise,  for  the  payment  of  his 
debt."  So  it  has  been  held  that  neither 
the  turn-tables  nor  the  freight  cars 
found  on  the  road  can  be  levied  upon 
and  sold  on  execution  against  a  rail- 
road company,  as  they  are  part  of  the 
realty,  and  cannot  be  severed  and  sold. 
Titus  V.  Mabee,  25  111.  257  ;  Seymour 
V.  Milford,  etc,  T.  Co.,  10  Ohio,  476  ; 
Hunt  V.  Bullock,  23  111.  320  ;  Palmer 
V.  Forbes,  id.  302  ;  Western  Pa.  R.  Co. 
V.  Johnston,  59  Penn.  St.  290  ;  Leedora 
V.  Plymouth,  etc.,  R.  Co.,  5  W.  &  S. 
265 ;  Susquehanna  Canal  Co.  v.  Bon- 
ham,  9  id.  27  ;  Wood  v.  Turnpike  Co., 
24  Cal.  478. 


'  Rorer  on  Jud.  Sales,  §  1069.     See,     v.    Colwell,    supra;    Youngman    v. 
also,  Herm.  on  Executions,  §  361  ;  Gue     Alexandria  R.  Co.,  65  Penn.  St.  278. 
V.  Canal  Co.,  supra  ;  Plymouth  R.  Co. 

67 


530  Pkivate  Corporations. 

But  it  is  also  held  that  tlio  wood  and  iron  of  a  railroad  com- 
pany may  be  taken  on  execution  and  sold,  although  such  personal 
property  may  be  necessary  to  enable  the  corporation  to  carry  out 
the  purposes  of  its  creation,  and  without  which  it  may  be  unable 
so  to  do.^  And  in  New  Hampsliire  the  locomotive  engines,  pas- 
senger cars  and  freight  cars  of  a  railroad  corporation  are  liable  to 
attachment  or  execution  when  not  in  actual  use."''  The  general 
doctrine  is,  that  the  property  of  a  corporation,  real  and  personal, 
may  be  taken  on  execution  and  sold,  the  same  as  in  case  of  indi- 
vidual defendants,  and  that  the  tangible  property  and  estate  is  no 
more  exempt  from  execution  than  that  of  an  individual.^ 

Much  controversy  has  existed  in  reference  to  the  character  of 
rolling  stock,  and  its  liability  to  execution,  depending  upon  the 
question  whether  it  belongs  to  the  real  estate,  and  is,  therefore, 
subject  to  mortgage  and  other  lien  on  its  real  estate,  or  whether 
it  is  personal  property,  and,  therefore,  not  covered  by  such  liens. 
The  courts  seem  to  be  divided  on  this  question.  But,  from  the 
preponderance  of  authority,  for  most  purposes,  it  is  considered  as 
personal  property,  and  that  as  such,  and  as  against  liens  upon  the 
right  of  way,  and  other  real  estate  of  the  corporation,  it  is  subject 
to  execution,  and  may  be  taken  and  sold  in  the  same  way  that 
other  personal  property  may  be  sold  on  execution.* 

'  Herm.  on  Esecu.,  §  361.    See,  also,  Barb.  591  ;  Beardsley  v.  Ontario  Bank, 

State  V.  Rives,   15  Ired.  297;  James  id.  619;  Hoyle  v.  Plattsburgh,  etc.,  R. 

V.  Railroad  Co.,  6  Wall.  750.  Co  ,  54  N.  Y.   314  ;  Herm.  on   Execu. 

'•^  Boston,  etc.,  R.  Co.  v.  Gilmore,  37  5G1.    See,  also,  6  Am.  Law  Reg.  502;  1 

N.  H.  410  ;  Rorer  on  Jud.  Sales,  346.  Dis.  (0.)  552.    The  character  of  rolling 

It8  property,   real  and  personal,  may  stock  as  real  or  personal   property,  as 

be    sold    as    in    case   of    individuals,  well   as   its  liability  to   execution,  is' 

Herm.  on  Execu  550.  sometimes  fixed  by  statute.     Thus,  in 

^  See  Herm.  on  Execu.,  §  360  ;  State  Wisconsin   it   is  provided  by  statute 

of  Maryland  v.  Bank  of   Md.,  6  G.  &  that  all    rolling  stock  of  any  railroad 

J.  219;  Slee  v.  Bloom,  5  Johns.   Ch.  company,  used  and  employed  in  con- 

366;  S.  C,    19  Johns.  456;  Pierce  v.  nection  with  its  railroad,   shall  be  a 

Partridge,  3  Mete.  44;  Perry  v.  Adams,  fixture.     Taylor's  Stat.,  p.  1048,  ^  53. 

id.  51;  Reg.  v.  Queen,  etc.,  Co.,    1  A.  See  construction  of  this  statute,  Chi- 

&   E.  (N.    S.)  288 ;    State  v.  Rives,  5  cago  &  N.  W.  R.  Co.    v.    Borough  of 

Ired.  297.  See,  also,  Regina v.Victoria,  Fort  Edward,  21  Wis.  44.     It  is  also 

etc.,  Co.,  1  Q.  B.  289;  Boyd  v.  Chesa-  provided   by  the  constitution  of   Illi- 

peake,  17  Md.  195.  nois   as  follows  :  "  The   rolling  stock 

^  Coe  V.  Railroad  Co.,   10  Ohio  St.  and    all   other  valuable   property  be- 

372;  B.  C.  &   M.  R.  Co.  v.  Gilmore,  37  longing   to   any  railroad   company  or 

N.  H.  410  ;  Randall  v.  El  well,  52  N.  Y.  corporation  in  this  state  shall  be  con- 

522 ;  Hill  v.   La  Crosse,  11  Wis.   214 ;  sidered   personal   property,  and  shall 

Pierce  v.  Emery,  32  N.  H.  484  ;  Min-  be  liable  to  execution  and  sale  in  the 

nesota  v.  St.  P.  R.  Co.,   2  Wall.  609  ;  same  manner  as  the  personal  property 

Stevens  V.  Buffalo,   etc.,    R.   Co.,   31  of  individuals,  and  the  general  assem- 


Execution  and  the  Appointment  of  Receiveks.       531 

Sec.  373.     Where  the  statute  provides  for  sale  on  execution We 

have  noticed  that  statutes  sometimes  provide  for  the  sale  of  the 
corporate  franchise  on  execntion.  In  snch  cases  the  statute  must 
be  strictly  followed;  and  no  title  will  pass  by  the  sale  unless  made 
in  such  a  manner  as  the  statute  prescribes.^  On  the  sale  of  shares 
or  of  the  franchise,  under  the  provisions  of  a  statute  a  distinction 
is  made  between  it  and  an  ordinary  sale  of  personal  property. 
In  the  former  case  there  can  be  no  tangible  possession  taken  by 
the  office]"  or  delivered  to  the  purchaser,  as  in  the  case  of  the  lat- 
ter, where  it  is  held  that  the  actual  delivery  of  the  property  sold 
gives  the  purchaser  the  title,  although  it  may  be  irregularly  con- 
ducted by  the  officer,  whereas  in  the  other  case,  there  being  no 
tangible  property,  the  validity  of  the  transfer  must  rest  upon  a 
substantial  compliance  with  the  provisions  of  the  statute.^  Thus, 
if  the  officer  has  failed  to  give  the  notice  retj[uired  by  the  statute, 
this  will  render  the  sale  void.^  And  where  the  statute  gave 
authority  to  sell  the  franchises  of  a  plankroad  on  execution,  it 
was  held  that  a  sale  could  only  be  made  in  the  manner  ])ointed 
out  by  statute ;  and  that  an  illegal  sale  under  such  circumstances 
will  not  be  rendered  valid  by  the  acquiescence  of  the  stockholders 
in  the  purchaser's  possession,  the  payment  of  tolls  to  him,  or  by 
the  expenditure  of  money  by  him  to  repair  the  road,  with  the 
knowledge  of  the  stockholders.* 

Sec.  374.      Doctrine  as  to  the  subjection  of  stock  to  execution.  —  It 
seems  to  be  a  common-law  docrine  that  the  stocks  or  shares  held 

bly  shall  pass  no  law  exempting  any  a  preponderance  of  authority  as  well 

such    property    from    execution    and  as   the   soundest   reason,  based  upon 

sale."     Const.  111.,  art.  xi,  §  10,  which  the  circumstanees  under  which,  in  the 

took  effect  August  8,  1870.  progress   of    railroad    enterprise,    we 

Rolling   stock    of   a  railroad    is,  in  find  such  stock  used,   personal    prop- 

the   absence   of   statutory  provisions,  erty.    See  post,  %  iQI  ■  Hoyle  v.  Platts- 

and  circumstances  showing  a  purpose  burgh,  etc.,  R.  Co.,  54  N.  Y.  314. 
to  treat  it  otherwise;  and  according  to 

'James   v.  Plankroad  Co.,  8  Mich.  The    return   of    the   officer   should 

91  ;  Gue  v.  Canal  Co.,  24  How.  (U.  S.)  show  a  compliance  with  the  require- 

2o7;  Stamford  Bank  v.  Ferris,  17 Conn,  ments  of  the  statute.      Davis  v.  May- 

259.  nard,  9  Mass.  242;  Hammatt  v.Wymau, 

"Titcomb  v.  Union  Ins.  Co.,  8  Mass.  id.  138.     See,  also.  State  Bank  v.Tutt, 

326;    Howe    v.    Starkweather,    17  id.  44  Mo.  367. 

240;  Taylor  v    Jenkins,   6   Jones'  L.  •*  James  v.  Pontiac  P.  R.  Co.,  8  Mich. 

316.                     .  91.     See,  also,  Oakland  R.  Co.  v.  Kee- 

^  Howe   V.   Starkweather,  17  Ma.ss.  nan,  56  Penn.  St.  198. 
240.     See,  also,  Titcomb  v.  Union  Ins. 
Co.,  8  id.  326. 


632 


Private  Corporations. 


by  a  party  in  an  incorporated  company  is  a  mere  personal  inter- 
est ;  that  the  certificates  thereof  are  a  mere  evidence  of  owner- 
ship, and  have  no  vahie  in  themselves ;  ^  and  that  such  shares  and 
interests  are  not  liable  to  levy  and  sale  on  execution,  unless  pro- 
vision therefor  is  made  by  statute.^  "  Where  property  is  of  so 
intangible  a  nature,"  observes  Mr.  Brice,  "  that  there  can  be  no 
change  of  possession,  as  shares  in  a  corporation,  and  it  cannot  be 
known  whether  they  are  attached  or  not,  the  sale  of  them  on 
execution  is  a  mode  of  transfer  not  authorized  at  common  law."  ' 

Sec.  375.  statutes  generally  provide  for  garnishment  of  the  interests 
of  stockholders.  —  The  shares  held  by  debtors  not  being  liable  to 
levy  and  sale  on  execution  at  common  law,  it  has  in  many,  if  not 
most,  of  the  states  been  provided  by  statute  that  the  interest  thus 
owned  may  be  attached  by  garnishment- of  the  corporation."  But 
in  such  cases  the  attachment  is  subject  to  any  lien  which  the  cor- 
poration may  have,  by  virtue  of  the  by-laws  or  constating  instru- 


'  Redf.  on  Rail.  38  ;  Gilpin  v.  How- 
ell, 5  Penn.  St.  57;  Tippets  V.  Wal- 
ker, 4  Mass.  595  ;  Johns  v.  Johns,  1 
Ohio  St.  350  ;  Arnold  v.  Ruggles,  1 
R   I.  1(55 ;  Howe  v.  Starkweather,    17 

2  See  Uiie  v.  Canal  Co.,  24  How.  (U. 
S.)  257  ;  Ross  v.  Rosa,  25  Ga.  297  ;  Coe 
V.  Columbus,  etc.,  R.  Co.,  10  Ohio  St. 
372  ;  Western  Pa.  R.  Co.  v.  Johnson, 
59  Penn.  St.  290  ;  Stewart  v.  Jones,  40 
Mo.  140:  Denny  V.  Hamilton,  16  Mass. 
402  ;  Denton  v.  Livingston,  9  Johns. 
96;  Williamson  v.  Smoot,  7  Mart. 
(La.)  31 ;  2  Kent's  Com.  285 ;  Long  on 
Sales,  2  ;  New  York  v.  Schuyler,  38 
Barb.  534  ;  S.  C,  34  N.  Y.  30;  Ander- 
son V.  Nicliolas,  28  id.  600  ;  Bank  v. 
Lainer,  11  Wall.  369. 

^  Green's  Brice' s  Ultra  Vires,  562. 

•*  It  is  provided  by  the  statute  of 
Massachusetts,  that  any  share  of  a 
stockholder,  in  any  joint-stock  com- 
pany that  is  or  may  be  incorporated, 
may  be  attached  by  leaving  an  attest- 
ed copy  of  the  writ  (without  the  decla- 
ration), and  of  the  return  of  the  attach- 
ment, with  the  clerk,  treasurer  or 
cashier  of  the  company,  if  there  be 
any  such  officer,  otherwise,  with  any 
officer  or  person  who  has  at  the  time 
the  custody  of  the  books   and   papers 


of  the  corporation ;  that  any  share  of 
interest  so  attached  shall  be  held  as 
security  to  satisfy  the  final  judgment 
in  the  suit  in  like  manner  as  any  other 
personal  estate  is  held.  Rev.  Stat. 
Mass.,  chap.  90,  §  36. 

In  Iowa,  it  is  provided  by  statute  as 
follows : 

"  Stock  or  interest  owned  by  the  de- 
fendant in  any  company,  and  also 
debts  due  him,  or  property  of  his  held 
by  third  persons,  may  be  attached,  and 
the  mode  of  attachment  must  be  as 
follows  : 

"1.  By  giving  the  defendant  in  the 
action,  if  found  within  the  county,  and 
also  the  person  occupying  or  in  posses- 
sion of  the  property,  if  it  be  in  the 
hands  of  a  third  person,  notice  of  the 
attachment. 

"2.  If  the  property  is  capable  of 
manual  delivery,  the  sheriff  must  take 
it  into  his  custody  if  it  can   be  found. 

"  3.  Stock  in  a  company  is  attached 
by  notifying  the  president  or  other 
head  of  the  company,  or  the  secretary, 
cashier,  or  other  managing  agent 
thereof,  of  the  fact  that  the  stock  has 
been  so  attached."  Iowa  Code  (1873), 
§  2967.  See,  also,  the  same  provisions 
relating  to  stock  interests  apply  to 
executions.   Id.,  §  3050. 


Execution  and  the  Appointment  of  Receivers,       533 


ments.^  It  is  evident  that  where  there  is  a  provision  in  the  con- 
stating instruments,  that  all  debts  due  to  the  corpoi'ation  from  a 
stockholder  must  be  satisfied  before  anj  transfer  of  the  stock  held 
by  him  can  be  made,  no  creditor  by  attachment,  or  levy  under  an 
execution,  could  defeat  the  rights  of  such  corporation  to  such  lien, 
by  vii-tue  either  of  such  attachment  or  levy,  as  the  ]nn-chaser 
evidently  could  acquire  no  better  right  than  the  judgment  debtor 
had,  and  his  right,  as  we  have  heretofore  observed,  in  case  of  a 
sale  and  transfer  of  his  interest  would,  in  case  of  the  limitation 
we  have  referred  to,  only  carry  with  it,  like  any  other  chose  in 
action,  the  equitable  interest  only  of  the  assignor,  such  transfer  of 
stock  would  be  subject  to  the  liens  of  the  corporation,  provided 
for  by  contract,  by-laws,  or  by  the  constating  instruments.''^ 

On  this  subject  Mr.  Brice  observes :  "  The  right  to  subject 
stock  in  a  corporation  to  sale  on  execution,  not  being  given  at 
common  law,  but  being  a  statutory  provision,  the  statute  in  such 
cases  directs  the  mode  of  seizure  and  sale  on  execution.  Where, 
by  charter  or  statutory  enactments,  a  stockholder  who  is  indebted 


'  Sewall  V.  Lancaster  Bank,  17  S.  & 
R  285;  Titcomb  v.  Union  Ins.  Co.,  8 
Mass.  326  ;  Colemau  v.  Spencer,  5 
Blackf.  197. 

*  "  The  rule  tliat  an  assignor  of  stock 
may  convey  a  title  without  paying 
what  he  owes  to  the  company  will 
not  of  course  hold,  if  by  the  charter  of 
the  company  it  is  provided  that  all 
debts  due  the  company  from  a  stock- 
holder must  be  satisfied  before  any 
transfer  of  his  stock  shall  be  made." 
Ang.  &  Am.,  §  570. 

And  where  it  was  provided  by  stat- 
ute, that  "  no  stockholder,  indebted  to 
the  bank,  shall  be  authorized  to  make 
a  transfer,  or  receive  a  dividend  till 
such  debt  shall  have  been  discharged, 
or  security  to  the  satisfaction  of  the 
directors  given  for  the  same  ;  "  and  a 
stockholder,  who  was  indebted  to  a 
bank,  not  only  for  a  balance  of  sub- 
scription to  stock,  but  also  for  a  dis- 
counted note,  gave  a  power  of  attorney 
to  the  plaintiff  to  draw  dividends  and 
transfer  the  stock,  and  also  money  to 
pay  the  installments,  which  was  thus 
applied,  the  supreme  court  of  Pennsyl- 
vania held  that  the  plaintiff  was  not 
entitled  to  a  transfer  of  the  stock,  nor 
to  a  return  of  the  money  paid  on  in- 
stallments, TiTMAN,  (J.  J.,  observing  : 


'The  words  (of  the  act)  embrace  all 
debts,  and  there  is  good  reason  for 
their  extending  to  all.  When  the  di- 
rectors discount  the  note  of  a  stock- 
holder, they  know  that  his  stock  ia 
liable,  and,  therefore,  may  be  less 
attentive  to  the  sufficiency  of  the  in- 
dorsers.  The  indorsers,  too,  have  an 
interest  in  the  lien  of  the  bank,  and  it 
may  be  presumed  that  many  persons 
have  been  induced  to  indorse  on  the 
strength  of  this  lien."  Rogers  v.  Hunt- 
ingdon Bank,  12  S.  &  R.  77. 

And  in  Grant  v.  The  Mechanics' 
Bank,  15  S.  &  R.  140,  under  a  provision 
of  an  act  of  the  statt;  of  Pennsylvania, 
which  prohibited  a  transfer  of  stock 
by  a  stockholder  "indebted"  to  the 
bank,  it  was  held  that  a  note  given  by 
the  stockholder  to  the  bank  was  a 
debt  due  from  him  to  the  bank  before 
as  well  as  after  it  became  due,  as  the 
provision  would  fail  of  its  intended 
benefit,  if  a  stockholder  had  an  un- 
restrained right  to  transfer  at  any  time 
before  his  note  fell  due  ;  and  that  the 
lien  would  remain,  though  the  stock 
were  levied  upon  by  a  judgment  credi- 
tor, for  notes  drawn  before  but  falling 
due  after  the  levy,  even  though  they 
should  be  renewed. 


534  Private  Coepoeations. 

can  make  no  transfer  until  his  debt  is  discharged,  there  can  be  no 
levy  upon  such  stock  unless  it  be  subject  to  the  lien  of  the  corpo- 
ration. The  method  presci'ibed  in  the  charter  or  statute  for  the 
sale  of  such  stock  must  be  pursued  or  the  sale  will  be  void. 
Where  shares  of  stock  in  a  corporation  are  made  liable  to  levy 
and  sale  on  execution,  it  is  the  interest  the  party  has  in  the  corpo- 
ration that  is  sold,  not  the  mere  paper  certificates,  and  if  they  are 
sold  by  the  register  number  and  in  the  name  of  the  owner,  that 
is  a  good  sale."^ 

Sec.  376.  Appointment  of  receivers. —  The  appointment  of  a 
receiver  in  various  cases,  where  it  is  made  apparent  that  the  inter- 
ests, especially  of  a  judgment  creditor,  are  in  danger  of  being  lost, 
or  materially  endangered  or  impaired  without  it,  and  where  the 
interests  of  the  adverse  party  will  not  be  materially  prejudiced 
thereby,  is  now  the  common  subject  of  statutory  provisions  and 
regulations,  and  even  without  statutory  provisions  on  the  subject, 
it  is  one  of  the  most  efficient  remedies  in  such  cases,  and  within 
the  proper  jurisdiction  of  courts  of  equity,  where  an  execution 
against  a  corporation  is  returned  unsatisfied,  or  where  there 
is  nothing  that  can  be  levied  upon  but  the  mere  franchise  or 
easement  from  which  income  and  revenue  can  be  derived,  and 
then  only  by  the  use  of  the  same  for  the  purposes  for  which  the 
corporation  was  instituted. 

The  receiver,  on  his  appointment  in  such  cases,  takes  possession, 
charge,  and  control  of  the  franchises  and  revenues,  and  apj)lie8 
the  same  to  the  satisfaction  of  the  claim  of  the  judgment  creditor.^ 

On  this  subject,  Mr.  High,  in  his  valuable  treatise  on  Receivers, 
observes :  "In  most  of  the  states  of  this  country,  as  well  as  in 
England,  the  jurisdiction  of  courts  of  equity  over  corporations 
has  been  extended  by  legislative  enactments  to  the  appointing  of 
receivers  and  the  sequestering  of  the  property  of  the  corporation 
in   proper  cases,   and  in  some  of  the  states  this  jurisdiction  has 

'  Green's   Brice's   Ultra   Vires,  562,  '^  Covington,  etc.,   R.   Co.   v.    Shep- 

563.     See,   also,   Sewall    v.  Lancaster  herd,  21  How.  (U.  S.)  112  ;  Macon,  etc., 

Bank,  17  S.  &  R.  285  ,  Mechanics'  Bank  R.  Co.  v.  Parker,  9  Ga,  393.     As  to  the 

V.  Merchants'  Bank,  45  Mo.  513;  West  jurisdiction  of   courts  of   chancery   to 

Branch  Bank  v.  Armstrong,  40  Penn.  appoint,  see  High   on  Receivers,  §   40 

St.  278;  Stanford   v.  Ferris,  17  Conn,  et  seq.,  &nd  notes. 
258  ;  Howe  v.  Starkweather,  17  Mass. 
240. 


Execution  and  the   Appointment  of  Receivers.       535 

been  enlarged  by  statute  to  the  extent  of  winding  up  tlie  affairs 
of  the  corporation,  and  the  complete  annihihition  of  its  franchises. 
*  '^'  *  It  is  to  be  observed  in  the  outset,  that  the  general 
jurisdiction  of  equity  over  corporate  bodies  does  not  extend  to 
the  power  of  dissolving  the  corporation,  or  of  winding  up  its 
affairs  and  sequestering  the  corporate  property  and  effects,  in  the 
absence  of  express  statutory  authority.  And  courts  of  equity 
will  not,  ordinarily,  by  virtue  of  their  general  equitable  jurisdic- 
tion, or  of  their  visitatorial  powers  over  corporate  bodies,  sequester 
the  effects  of  the  corporation,  or  take  the  management  of  its 
affairs  from  the  hands  of  its  own  officers  and  intrust  it  to  the  con- 
trol of  a  receiver  of  the  court,  upon  the  appliction  either  of 
creditors  or  shareholders.^  *  *  *  'VVhere  the  jurisdiction  of 
courts  of  equity  has  been  extended  by  legislation  to  the  appoint- 
ment of  receivers  over  incorporated  companies,  the  power  thus 
conferred  is  treated  by  the  courts  as  a  delegated  authority,  the 
exercise  of  which  requires  the  most  careful  consideration.  The 
effect  of  appointing  a  receiver  being  to  take  the  property  of  the 
corporation  out  of  the  control  of  its  own  officers,  to  whom  it  has 
been  intrusted  by  its  stockholders,  the  courts  proceed  with  extreme 
caution  in  the  exercise  of  so  summary  a  power.^  And  in  con- 
struing such  statutes  they  are  inclined  to  give  them  a  strict  con- 
struction, and  require  the  prescribed  method  of  obtaining  juris- 
diction of  the  person  and  the  subject-matter  to  be  strictly  followed."^ 

Sec.  378.  Ju  dgment  creditor's  right  to  a  receiver  —  We  have  Said 
that  a  common  exercise  of  the  powers  of  a  court  of  equity  was 
the  appointment  of  a  receiver.  But  this  authority  was  not  usu- 
ally, if  ever,  exercised  for  the  purpose  of  sequestering  the  effects 
of  the  corporation  and  closing  up  its  affairs,  but  merely  for  the 
purpose  of  using  the  franchises,  and,  through  the  management  and 

1  Citing  Bangs  v.  Mcintosh,  23  Barb,  collusion  on  the  part  of  the  corporate 

591  ;  Howe  v.  Deuel,  43  id.  504 ;  Wa-  authorities.   Waterbury  v.  Merchants' 

terbury  v.  Merchants'  Union  Ex.  Co.,  Union  Ex.  Co.,  50   Barb.  157;  Xeall  v. 

50  id.  157  ;  Belmont  v.  Erie  R.  Co.,  53  Hill,  16  Cal.  145  ;  High   on    Inj.,  §  288 

id.  637;  Neall   v.  Hill,    16   Cal.    145;  and  notes. 

Baker  V.  Administrator,  etc.,  32  111.79.  -  Oakley  v,  Paterson  Bank,  1  N.  J. 

But   a  court  of   equity  will   generally  Eq.  173. 

refuse  to  appoint  a  receiver  on  the  ap-  *  High   on  Receivers,  287-289.     See, 

plication  of  a  stockholder  on  the  also.  Bangs  v.  Mcintosh,  23  Barb.  591. 
ground  of   fraud,  luismauagemeut   or 


536  Private  Corpoeations. 

control  of  tlie  corporate  powers  by  the  receiver,  to  secure  the  ap- 
pHcation  of  the  revenues  and  net  profits  of  the  corporate  business 
to  the  satisfaction  of  a  judgment  creditor,  where  satisfaction  of 
his  judgment  could  not  be  otherwise  secured,  and  of  wliich  fact 
the  return  of  the  officer  on  an  execution  is  usually  sufficient  evi- 
dence. But  the  proceeding  in  such  cases  is  usually  a  matter  of 
statutory  regulation,  and  the  power  conferred  thereby,  as  we  have 
observed,  may  extend  to  the  sequestration  of  the  corporate  prop- 
erty, and  the  closing  up  of  the  corporate  business.^ 

Sec.  379.  Same  continued.  —  The  general  right  of  creditors  in 
case  of  their  inability  to  satisfy  their  claims  by  execution  is  illus- 
trated by  the  opinion  of  the  supreme  court  of  the  United  States, 
in  the  case  of  Covington  Drawbridge  Company  v.  Shepherd^^ 
The  corporation  in  this  case  was  created  by  an  act  of  the  state  of 
Indiana,  for  the  purpose  of  building  'a  drawbridge  over  the 
Wabash  river,  in  that  state.  Judgments  were  obtained  against 
the  corporation  in  the  circuit  court  of  the  United  States,  in  that 
state,  and  on  execution  a  judgment  creditor  became  tlie  purchaser 
of  the  rents  and  profits  of  the  bridge  as  real  property,  under  the 
statutes  of  that  state,  for  one  year.  He  afterward,  with  other 
judgment  creditors,  filed  a  bill  in  the  circuit  court  of  the  United 
States,  and  secured  the  appointment  of  a  receiver,  with  authority 
to  take  possession  of  the  bridge,  collect  the  tolls  and  pay  them 
into  court,  to  be  applied  in  satisfaction  of  the  judgments  of  such 
creditors. 

Upon  appeal,  in  the  supreme  court  of  the  United  States, 
Catron,  J.,  in  delivering  the  opinion  of  the  court,  observes : 
"  By  the  laws  of  Indiana,  lands  and  tenements  cannot  be  sold 
under  an  execution  until  the  rents  and  profits  thereof  for  a  term 
not  exceeding  seven  years  shall  have  been  first  offered  for  sale  at 
public  auction ;  and  if  that  term  or  a  less  one  will  not  satisfy 
the  execution,  then  the  debtor's  interest  or  estate  in  the  land  may 
be  sold,  provided  it  brings  two-thirds  of  its  appraised  value.  The 
tolls,  under  the  idea  that  they  were  rents  and  profits  of  the 
bridge,  were  sold  for  one  year,  according  to  the  forms  of  this  law. 

'High  on  Receivers,  §§297,298;  480.  See,  also,  cases  cited  in  the  pre- 
Atlas  Bank  v.  Nahant  Bank,  23  Pick      ceding  section. 

•^21  How.  (U.  S.)112. 


Execution  and  the  Appointment  of  Keceivers.       537 

The  tolls  of  the  bridge  being  a  franchise  and  sole  right  in  the 
corporation,  and  the  bridge  a  niei'e  easement,  the  corporation  not 
owning  the  fee  in  the  land  on  either  bank  of  the  river,  or  under 
the  water,  it  is  difficult  to  say  how  an  execution  could  attach  to 
either  the  franchise  or  the  structure  of  the  bridge,  as  real  or  per- 
sonal property.  This  is  a  question  that  this  court  may  well  leave 
to  the  tribunals  of  Indiana  to  decide  on  their  own  laws,  should  it 
become  necessary.  One  thing,  however,  is  plainly  manifest,  that 
the  remedy  at  law  of  these  execution  creditors  is  exceedingly  em- 
barrassed, and  we  do  not  see  how  they  can  obtain  satisfaction  of 
their  judgments  from  this  corporation  (owning  no  corporate  prop- 
erty but  this  bridge),  unless  equity  can  alford  relief.  *  *  * 
All  that  we  are  called  upon  to  decide  in  this  case  is,  that  the 
court  below  had  power  to  cause  possession  to  be  taken  of  the 
bridge,  to  appoint  a  receiver  to  collect  tolls  and  pay  them  into 
the  court,  to  the  end  of  discharging  the  judgments  at  law ;  and 
our  opinion  is  that  the  power  to  do  so  exists,  and  that  it  was 
properly  exercised.  It  is,  therefore,  ordered  that  the  decree  below 
be  athrmed,  and  the  circuit  court  is  directed  to  proceed  to  execute 
its  decrees." 

Sec.  380.  Same  continued.  —  Under  the  statutes  of  Wisconsin  it 
was  held  that  a  judgment  creditor  of  a  corporation  may,  after 
execution  is  returned  unsatisfied,  in  whole  or  in  part,  file  a  hill 
on  behalf  of  himself  and  other  creditors  against  not  only  the  cor- 
poration but  the  delinquent  stockholders,  for  an  account  of  the 
assets  and  the  appointment  of  a  receiver. ' 

'  Adler  v.  Milwaukee  Pat. Brick  Man.  the  acting  party  and  alone  responsible 

Co.,  13  Wis.  57.     See,  also,  Rev.  Stat,  to  other  parties  who  may  receive  in- 

Wis.,  §§  18,  19,  chap.  148,   and  same  juries  by  the  transaction  of  the  busi- 

chap.,§  15.  ness  of  the  company,  either  by  omis- 

Mr.  Redfield   observes  in  reference  sion  of  duty   or  positive   aggression, 

to  receivers  as  follows  :  "The  rules  of  And,  although  the  court  will  inmost 

the  courts  of  equity  in  regard  to  the  instances  interfere  for  the  protection 

office  and  agency  of  a  receiver  are  very  of  the  receiver,  on  his  request,  that  is 

strict    and    stringent.     The    property  not  always  done,  especially  where,  as 

while  in  his    custody    is  regarded    in  in  some    of   the  other  states,  railway 

legal  contemplation  as  in  the  custody  corporations  are  kept  in  the  hands  of 

of  the  court.     The  assets  are  thence-  receivers    through     a    succession     of 

forth   in  gremio  legh,  and  cannot  be  years. 

seized  by  process  from  any  otlier  court.  And  where  the  court  of  equity 
And,  as  a  general  thing,  while  a  rail-  does  not  interfere  to  protect  a  re- 
way  corporation  is  in  the  hands  of  a  ceiver  from  his  ordinary  responsibil- 
receiver,   the  receiver  is   regarded  as  ity,  measured  by  his  acts,  he  will  be 

63 


538 


Private  Corporations. 


In  the  case  just  cited  Chief  Justice  Dixon,  after  maintaining 
that  the  capital  stock  of  a  corporation,  both  that  which  is  paid  in 
and  that  which  remains  unpaid,  is  a  trust  fund  pledged  for  the 
payment  of  the  debts  of  the  corporation,  observes  in  reference 
to  the  powers  of  a  court  of  equity  to  afford  the  requisite  relief  in 
such  cases,  as  follows :  "  The  practice  in  such  cases,  in  those 
states  where  the  mode  of  closing  up  the  affairs  of  non-paying 
and  insolvent  corporations,  and  of  distributing  the  proceeds  of 
their  property  and  effects  among  their  creditors,  is  governed  by 
the  common  law,  as  indicated  by  the  authorities  to  which  refer- 
ence has  been  made,'  precisely  that  which  was  adopted  by  the 


held  responsible  for  all  the  acts  and 
omissions  of  the  corporation  while 
under  his  sole  control  and  manage- 
ment. 

This  subject  underwent  a  very  elab- 
orate examination  in  the  supreme 
court  of  Indiana,  and  the  following 
propositions  were  maintained  :  That  a 
railway  with  all  its  appurtenances 
was  in  the  exclusive  possession,  use 
and  control  of  a  receiver  appointed  by 
a  court  of  competent  jurisdiction,  who 
had  the  employment  and  control  of 
all  the  hands  upon  the  road  ;  that  the 
])Ossession  of  the  receiver  could  not 
be     regarded      as     the     corporation, 


neither  could  the  company  be  held 
responsible  for  the  acts  of  any  ser- 
vant or  employee  of  the  servant.  The 
position  of  the  corporation  is  more 
completely  obscured  and  extinguished, 
so  to  speak,  by  the  works  being  placed 
under  the  control  of  a  receiver  by 
compulsory  proceedings  in  the  courts 
than  by  any  voluntary  surrender  of 
the  road  and  its  operations  into  the 
hands  of  lessees  or  mortgagees,  where 
it  has  generally  been  held  that  the 
corporation  may  still  be  held  responsi- 
ble." 2  Redf.  on  Rail.  362  ;  Ohio  & 
Miss.  R.  Co.  v.  Davis,  23  lud.  553. 


'  Spear  v.  Grant,  16  Mass.  9  ;  Vose 
V.  Grant,  15  id.  505;  Wood  v. 
Drummer,  3  Mason,  308.  la  Ward  v. 
Griswoldville  Manuf.  Co.,  16  Conn. 
598,  the  complainants,  creditors  of 
the  defendant  corporation,  brought  a 
bill  asking  the  court  to  compel  the 
subscriber  to  pay  into  the  hands  of  the 
receiver  sixty  percent  upon  the  stock, 
being  the  sum  then  remaining  unpaid. 
Waite,  J.,  in  granting  the  relief 
prayed  for,  said  :  "  The  resolve  incor- 
porating the  Griswoldville  Manufac- 
turing Company  provides,  that  "the 
capital  stock  of  the  corporation  shall 
not  exceed  $50,000  "  —  "  that  a  share 
of  the  stock  shall  be  $100  "  —  "  and 
that  the  directors  may  call  in  the  sub- 
scriptions to  the  capital  stock  by  in- 
stallments, in  such  proportions,  and 
at  such  times  and  places,  as  they  may 
think  proper,  giving  such  notice 
thereof  as  the  by-laws  and  regulations 
of  the  company  shall  prescribe." 


There  is  a  furthe^  provision,  that 
"  the  stock,  property  and  affairs  of 
the  corporation  shall  be  managed  by 
not  less  than  three  nor  more  than  five 
directors,  one  of  whom  they  shall 
appoint  their  president  "  —  and  they 
shall  have  power  "  to  make  and  estab- 
lish such  by-laws,  rules  and  regula- 
tions as  they  shall  think  expedient, 
for  the  better  management  of  the  con- 
cerns of  the  corporation,  and  the  same 
to  alter  and  repeal." 

1.  The  first  inquiry  arising  in  this 
case  is,  what  obligation  did  a  stock- 
holder assume  upon  himself,  when  be 
subscribed  for  a  share  of  the  stock  of 
this  company  ?  The  answer  obviously 
is,  that  he  agreed  to  pay  the  sum  of 
$100,  in  such  installments  and  at  such 
times,  as  should  be  required  by  the 
directors.  There  was  no  discretion 
left  to  him  as  to  times  of  payment, 
nor  as  to  the  amount,  except  that  it 
should    not   exceed  the   sum  of 


Execution   and  the  Appointment  of  Receivers.       539 

appellant  in  this  case.  The  creditor  is  first  to  establish  liis  claim 
by  a  judgment  at  law,  and  then  after  execution  issued  and  returned 
in   whole  or  in  part   unsatisfied,  he    may  file  his  bill  in  his  own 


He  had  indeed  a  voice  in  the  election 
of  the  directors;  bat  when  they  were 
chosen  they  were  clothed  witii  the 
power  of  making  by-laws,  prescribing 
the  time  and  manner  of  paying  the  in- 
stallments upon  the  shares,  and 
managing  the  affairs  of  the  corpora- 
tion. Were  they  now  to  call  in  the 
balances  due  upon  the  shares,  the 
stockholders  could  not  successfully  re- 
sist the  demand. 

This  is  not  only  apparent  from  the 
terms  of  the  act  of  incorporation,  but 
in  conformity  with  principles  settled 
by  this  court  in  a  very  recent  case. 
Hartford  and  New  Haven  Kail- 
road  Company  v.  Kennedy,  13  Conn. 
507.  The  defendant  in  that  case  had 
subscribed  to  the  stock  of  a  railroad 
company,  and  an  action  was  brought 
against  him  to  recover  the  amount  of 
certain  installments  on  his  shares, 
ordered  by  the  directors  to  be  paid. 
The  judge  who  gave  the  opinion  of 
the  court,  in  that  case,  says,  "  Did  the 
defendant,  by  becoming  and  continu- 
ing a  stockholder,  incur  a  personal 
obligation  to  pay  the  installments  re- 
quired by  the  directors,  in  the  manner 
prescribed  by  the  charter,  on  the 
shares  by  him  originally  subscribed, 
and  held  by  him  at  the  time  such  in- 
stallments were  called  for  and  were 
due  ?  We  think  such  an  obligation 
was  created  ;  and  the  law  coinciding, 
in  this  case,  with  justice  and  good 
faith,  will  enforce  it.  It  is  true  a 
promise  to  pay,  i  a  2y)'ecise  terms,  doea 
not  appear  to  have  been  made.  The 
defendant  has  not  affixed  his  signa- 
ture to  an  instrument  which  contains 
the  words  I  promise  to  pay  ;  but  he 
has  done  an  equivalent  act.  He  has 
contracted  witli  the  plaintiff  to  become 
a  member  of  their  corporation,  and  to 
be  interested  in  their  stock,  to  the  ex- 
tent of  $100  for  each  share  assigned  to 
him,  if  that  amount  be  required." 

And  in  a  subsequent  case,  it  was 
holden,  that  a  stockholder  who  de- 
rived his  stock  by  a  transfer  from  the 
original  subscriber,  and  received  a 
new  certificate  from  tne  company, 
was  personally  liable  to  pay  the  in- 
stallments called    for  after  the  trans- 


fer. Hartford  and  New  Haven  Rail- 
road Company  v.  Boorman  et  al.,  13 
Conn.  530. 

The  only  difference  between  those 
cases  and  the  present  is,  that  in  the 
former  the  subscriptions  were  to  the 
stock  of  a  railroad  company,  and  in 
the  latter,  to  that  of  the  manufacturing 
company.  But  the  language  used  in 
the  two  charters  is,  in  this  respect, 
very  much  alike ;  and  we  discover 
nothing  in  the  object  of  these  com- 
panies re(iuiring  a  construction  to  be 
given  in  one  case  different  from  that 
given  in  the  other.  The  stockholders, 
therefore,  are  equally  liable,  whether 
they  obtained  their  shares  by  pur- 
chase, or  by  virtue  of  an  original  sub- 
scription, 

2.  In  the  next  place,  does  the  amount 
of  the  shares  subscribed  constitute 
the  capital  stock  of  the  company,  or 
only  the  amount  actually  paid  in  ? 
Had  these  plaintiffs,  when  they  dealt 
with  the  company,  and  gave  them 
credit,  a  right  to  look  to  the  former,  as 
a  fund  applicable  to  the  payment  of 
their  debts,  or  only  to  the  latter? 

The  unpaid  balances  of  the  shares 
are  as  much  subject  to  the  call  of  the 
directors  as  any  debts  due  the  com- 
pany. Payment  can  as  well  be  en- 
forced in  the  one  case  as  in  the  other. 
The  directors  can  at  any  time  collect 
those  balances,  and  if  sufficient,  pay 
off  the  debts  due  the  plaintitHs.  And 
why  should  they  not  do  so  V  What 
justice  is  there  in  withholding  funds 
at  their  command,  and  ap[)licable  to 
the  payment  of  those  debts  ? 

It  is  apparent  that  it  is  not  for  their 
interest  to  do  it.  Tlie  charter  re- 
quires them  to  be  stockholders,  and 
the  bill  alleges  that  they  are  such, 
and  actually  own  a  large  amount  of 
the  shares  of  the  company.  A  call 
upon  the  stockholders  for  funds  to  pay 
off  these  debts  of  this  insolvent  com- 
pany would  be  in  part  a  call  upon 
themselves,  and  might  materially 
affect  their  own  interests.  They  may, 
therefore,  prefer  to  let  these  creditors 
suffer,  rather  than  become  sufferers 
themselves. 

But,  have  they  a  right    to  do  this? 


540 


Private  Corporations. 


behalf  and  in  belialf  of  sucli  other  creditors  of  the  corporation  as 
may  elect  to  become  parties  thereto,  against  the  corporation  and 
its  delinquent  or  withdrawing  stockholders,  alleging  the  recovery 


They,  with  others,  have  embarked  in 
a  business,  perhaps  hazardous,  and  as 
events  have  shown  unfortunate,  ex- 
pecting to  share  in  the  profits  ;  and 
why  should  they  not  also  bear  their 
proportion  of  the  losses  ? 

It  is  true  the  company  was  incor- 
porated, and  the  members  were  not 
made  liable,  in  their  individual  capaci 
ties,  for  the  debts  of  the  company,  but 
it  was  necessary  for  the  company  to 
create  a  capital  before  they  could 
obtain  credit.  This  was  done  by  the 
subscriptions  to  the  capital  stock.  In 
that,  there  was  a  limit  fixed  to  their 
liability,  beyond  which  they  could  not 
be  compelled  to  go.  No  stockholder 
can  be  compelled  to  pay  more  than 
$100  on  each  share  he  owns,  let  the 
amount  of  the  debts  of  the  company 
be  ever  so  great.  All  that  is  required 
of  the  defendant,  in  the  present  case, 
is,  that  the  members  shall  discharge 
the  obligations  which  they  assumed, 
upon  becoming  stockholders,  or  at 
least,  so  much  as  may  be  necessary  to 
pay  off  the  debts  of  the  company. 

Some  stress  has  been  laid,  in  the 
argument,  upon  the  proviso  in  the  act 
of  incorporation,  requiring  the  com- 
pany, within  three  months  from  the 
passing  of  the  act,  to  lodge  a  certifi- 
cate with  the  town  clerk  of  Wethers- 
field,  containing  the  amount  of  capital 
stock  actually  paid  in  and  belonging 
to  the  company  ;  and  directing  that  it 
should  not  be  withdrawn,  so  as  to  re- 
duce the  same  below  $5,000 ;  and 
further  providing,  that,  if  any  part  of 
the  capital  paid  in  and  certified 
should  be  withdrawn,  without  the 
consent  of  the  general  assembly,  the 
directors  allowing  it  should  become 
liable,  in  case  of  the  insolvency  of  the 
corporation.  Hence  it  is  insisted  that 
the  capital  thus  certified,  and  not  the 
amount  of  the  shares  subscribed,  con- 
stitutes the  stock  of  the  company. 

The  act  does  not  prescribe  the 
amount  of  capital  stock.  It  says,  that 
it  shall  not  exceed  $50,000;  and  the 
fair  inference  to  be  drawn  from  the 
proviso  is,  that  it  shall  not  be  less  than 
$5,000.  The  company,  therefore,  might 


commence  business  with  any  capital 
between  those  sums.  But  that  the 
public  might  know  the  amount,  it  was 
very  proper  that  a  certificate  should  be 
lodged  with  the  town  clerk,  for  the 
examination  of  those  who  might  wish 
to  deal  with  them.  Suppose  the  num- 
ber of  shares  subscribed  had  been 
five  hundred  ;  the  amount  paid  upon 
each  share,  at  the  end  of  the 
three  months,  $10  ;  and  the  company 
had  lodged  a  certificate,  stating  that 
the  capital  subscribed  was  $50,000,  and 
the  amount  then  actually  paid  in 
$5,000;  would  any  one  dealing  with 
the  company  hesitate  in  believing 
that  the  amount  subscribed  constituted 
the  capital  stock  of  the  company  ?  — 
He  would  know  that  but  a  small  por- 
tion of  the  capital  had  been  paid  in  ;  — 
but, at  the  same  time,  he  would  know, 
from  the  act  of  incorporation,  that  the 
balance  was  at  all  times  subject  to  the 
call  of  the  directors.  And  if  he  con- 
sidered them  honest  men,  he  would 
believe  that  they  would  call  in  the 
remaining  installments,  whenever  the 
wants  of  the  company  required  it. 

The  act  does  not  prescribe  the  form 
of  the  certificate,  but  it  would  be 
natural  for  them  to  make  it  according 
to  the  condition  of  the  case.  How  it 
was  in  fact  made  does  not  appear. 

3.  It  is  further  claimed,  on  the  part 
of  the  defendants,  that  the  power 
conferred  upon  the  directors  to  call  in 
the  installments  upon  the  shares  is  a 
discretionary  power,  with  the  exercise 
of  which  a  court  of  chancery  will 
never  interfere.  But  that  discretion 
is  merely  neodal,  relating  to  the  time 
and  manner  of  making  the  payments. 
When  the  wants  of  the  company  re- 
quire those  payments,  it  becomes  the 
duty  of  the  directors  to  cause  them  to 
be  made,  as  much  so  as  to  require 
payment  of  debts  due  to  the  company. 
We  think  it  is  not  discretionary  with 
the  directors  to  say  whether  the  com- 
pany debts  shall  be  paid  or  not,  when 
they  have  the  means  at  command. 

Tlie  case  of  Catlin  v.  The  Eagle 
Bank,  6  Conn.  233,  has  been  cited  as 
an  authority  against  this  application. 


Execution  and  the  Appointment  of  Keceivers.       541 

and  non-payment  of  his  judgment,  and  praying  tlie  decree  or 
order  of  the  court  that  an  account  of  the  assets  and  debts  be 
taken  and  a  receiver  appointed,  and  tliat  the  stockholders  and 
officers  pay  in  and  account  to  the  receiver  for  so  much  of  the 
capital  stock  as  will  be  sufficient  to  pay  the  debt  of  the  plaintiff, 
and  those  of  such  other  creditors  as  may  choose  to  join  him  and 
come  in  under  the  decree ;  and  that  the  receiver  be  directed  to 
apply  the  same  in  discharge  thereof." 

But  it  has  been  held  in  New  York  that  a  mere  common  creditor 
of  a  manufacturing  corporation  is  not  entitled  to  the  appointment 
of  a  receiver,  in  an  action  by  him  for  a  dissolution,  and  the 
sequestration  of  the  property  of  the  corporation,  on  the  ground 


But  that  case  is  clearly  distinguishable 
from  this.  The  question  there  was, 
whether  an  insolvent  corporation 
might  pay  one  creditor  in  preference 
to  others.  Here  the  question  is, 
whether  the  corporation  may  refuse  to 
pay  any  of  their  creditors. 

4.  It  is  finally  said,  that  if  these 
plaintiffs  are  entitled  to  any  remedy,  it 
is  not  by  a  suit  in  chancery,  but  by  a 
writ  of  mandamus,  requiring  the 
directors  to  make  the  necesssary  calls 
upon  the  stockholders.  The  Queen  v. 
The  Victoria  Park  Company,  1  Ad.  & 
El.  288  ;  The  Queen  v.  Ledgard  et  al., 
id.  616 ;  The  King  v.  St.  Catharine 
Dock  Company,  -1  B.  &  Ad.  360. 

The  authorities  cited  show  that 
there  are  cases  where  the  officers  of  a 
company  may  be  compelled  to  make 
calls  upon  the  members,  by  a  writ  of 
mandamus.  Whether  such  a  writ 
could  properly  issue  against  the  direc- 
tors of  this  company,  under  any  cir- 
cumstances, we  do  not  deem  it  neces- 
sary to  inquire  ;  because  in  the  present 
case  such  a  writ  would  be  wholly  in- 
adequate to  give  the  relief  prayed  for 
in  this  bill. 

The  debts  of  the  plaintifiFs  are  not 
such  as  the  company  is  bound  to  pay 
at  all  events.  It  is  averred  in  the  bill 
that  the  company  is  entirely  insolvent, 
and  has  no  visible  property.  The 
stockholders  are  liable  only  to  a  cer- 
tain extent.  There  may  be  other 
creditors  entitled  to  share  in  the  funds 
of   the    company,  as    well    as    these 


plaintiffs  ;  and  these  funds  may  fall 
short  of  the  amount  of  the  debts 
against  the  company  under  such  cir- 
cumstances. 

It  is  in  the  power  of  a  court  of 
chancery  to  do  more  ample  and  com- 
plete justice  to  the  parties  interested 
than  can  possibly  be  done  in  a  court  of 
law. 

The  bill  shows  that  the  plaintiffs 
have  proceeded  as  far  as  thej'  can  at 
law.  They  have  obtained  judgments 
against  the  corporation  —  made  de- 
mand upon  the  company  for  payment 
of  these  executions  —  and  these  exe- 
cutions have  been  returned  wholly 
unsatisfied.  They  are  now  remediless, 
unless  the  corporate  funds  can  be 
reached,  by  the  aid  of  a  court  of 
chancery,  on  a  writ  of  mandamus. 
The  former,  in  our  opinion,  is  decided- 
ly the  more  appropriate  remedy. 

Upon  the  whole,  we  think  that  the 
plaintiffs,  upon  the  allegations  con- 
tained in  their  bill,  are  entitled  to  re- 
lief ;  and  that,  consequently,  the  de- 
murrer must  be  overruled."  See  Mann 
V.  Cooke,  20  Conn.  178,  where  it  was 
held  that  a  public  corporation  could 
not  receive  a  subscription  under  a 
private  arrangement  at  less  than  the 
par  value  of  the  stock  subscribed  for  ; 
and  such  subscriber  was  decreed  to 
pay  up  the  unpaid  balance.  Mann  v. 
Pentz,  3  N.  Y.  415  ;  Nathan  v.  Whit- 
lock,  9  Paige,  153 ;  Henry  v.  V. 
&  A.  R.  Co.,  17  Ohio,  187  ;  Ogilvie  v. 
Knox  Ins.  Co.,  33  How.  (U.  S.)  380. 


542  Private  Corporations. 

that  there  was  an  adequate  remedy  at  law,  and  that  in  such  a  case 
the  creditor  will  be  left  to  pursue  his  legal  remedy." 

Sec.  381.  Functions,  rights  and  duties  of  a  receiver  of  a  corporation.  — 
In  relation  to  the  functions,  rights  and  duties  of  a  receiver  of  a 
private  corporation,  it  may  be  observed  that  he,  for  certain  pur- 
poses, stands  as  the  trustee  of  both,  for  creditors  and  stockholders,^ 
and,  in  other  respects,  he  represents  the  corporation. 

In  case  of  the  appointment  of  a  receiver  on  the  application  of  a 
judgment  creditor,  who  is  unable  to  obtain  satisfaction  by  exe- 
cution, it  has  been  held  that  the  receiver  thus  appointed  becomes 
a  trustee,  not  only  for  the  creditor  who  secures  the  appointment, 
but  of  other  creditors  and  the  stockholders.^  But  he  is  vested  by 
law  for  other  purposes  with  the  powers  of  the  corporators,  and 
the  estate  of  the  corporation  ;  and,  for  the  purpose  of  determining 
the  extent  of  his  power  and  title,  he  represents  the  body  itself.^ 
In  the  case  of  Curtis  v.  Leavitt,  just  cited,  in  reference  to  the 
powers  and  functions  of  the  receiver,  Comstock,  J.,  observes  :  ''It 
has  been  said,  in  this  as  in  other  cases,  that  lie  represents  the 
creditors  and  stockholders,  but  for  all  the  purposes  of  inquiring 
into  his  title,  he  really  represents  the  corporation.  He  is  by  law 
vested  with  the  estate  of  the  corporate  body,  and  takes  his  title 
under  and  through  it.  It  is  true,  indeed,  that  he  is  declared  to 
be  a  trustee  for  creditors  and  stockholders  ;  but  this  only  proves 
that  they  are  the  beneficiaries  of  the  funds  in  his  hands,  without 
indicating  the  sources  of  his  title  or  the  extent  of  his  powers. 
If  then,  in  a  controversy  between  the  receiver  and  third  parties, 
in  respect  to  the  corporate  estate,  it  is  possible  to  form  a  concep- 
tion of  rights,  legal  or  equitable,  belonging  to  the  shareholders  as 

1  Qalway    v.    United  States    Steam  Atcliison    v.    Davidson,  2  Piuu .  (Wis. 

Sugar    Ref.    Co.,   13    Abb.    Pr.  211  ;  48. 

Parmly  v.  Tenth  Ward  Bank,  3  Edw.  ^  Id. 

Ch .  395.  4  Hii,rb  on  Receivers,  §  315.   See,  also, 

•^  Gillet  V.  Moody,  3  N.  Y.  479  ;  Tal-  Curtis  v.  Leavitt,  15   N.  Y.   44  ;  Hyde 

mage  v.  Pell,  7  id.  347  ;  Libbv  v.  Rose-  v.  Lvnde,  4  id.  887.  See,  also,  Brouwer 

krans,55  Barb.  217;  Angell  v."Silsbury,  v.  Hill,  1  Sandf.629;  White  v.  Haight, 

19  How.  Pr.  48,  vs^hich  was  a  decision  16    N.   Y.   310;    Osgood  v.   Laytin,  48 

under  the  statutes  of  New  York.   See,  Barb.  464  ;  Shaughnessy  v.  The  Rens- 

also,  under   the    statutes   of   Ohio,  in  selaer  Ins.  Co.,  21  id.  605  ;  New  Orleans 

such  a  case,  Lafayette  Bank  v.  Buck-  Gas-light  Co.  v.  Bennett,  6  La.    Ann. 

ingham,  12  Ohio  St.  419  ;  State  v.  Clay-  457  ;  Gas-light  and  Bank  Co.  v.  Haynes, 

pool,  13   id.    14 ;  also,  iu    Wisconsin,  7  id.  114. 


Execution  and  the  Api'oint>[ent  of  Receivers.  543 

individuals,  to  which  tlie  corporation  itself  could  not  assent  in  its 
own  uaiucj  the  receiver  does  not  rei)resent  those  rights.  So  far 
as  sliareholders  are  concerned,  he  can  litigate  respecting  the  fund 
upon  precisely  the  grounds  which  would  be  available  to  the  cor- 
poration, if  it  were  still  in  existence,  solvent,  and  no  receivership 
had  been  constituted." 

Sec.  382.  Same  continued.  —  It  is  not  our  purpose,  however,  to 
consider  fully  the  subject  of  the  functions,  powers  and  duties  of 
receivers  of  corporations.  The  general  subject  has  received  the 
attention  of  able  writers  ;  and  these  particular  topics  have  received 
particular  consideration  by  them.  Besides,  tliey  have  generally, 
to  a  greater  or  less  extent,  been  made  the  subject  of  statutory 
regulations  ;  and  where  this  is  the  case,  the  statutes  must  be  con- 
sulted in  order  to  determine  questions  relating  to  the  same. 

In  conclusion  we  may  notice  the  following  powers  and  duties 
and  effect  of  the  appointment  of  the  receiver.  His  appointment 
does  not  change  the  rights  of  action,  or  the  contract  relations  of 
the  corporation ;  ^  he  is  the  officer  and  agent  of  the  court,  and  sub- 
ject to  its  directions  ;  '^  and  he  cannot  disaffirm  a  settlement  made 
by  the  corporation  ; '  but  he  may  disaffirm  acts  of  the  corporation 
in  fraud  of  creditors.* 

Sec.  383.  It  is  the  duty  of  the  receiver,  as  the  trustee  of  the 
various  parties  having  an  interest  in  the  corporate  affairs,  and  as 
the  agent  and  instrument  of  the  court,  to  act  prudently  in  the 

1  Williams  V.  Babcock,  25  Barb.  109;  by  reason  of  the  fraud  or  illegality  in 

Bell  V.  Shibley,  83  id.    610  ;    Shaugh-  its  procurement  or  inception,  passing 

nessy  v.  The   Rensselaer   lus.    Co.,  21  into  the  hands  of  a  receiver  does  not 

id.  G05  ;  Savage  v.  Medbury,  19  N.  Y.  purge  it  of  these  defects." 

32;  Moise  v.  Chapman,  24    Ga.    249;  -Booth    v.    Clark,   17    How.    (U.S.) 

Ddvendorf  V.  Beardsley,  23  Barb.  056.  322;    Hunt    v.    Wolfe,    2    Daly,    303; 

In  the  latter  case  Mr.  Justice  James  Devendorf  v.  Dickinson,  21  How.  Pr. 

observes:  "The  plaintiff,  as  receiver  275  ;  Corey  v.  Long,  43  id.  497;  S.  C, 

of   the    American    Mutual    Insurance  12  Abb.    Pr.  (X.  S.)  427  ;  Skinner  v. 

Company,  takes  its   notes   and   assets  Maxwell,    66    X.   C.   45;  S.   C,  68  id. 

subject  to  all  the  conditions  and  legal  400;    Battle    v.    Davis,   66    id.    252; 

disabilities    with    which    they     were  Hooper  v.  Winston,  24  111.  353  ;  Kaiser 

transacted  in  the  bands  of  the  corpora-  v.    Kellar,   21    Iowa,    95  ;    Ellicott   v. 

tion  itself;  he  cannot  impeach  or  dis-  Warford,  4  Md.  80. 

affirm    its    authorized    acts,    nor   the  *  High  on  Receivers,  §  320. 

authorized    acts    of   its    agents.     If   a  ■*  Gillet  v    Moody,  3  N.  Y.  479  ;  But- 

note  in  the  hands  of  the  corporation  terworth  v.  O'Brien,  24  How.  Pr.  438. 
was  void,  or  incapable  of  enforcement, 


544:  Private  Cokporations. 

management  and  settlement  of  the  corporate  affairs,  acting 
under  the  direction  of  the  court  for  the  best  interests  of  all  con- 
cerned, according  to  the  best  of  his  ability.'  And  wlien  there 
are  funds  on  hand  to  be  divided  among  the  creditors,  this  should 
ordinarily  be  brought  into  court  and  distributed,  under  the  direc- 
tion of  the  court,  to  the  parties  entitled  to  it/ 

"  The  first  duty  of  receivers  of  insolvent  corporations,"  observes 
Mr.  High,  "  is  to  faithfully  collect  and  justly  disburse  the  assets 
of  the  corporation,  which  constitute  the  trust  fund  for  the  credi- 
tors. In  the  discharge  of  this  duty  they  are  properly  vested  with 
a  certain  degree  of  discretion,  in  the  coniprgmising  and  settlement 
of  demands  against  the  corporation ;  but,  in  the  exercise  of  their 
discretionary  powers,  they  should  keep  constantly  in  view  the  in- 
terests of  those  whom  they  represent,  and  for  whom  they  act."  ^ 

But  for  a  fuller  consideration  of  this  subject  reference  must  be 
had  to  those  treatises  expressly  devoted  to  it. 

1  If  there  is  any  doubt  in  the  mind  Receivers  may  decline  to  ratify  a 
of  the  receiver  as  to  tlie  proper  course  contract  made  by  a  corporation  after 
of  action  or  conduct,  it  is  safe  to  apply  its  insolvency,  if  satisfied  the  ratifica- 
to  the  court  for  directions.  In  re  Van  tion  would  result  in  loss.  Id. ;  Suydam 
Alleu,  37  Barb.  335.  v.  Receivers,  3  Green's  Ch.  114  ;  S.  C, 

2  Benneson  v.  Bill,  63  111.  408.  id.  376.   See,  also,  Evans  v.  Trimount- 
*  High  on  Receivers,  §  334.  ain  Mut.  Fire  Ins.  Co.,  9  Allen,  339. 


Amalgamation  and  CoNsoLroATioN.  545 

CHAPTER    XVI. 

AMALGAMATION   AND  CONSOLIDATION. 

Sec.  384.   Amalgamation  —  meaning  of . 

Sec.  385.   The  Eagjish  doctrine  relating  to  amalgamation. 

Sec.  386.   Doctrine  in  this  country. 

Sec.  387.   Consolidation  must  be  authorized  by  legislative  authority. 

Sec.  388.    Where  legislative  authority  is  conferred  after  the  creation  of  the 

corporation. 
Sec.  389.   Same  continued. 

Sec.  390.   DitJiculty  removed  by  the  exercise  of  the  right  of  eminent  domain. 
Sec.  391.  Same  continued. 
Sec.  392.    Where  authority  to  consolidate  exists  at  the  time  of  the  creation  of 

the  corporation. 
Sec.  393.   Rule  as  to  the  requisite  concurrence  where  no  provision  is  made 

therefor. 
Sec.  394.  The  new  corporation  created  by  consolidation. 
Sec.  395.   Doctrine  as  to  the  creditors  of  the  consolidating  companies. 
Sec.  396.  Consolidation  of  companies  organized  in  different  states. 
Sec.  397,   Same  continued. 

Sec.  384.  Amalgamation  — meaning  of,  etc.  — The  term  "amalga- 
mation "  seems  in  England  to  be  generally  used  in  the  place  of  con- 
solidation in  this  country,  and  it  has  there  been  said  to  consist  in 
making  two  companies  into  one ;  as,  where  two  companies  mutu- 
ally agree  to  abandon  their  organization  or  association  and  reor- 
ganize a  new  one  as  one  body. '  It  is  affirmed  in  relation  to  amalga- 
mation in  England,  that  there  is  no  implied  power  in  corporations 
so  to  do,  and,  also,  that  a  majority  of  the  directors  cannot  authorize 
and  consummate  an  amalgamation  under  a  general  authority  to 
amalgamate,  so  as  to  bind  the  dissenting  members  to  assume  liabil- 
ities in  the  new  organization.  In  such  a  case  it  was  observed  by 
the  vice-chancellor  In  re  Empire  Assurance  Corporation,  exparte 
Bagshaio,  above  cited,  as  follows :  "  It  is  possible  that  this  author- 
ity may  go  thus  far ;  it  may  empower  the  directors,  without  being 
called  to  account  for  so  doing  in  this  court,  or  by  any  other  juris- 
diction, to  sacrifice  or  to  give  up  (which  implies  something  more) 
the  whole  of  their  business,  and  to  transfer  their  assets,  if  they 

1  In  re  Bank  Hindustan,  etc.,  3  H.  &  4  Eq.  341  ;  36  L.  J.  Ch.  663  ;  15  W.  R. 
M.  666.  See,  also,  /«,  re  Empire  As-  889;  16  L.  T.  (N.  S.)  345;  Era  Ass. 
surance  Corp.,  exparte  Bagshaw,  L.  R.,     Co.,  Williams'  Case,  3  J.  &  H.  400. 

69 


546  Pkivate  Corporations. 

think  fit,  to  some  other  company  to  carry  on  the  business  on  the 
best  terms  they  can  make  witli  thein.  In  carrying  out  this  the 
directors  may  possibly  be  authorized  to  say,  '  you  who  do  not  like 
this  arrangement  must  simply  lose;  we  have  amalgamated  one 
company  with  the  other,  *  ^  *  and  we  have  placed  all  your 
assets  in  the  hands  of  another  concern.'  But  that  does  not  imply 
that  the  dissentient  shareholders,  besides  losing  their  assets,  are 
personally  bound  to  take  part  and  lot  in  the  new  concern.  It  is 
one  thing  to  say,  '  Possibly  you  may  find  all  the  assets  gone  and 
your  share  of  no  value  ; '  but  it  is  a  prodigious  step  further,  to 
say,  that  the  dissentient  shareholder,  having  been  concerned  in  an 
insurance  company,  shall  be  obliged  to  become  subject  to  all  lia- 
bilities of  another  company,  which  is  not  only  an  insurance  com- 
pany but  a  guaranty  company,  and  a  company  for  the  purchase 
of  houses  and  various  other  things  as  well." 

Sec.  385.  The  Snglish  doctrine  relating  to  amalgamation. —  The 
recognized  English  doctrine  on  the  subject  of  amalgamation  is,  as 
we  have  noticed,  that  a  majority  of  the  members  cannot  amalga- 
mate, and  transform  shares  from  one  association  into  another,  as 
such  a  proceeding  would  be  uU7'a  vires?  But,  it  is  there  held, 
that  where  amalgamation  cannot  be  legally  effected  in  a  direct 
manner,  the  object  may  be  accomplished  in  an  indirect  manner. 
Thus,  Mr.  Brice  observes :  "  It  may  do  so  by  transferring  its 
property,  funds,  rights  and  liabilities  to  the  other  contracting  cor- 
poration, and  then  voluntarily  dissolving  itself,  usually  by  wind- 
ing-uj).  Generally  the  arrangement  is  supplemented  by  a  proviso, 
w^hereby  a  transferee,  the  purchasing  company,  indemnifies  the 
selling  company  against  the  liabilities  which  it  may  be  under  in 

*  Clinch  V.  Financial  Corporation,  L.  It  was  held  that  there  was  no  special 
R.,  4  Ch.  117  ;  Higg's  Case  and  Mar-  power  in  the  constitution  of  corpora- 
tin's  Case,  3  H.  &  M.  657  ;  Los's  Case,  tion  B.,  or  in  tlie  provisions  of  the 
34  L.  J.  Ch.  609  ;  London,  etc..  Bank,  Euo^lish  act  (1862),  relating  to  the 
Drew's  Case,  36  L.  J.  Ch  785.  subject,  to  authorize  such  a  proceed- 
In  the  case  first  cited,  B.,  a  corpora-  ing.  See,  also,  Imperial  Bank,  etc.,  v. 
tion,  had  agreed  to  purchase  the  good-  Bank  of  Hindustan,  etc.,  L.  R.,  6  Eq. 
will  of  C,  another  corporation,  and  91  ;  London,  etc.,  Corp.,  L.  R.,  4  Ch. 
such  agreement  was  confirmed  at  a  683  ;  James  v.  Eve,  L.  R.,  6  H.  L.  335  ; 
special  meeting  of  B,  But  the  plaint-  Fremont  v.  Stone,  43  Barb.  169;  Bliss 
itf,  one  of  the  stockholders  in  the  v.  Matteson,  53  id.  335;  S.  C,  45 
corporation  B. ,  objected,  and  filed  a  N.  Y.  33  ;  Green's  Brice's  Ultra  Vires, 
bill  against  the  other  shareholders  and  513. 
directors  to  set  aside  the  agreement. 


Amalgamation  and  Consolidation.  547 

respect  to  claims,  existing  or  prospective.  This,  after  all,  is  not 
an  anuil<i;Hniati()n  ;  it  is  not  a  union  of  one  corporation  with 
another,  but  is  simply  a  transfer  of  assets,  with  attendant  respcMi- 
sibilities.  It  is,  however,  a  sufficient  amalgamation  for  all  practi- 
cal purposes,  and  it  is,  therefore,  the  process  always  adopted."  ^ 

Seo.  386.  Doctrine  in  this  country The  term   consolidation,  in 

this  country,  is  generally  used  in  the  place  of  amalgamation  in 
Eny-land.  It  is  sometimes  an  or«::anization  or  constitution  of  a 
new  company  out  of  two  or  more  old  ones,  or  a  conveyance  of 
the  capital  and  rights  of  one  or  more  to  another,  the  latter  con- 
tinuing the  business  of  all  in  its  original  corporate  name,  under 
stipulated  arrangements,  and  in  accordance  with  statutory  pro- 
visions relating  to  the  subject.  In  the  case  of  the  consolidation 
of  three  companies,  it  has  been  observed  that  the  effect  of  the 
consolidation  "  was  a  dissolution  of  the  three  corporations  named, 
and  at  the  same  instant  the  creation  of  a  new  corporation,  with 
property,  liabilities,  and  stockholders  derived  from  those  then 
])assing  out  of  existence."  '"  So,  again  it  has  been  observed,  that 
consolidation  amounts  to  "  a  surrender  of  the  old  charters  by  com- 
panies, the  acceptance  thereof  by  the  legislature,  and  the  forma- 
tion of  a  new  corporation  out  of  such  portions  of  the  old  as  enter 
into  the  new."  ^  But  where,  by  the  provisions  of  the  statute  and 
by  agreement,  one  corporation  conveys  all  its  property  to  another 
and  is  extinguished,  this  was  held  in  Missouri  not  to  be  an  amal- 
gamation or  consolidation  of  the  two  corporations  into  one."  The 
general  doctrine  in  this  country  seems  to  be,  as  in  England, 
that  there  is  no  inherent  power  in  a  corporation,  or  implied 
authority  in  constating  instruments,  to  autliorize  a  corporation  to 
amalgamate  or  consolidate  Math  another  or  other  companies.  The 
reasoning  against  this  power  is,  that  as  the  charter  is  a  contract 
between  the  state  and  the  corporation,  any  alteration  made  there- 

'  Green's  Brice's  Ultra  Vires,  513;  (X.   S.)  283;  Same  v.  Same,  6   Lans. 

Anglo-Australian  Co.  v.  British,  etc.,  25;  Kelly  v.  Mariposa  Mining  Co.,  4 

Co.,  3Giff.  521  ;  4  DeG.,  F.  &  J.  341.  Hun,  632. 

See,  also,  same  principle  in  Hodges  v.  "■'McMahan  v.  Morrison,  16  Ind.  172. 

N.  E.  Screw  Co.,  1  R.  I.  312;  S.  C,  3  id.  3  i.auman   v.   Lebanon,  etc.,   K.  Co., 

9  ;  Booth  V.  Bunce,  33  N.  Y.  130  ;  Horke  30  Penn.  St.  42. 

V.    Tiiomas,    56  id.   559;    Barclay  v.  ^  Powell  v.  North  Mo.  R.  Co.,  42  Mo. 

Quicksilver  Mining  Co.,   9  Abb    Pr.  63. 


548 


Private  Corpokations. 


in  must  be  assented  to  hj  both  parties,  and  lience  tlie  state  must 
assent  to  any  cliange  of  its  purposes  and  powers.^ 

Sec.  387.  Consolidation  must  be  authorized  by  legislative  authority. — 
From  what  we  have  observed,  it  may  be  inferred  that  in  order  to 
make  consolidation  effective  and  valid,  it  must  in  all  cases  receive 
at  least  legislative  assent.  This  may  be  given  in  the  original 
charter,^  or  by  general  laws  ;  and  provision  therefor  may  be  made 
by  general  laws,  or  by  a  sjsecial  act  even  after  the  organization  of 
the  original  corporations.^  But  with  what  effect,  where  members 
or  creditors  dissent  from  the  consolidation,  we  shall  hereafter 
notice.  The  demand  for  the  consolidation  of  railroad  companies, 
not  only  in  the  various  states,  but  with  connecting  lines  in  other 
states,  has  secured  legislation  for  this  purpose  in  most  of  the 
states.  And  in  view  of  the  manifest  interest  of  stockholders  and 
creditors,  the  American  policy  has  favored  general  statutes  on 
this  subject,  providing  for  consolidation  of  continuous  lines  of 
railroads  owned  by  different  companies,  created  even  in  different 
states.  And  where  such  authority  is  not  provided,  the  same 
object  has  partially  been  accomplished  by  leasing  such  railroad 
lines.* 


'  The  right  to  consolidate  two  or 
more  corporations  into  one  can  be  ac- 
quired by  legislative  authority  to  that 
end.  N.  Y.  &  Sliaron  Canal  Co.  v. 
Fulton  Bank,  7  Wend.  413  ;  Black  v. 
Delaware,  etc.,  Canal  Co.,  24  N.  J. 
Eq.  455.  And  a  consolidation  eiifected 
without  such  special  authority  is  ultra 
vires  and  void.  In  re  Era  Insurance 
Soc,  3  L.  T.  (N.  S.)  314.  And  equity 
will  restrain  a  corporation  under  such 
circumstances  from  consolidating  with 
another,  at  the  suit  of  any  stockholder. 
Charlton  v.  Newcastle  &  Carlisle  Rail- 
way Co.,  5  Jur.  (N.  S.)  1096.  So,  too, 
in  this  country,  the  consent  of  the 
stockholders  is  necessarv.  Kean  v. 
Johnson,  9  N.J.  Eq.  401;  Fisher  v. 
Evansville,  etc.,  R.  R.  Co.,  7  Ind.  407; 
Black  v.  Delaware,  etc.,  Canal  Co., 
ante;  Blatchford  v.  Ross,  54  Barb.  42 ; 
In,  re  Empire  Assurance  Co.,  L.  R.,  4 
Eq.  341;  In  re  London,  etc.,  Ins.  Cor- 
poration, L.  R.,  4  Ch.  App.  682. 

2  Clearwater  V.  Meredith,  1  Wall.  25; 
Nugent  V.  Supervisors,  19  id.  241. 

^  Black  v.  Delaware,  etc..  Canal  Co., 
24  N.  J.  Eq.  455;  Bishop  v.  Brainerd, 
23   Conn.    389.     See,    also,   Pearce  v. 


Madison,  etc.,  R.  Co.,  21  How.  441; 
Fisher  v.  Evansville,  etc.,  R.  Co.,  7 
Ind.  407. 

4  For  general  statutes  of  various 
states  on  the  subject  of  consolidation, 
see  Iowa  Code  (1873),  233,  §  1275  ; 
Wagner's  Missouri  Statute,  314,  §  56; 
Laws  of  Kansas  (1870),  chap.  92,  t^  1, 
p.  195;  California  Code.  10;  Rev.  Stat. 
Col.,  chap.  18,  §  57,  p.  137  ;  Gen.  Stat. 
Neb.  196,  S  114;  Compiled- La ws  Nev. 
(1873).  vol.'  2,  p.  301,  §  3465;  Webb's 
Railroad  Laws  of  Me.  87  ;  Edmonds' 
N.  Y.  Stat,  at  Large,  529;  Laws  of 
N.  J.  (1873),  chap.  413,  i^  17,  p.  98; 
Brightlev's  Purdon's  Dig.  (Laws  of 
Pa.)  1222-1226;  Battle's  Rev.  Stat.  N. 
C.  749;  Rev.  Stat.  S.  C.  368;  Sess. 
Laws  Ala.  (1869-70)  318;  Rev.  Stat. 
Ky.  (Stanton^  vol.  2,  p.  548;  Stat. 
Tenn.  1140;  Rev.  Stat.  Ohio  (Curwin). 
pp.  1882,  2791  ;  Wilcox's  R.  R.  Laws. 
Ohio,  134  ;  Gen.  Stat.  Ind.,  vol.  3 
(Davis'  Supp.),  399 ;  Rev.  Stat.  111. 
(1874),  294,  295  ;  Gilbert's  R.  R.  Laws 
of  111.  229:  Compiled  Laws  Mich., 
chap.  75.  p.  812,  g  41  ;  Rev.  Stat. 
Minn.,  chap.  34,  p.  269;  Edgerton's 
R.  R.  Laws  of  Minn.,  19. 


Amalgamation  and  Consolidation.  549 

Seo.  388.  Where  legislative  authority  is  conferred  after  the  creation 
of  the  corporation. —  AVI le re  tliu  legLshitivo  autliority  is  conferred 
after  the  charters  liave  been  granted  to  the  consolidating  compa- 
nies, or  after  tliey  liave  organized  under  general  laws,  it  has  been 
held  that  the  constating  instruments  become  an  invi<>lable  contract 
not  oidy  between  the  state  and  the  corporation,  but  between  the 
corporation  and  its  members ;  and  that  in  the  absence  of  authority 
conferred  at  the  time,  or  previously  thereto,  the  corporation  can- 
not change  the  nature  and  purposes  of  the  corporation,  even  with 
the  assent  of  the  legislature  subsequently  given,  without  the 
unanimous  assent  of  the  stockholders.  The  legislature  carmot, 
in  such  a  case,  authorize  a  majority  of  the  corporation  to  make 
a  contract  to  consolidate  with  another  corporation,  against  the  will 
of  a  minority,  as  it  would  impair,  in  such  a  case,  the  ol)ligation  of 
the  contract.  In  relation  to  this  subject  and  the  rights  of  stock- 
holders in  such  cases,  in  a  recent  case  in  the  supreme  court  of 
Maryland,  it  was  observed  :  "  As  stockholders  they  own  the  road 
in  common,  to  be  employed  for  specific  uses.  Each  oXvns  a  share 
in  the  whole,  and  is  to  have  a  proportionate  share  in  its  profits. 
They  have  invested  a  portion  of  their  capital  in  it,  and  in  it  alone. 
They  have  a  right  in  the  road  and  in  every  dollar  it  earns.  The 
directors  are  their  trustees  to  employ  their  joint  capital  in  the 
management  of  the  road,  and  the  road  only,  to  the  end  that  from 
the  investment  the  stockholders  have  chosen,  they  may  reap  the 
contemplated  profits.  And  this  is  the  agreement  of  the  stock- 
holders among  themselves.  They  each  contract  with  the  other 
that  the  money  shall  be  so  employed.  What  the  majority  deter- 
mine within  the  scope  of  this  mutual  contract  they  each  agree  to 
abide  by ;  but  there  their  mutual  contract  ends,  and  no  majority, 
however  large,  has  a  right  to  divert  one  cent  of  the  joint  capital 
to  any  purpose  not  consistent  with,  and  growing  out  of  this  origi- 
nal fundamental  joint  intention.  To  sell  the  road,  to  abandon 
the  contemplated  investment  and  embark  in  another  scheme, 
whether  entirely  different  or  only  more  extensive  than  the  origi- 
nal contemplation,  as  apparent  on  the  face  of  the  charter,  is,  it 
seems  to  me,  clearly  contrary  to  the  rights  of  the  individual 
stockholders."  ' 

'  Kean  v.  Johnson,  9  N.  J.  Eq.  401. 


550  Private  Corporations. 

Sec.  389.  Same  continued.  —  Tlie  doctrine  sustained  by  principle 
seems  to  be  that  the  corporate  contract  and  the  vested  rights  of 
stockholders  under  the  same  cannot  be  affected  by  legislative  au- 
thority authorizing  any  change  of  its  -original  purposes  or  business. 
The  stockholders  have  entered  into  a  contract,  and  assumed  obli- 
gations, under  legislative  sanction,  to  expend  money  in  a  manner 
mutually  agreed  upon,  and  an  objecting  stockholder  should  not  be 
compelled  to  engage  in  a  new  and  different  enterprise;'  and  a 
dissenting  stockholder  may  prevent  consolidation  or  amalgamation 
of  the  corporation  of  which  he  is  a  member  with  any  other,  unless 
such  a  condition  is  a  part  of  the  contract  entered  into  by  him. 

Sec.  390.  Difficiilty  removed  by  the  exercise  of  the  right  of  eminent 
domain. —  The  difficulty  in  effecting  consolidations  of  railroad 
companies  under  the  circumstances  indicated  in  the  preceding 
section  has  been,  in  some  cases,  obviated  with  corporations  having 
duties  to  perform  to  the  public,  by  the  exercise  of  the  power  of 
eminent  domain.  On  this  subject,  generally,  Mr.  Cooley  observes : 
"  Every  species  of  property  which  the  public  needs  may  require, 
and  which  government  cannot  lawfully  appropriate  under  any  other 
right,  is  subject  to  be  seized  and  appropriated  under  the  right  of 
eminent  domain.  Lands  for  the  public  ways ;  timber,  stone  and 
gravel  with  which  to  make  or  improve  the  public  ways ;  build- 
ings standing  in  the  way  of  contemplated  improvements,  or  which 
for  any  other  reason  it  becomes  necessary  to  take,  remove  or  de- 
stroy for  the  public  good ;  streams  of  water ;  corporate  franchise ; 
and  generally,  it  may  be  said,  legal  and  equitable  rights  of  every 
description  are  liable  to  be  thus  appropriated."  ^ 

'  Black  V.  Delaware, etc.,  Canal  Co.,  edy  by  due   course  of  law,  which  the 

24  N.  J.  Eq.  455.     See,  also,  Lauman  dissenting  stockholder  is  entitled  to, 

V.  Lebanon,  etc.,  R.  Co.,  30  Penn.  St.  because  of  the  departure  or  diversion 

46,  where  LOWRIE,  J.,  in  considering  of  the  association  from  its  agreed  pur- 

the  rights  of  a  dissentient  stockholder,  poses;  and  would,  besides  this,  change 

says:  "  He  may  object  that  his  co-cor-  the     essential    nature     of     contracts, 

porators  have  no  power  to  make  a  new  which  even  legislative  power  cannot 

contract  for  him,  and  thereby  consti-  do,   and    much    les.s    legislative    au- 

tute  him  a  member  of  a   new  and  a  thority." 

different   corporation.      *      *      *     He        See.  also,  Clearwater  v.  Meredith,  1 

may  object  even  that  the  legislature  Wall.  25  ;    Nugent  v.   Supervisors,  3 

caunot  authorize  this,  for  by  so  doing  Biss.  105;  S.  C,  19  Wall.  241;  McMa- 

they  would  authorize  the  destruction  han  v.  Morrison,  16  Ind.  172;  Mowrey 

of  one  private  contract,  aud  the  com-  v.  Ind.  &  Cin.  R.  Co..  4  Biss.  78. 
pulsory   creation    of    another    in    its        *  Cooley  on  Const.  J^im.  526. 
etead,  and  would  take  away  the  rem- 


Amalg^uiation  and  Consolidation.  551 

Sec.  391.  Same  continued.  —  It  is  claimed  that  the  stock  of  an  in- 
dividual is  just  as  subject  to  the  claim  of  eminent  domain  as  any 
other  property;  that  rail  corporations  have  duties  to  perform  to  the 
public,  and  that  if  one  unwilling  stockholder  should  be  permitted 
to  obstruct  the  growth  and  development  of  every  railroad  enter- 
prise in  which  he  may  have  participated,  and  hinder  their  union 
under  one  management,  when  the  interests  of  commerce  and  of 
the  stockholders  and  creditors,  and  public  convenience  and  policy 
may  require  it,  the  government  would  fail  to  discharge  its  duty  if 
it  should  not  exercise  this  right.  On  this  subject  in  a  recent  case 
in  New  Jersey,  Yax  Syckel,  J.,  observed  as  follows :  "  In  the 
exercise  of  the  right  of  eminent  domain,  the  legislature  may  au- 
thorize shares  in  corporations  and  corporate  franchises  to  be  taken 
for  public  uses,  upon  just  compensation.  The  title  to  this  species 
of  property  is  no  more  secure  against  invasion  when  the  public 
use  requires  it  than  is  the  ownership  of  real  estate.  Under  this 
paramount  right  in  the  public,  subject  to  which  all  private  prop- 
erty is  held,  the  franchises  of  one  corporation  have  been,  and  may 
be  taken  and  bestowed  upon  another.  *  *  *  When  authority 
is  granted  for  the  consolidation  of  existing  connected  routes,  the 
presumption  flows,  from  the  fact  of  the  enactment  being  made, 
that  the  legislature  decided  upon  its  necessity.  This  results  from 
the  familiar  rule  that  every  intendment  will  be  made  in  support 
of  the  constitutionality  of  the  acts  of  a  co-ordinate  branch  of  the 
government."  ' 

But  where  this  doctrine  is  recognized  it  is  evident  that  a  just 
compensation  should  be  allowed  the  party  whose  stock  is  taken 
under  such  right.^    And  it  may  be  affirmed  that  in  all  cases  where 

'  Black  V.  Delaware,  etc..  Canal  Co.,  public  use  and  benefit  is  to  be  sub- 

9  C.  E.  Gieeu,  453.  served.     But  what  is  a  public  benefit 

-  Lauman  v.   Lebanon,  etc. ,  R.  Co.,  or  use? 
30  Penu.  St.  42;  Fisher  v.  Evansviile,         Ou    this    subject    Mr.    Cooley    ob- 

etc,  R. ,  7  Ind.  407;  McCray  v.  June-  serves  :  "  We    find    ourselves   at  sea, 

tioii  R.  C«.,  9  id.  o58  ;  State  v.  Bailej',  however,  when  we   undertake  to  de- 

16  id.   46;  Shelbyville,  etc.,  T.  Co.  v.  fine,  in  the  light  of  the  judicial  decis- 

Barnes,  43   id.   408;  Illinois   G.  T.  R.  ions,  what  constitutes  a  public  use." 

Co.  V.  Cook,  29   111.    2:37;  Lauiuan  v.  Cooley    on    Const.    Lim.    5ol.      And 

Lebanon  Valley  R.  Co.,  80  Penn.  St.  42.  Chancellor  Watavortii  has  said  :  "  If 

It    is   generally   conceded    that    the  the  public  interest  can  be  in  any  way 

condemnation    of  property  and  inter-  promoted    by   the    taking   of    private 

ests,  under  this  power  of  eminent  do-  property,  it  must  rest  in  the  wisdom 

main,  is  a   right  which  exists  in  tlie  of  the  legislature  to  determine  wliether 

sovereign    power    only    where    some  the   benefit  to  the  public  will    be  of 


552 


Private  Corporations. 


a  consolidation  is  effected,  unless  the  power  so  to  do  existed  at 
the  time  the  contract  between  the  corporation  and  the  stock- 
holder was  entered  into,  even  tln-ough  the  exercise  of  the  power 
of  eminent  domain,  it  will  relieve  a  dissenting  stockholder  from 
his  subscription,  and  must  entitle  him  to  recover  the  value  of  his 
interest  in  the  corporation,  as  i-t  existed  at  the  time  of  the  exer- 
cise of  this  power/ 

Sec.  392.  Where  authority  for  consolidation  exists  at  the  time  of  the 
creation  of  the  corporation. —  If  authority  is  contained  in  the  charter 
or  general  act  under  which  the  corporation  was  organized,  or 
where  authority  is  subsequently  given  either  by  a  general  or  a 
special  statute,  but  before  the  contract  of  subscription  is  entered 
into,  it  not  only  authorizes  a  consolidation  according  to  the  terms 
and  provisions  of  the  act,  but  precludes  any  objection  on  the  part 
of  the  stockholders  to  tlie  consolidation.'  The  terms  and  condi- 
tions of  the  consolidation,  and  the  rights  and  privileges  of  the 


sufBcieut  importance  to  render  it  ex- 
pedient for  them  to  exercise  tlie  rig:ht 
of  eminent  domain,  and  to  authorize 
an  interference  with  the  private  rights 
of  individuals  for  that  purpose.  It  is 
upon  this  principle  that  the  legisla- 
tures of  several  of  the  states  have 
authorized  the  condemnation  of  lands 
of  individuals  for  mill  sites,  when 
from  the  nature  of  the  country  such 
mill  sites  could  not  be  obtained  for  the 
accommodation  of  the  inhabitants 
■without  overflowing  the  lands  thus 
condemned.  Upon  the  same  principle 
of  public  benefit,  not  only  the  agents 
of  the  government,  but  also  individu- 
als and  corporate  bodies  have  been 
authorized  to  take  private  property 
for   the    purpose    of    making    public 

'Carlisle  v.  Terre  Haute,  etc.,  R. 
Co.,  6  lud.  316. 

Where  a  public  use  or  benefit  is  to 
be  accomplished ,  a  change  in  the  ob- 
jects and  purposes  of  the  corporate 
enterprise  may  be  enforced  by  the 
legislature,  provided  compen.sation  is 
made  for  the  interest  of  dissenting 
stockholders.  Boston  Water  Power  Co. 
V.  Boston,  etc.,  R.  Co.,  23  Pick  360; 
Springfield  v.  Connecticut  River  R.  Co., 
4  Cush.  63  ;  Central  Bridge  Co.  v.  City 
of  Lowell,  4  Gray,  474  ;  West  River 
Bridge  v.  Dix,  6  How.  507;  Richmond 


highways,  turnpike-roads  and  canals, 
of  erecting  and  constructing  wharves 
and  basins,  of  establishing  ferries,  of 
draining  swamps  and  marshes,  and  of 
bringing  water  to  cities  and  villages. 
In  all  such  cases  the  object  of  the 
legislative  grant  of  power  is  the 
public  advantage  expected  from  the 
contemplated  improvement,  whether 
such  improvement  is  to  be  effected 
directly  by  the  agents  of  the  govern- 
ment or  through  the  medium  of  cor- 
porate bodies  or  of  individual  enter- 
prise." Beekman  v.  Saratoga  &  Sche- 
nectady R.  Co.,  3  Paige,  73.  See,  also, 
Cooley's  Const.  Lim.  532  et  seq.  ;  also, 
on  the  subject  of  public  interest  in 
case  of  eminent  domain ,  post,  §  441 
et  seq. 

R.  Co.  V.  Louisa  R.  Co.,  13  id.  71  ; 
White  River  Turnp.  Co.  v.  Vermont 
Cent.  R.  Co.,  21  Vt.  590;  Piscataqua 
Bridge  v.  New  Hampshire  Bridge,  7 
N.  H.  35;  Crosby  v.  Hanover,  36  id. 
404 ;  Tide  Water  Canal  Co.  v.  Coster, 
3  C.  E.  Green,  521;  Matter  of  Drain- 
age, 6  Vroom,  497  ;  Black  v.  Delaware, 
etc.,  Co.,  9  C.  E.  Green,  455  ;  Chesa- 
peake, etc.,  R.  Co.  V.  Baltimore,  etc., 
R.  Co.,  4  Gill  &  J.  1 ;  Newcastle  R.  Co. 
V.  Peru,  etc.,  R.  Co.,  3  Ind.  464  ;  En- 
field Bridge  Co.  v.  Hartford,  etc.,  R. 
Co.,  17  Conn.  40. 


AmALGAMA^TION    and    CoNSOLTn.VTION. 


553 


stocklioldcr  in  such  cases  may  depend  upon  the  provisions  of  the 
statute  ur  other  constating  instruments.  Tliese  may  provide  for 
the  concnrrence  requisite  to  consummate  a  consolidation,  either  by 
the  corporators  or  the  directors,  and  what  the  rights  of  stock- 
holders shall  be  in  that  event.' 


Sec.  393.  Riile  as  to  the  concuirrence  required  Tvhere  no  provision  is 
made  therefor.  —  If  authority  to  consoUdatc  is  given,  and  no  express 
provision  made  as  to  the  mode  or  the  concurrence  requisite  to 
accomjilish  this  purpose,  it  could  undoubtedly  be  accomplished  by 
the  corporate  body  in  the  usual  way  of  corporate  action,  and  in 
such  a  case  the  concurrence  of  a  majority  of  the  members  would 
be  sufficient  to  accomplish  the  purpose.'' 


'  Tlie  general  rule,  as  well  as  the 
distinction  referred  to,  Las  been  illus- 
trated by  the  opinion  of  the  supreme 
court  of  the  United  States  in  the  case 
of  Nugent  v.  Supervisors,  19  Wall. 
241,  in  which  an  attempt  was  made  to 
avoid  a  subscription  on  the  part  of  a 
county  in  the  state  of  Illinois  to  the 
stock  of  a  corporation,  on  the  ground 
of  a  subsequent  consolidation  of  such 
company  with  another.  But  an  au- 
thority to  consolidate  existed  at  the 
time  of  the  creation  of  the  company, 
by  an  act  of  that  state  approved  Feb. 
28,  1854.  The  court  say  :  "  It  must  be 
conceded  as  a  general  rule  that  a  sub- 
scriber to  the  stock  of  a  railroad  com- 
pany is  released  from  obligation  to 
pay  his  subscription  by  a  fundamental 
alteration  of  the  charter.  The  reason 
of  the  rule  is  evident.  A  subscription 
is  always  presumed  to  have  been 
made  in  view  of  the  main  design  of 
the  corporation,  and  of  the  arrange- 
ments made  for  its  accomplisiiment. 
A  radical  change  in  the  organieation 
or  purposes  of  the  company  may, 
therefore,  take  away  the  motive  which 
induced  the  subscription,  as  well  as 
affect  injuriously  the  consideration  of 
the  contract.  For  this  reason  it  is 
held  that  such  a  change  exonerates  a 
subscriber  from  his  liability  for  his 
subscription  ;  or,  if  the  contract  has 
been  executed,  justifies  a  stockholder 
in  resorting  to  a  court  of  equity  to  re- 
strain a  company  from  applying  the 
funds  of  the  original  organization  to 
any  project  not  contemplated  by  it. 
But   while   this  is    true  as  a  general 

70 


rule,  it  has  no  application  to  a  case 
like  the  present.     The   consolidation 

*  *  *  was  no  departure  from  its 
original  design.  The  general  statute 
of  the  state  *  *  *  authorized  all 
railroad  companies,  then  organized  or 
thereafter  to  be  organized,  to  consoli- 
date tlieir  property  and  stock  with 
each  other,  and  with  companies  out  of 
the  state,  whenever  their  lines  connect 
with  the  lines  of  such  companies  out 
of  the  state  *  *  *  The  American 
authorities  uniformly  assert  that  the 
subscriber  for  stock  is  released  from 
his  subscriptions  by  a  subsequent  alter- 
ation of  the  organization  or  purposes 
of  the  company,  only,  when  stich  alter- 
ation is  both  fundamental  and  not  pro- 
vided for  or  contemplated  by  either 
the  charter  itself  or  the  general  laws 
of  the  state." 

See,  also,  Hanna  v.  Cincinnati,  etc., 
R.  Co.,  20  Ind.  30,  where  it  was  held 
that,  as  one  of  the  purposes  for  which 
the  corporation  was  organized  was  to 
consolidate,  it  would  be  presumed 
that  the  subscriber  might  have  reason- 
ably anticipated  such  a  result,  and  he 
was  held  bound  by  his  subscription. 
See,  also,  Hamilton  v.  Hobart,  2  (tray, 
543  ;  Gardner  v.  Hamilton  Ins.  Co.,  33 
N.  Y.  421  ;  Sparrow  v.  Evansville, 
etc.,  K.  Co.,  7  Ind.  369  ;  Bish  v.  John- 
son, 21  id.  299  ;  Mowrey  v.  Indiana, 
etc.,  R.  Co  ,  4  Biss.  78;  Blatchford  v. 
Ross,  54  Barb.  42. 

2  See  Black  V.  Delaware,  etc.,  Canal 
Co.,  7  C.  E.  Green,  130  ;  Zabriskie  v. 
Hackeusack  &  N.Y.  R.  Co.,  3  id.  178; 
McVicker  v.  Ross,  55  Barb.  347.         • 


554 


Private  Coeporations. 


Sec.  394,  The  powers  of  the  new  corporation,  created  by  consoli- 
dation.—  By  consolidation  the  old  companies  cease  and  a  new  one 
is  created  and  usnally  the  property  and  the  rights  and  liabilities 
of  each  pass  to  the  new  company.'  But  it  is  evident  that  the 
franchises,  that  would  pass  to  the  new  company,  would  be  only 
such  as  would  be  necessary  for  the  exercise  of  the  powers  and 
privileges  conferred  npon  it  by  the  new  organization.^ 


'  Miller  v.  Lancaster,  5  Cold.  514  ; 
Paine  v.  Lake  Erie  R.  Co.,  31  Ind. 
283  ;  Columbus,  etc.,  R.  Co.  v.  Powell, 
40  id.  37. 

'  As  to  effect  of  exemption  from  tax- 
ation of  one  of  the  old  companies,  see 
Philadelphia,  etc.,  R.  Co.  v.  Maryland, 
10  How.  (U.  S.)  376;  Tomlinsou  v. 
Branch,  15  Wall.  460.  See,  also,  in 
reference  to  special  rights  enjoyed  by 
cue  of  the  original  companies,  Shaw 
V.  Norfolk,  16  Gray,  407  ,  Bishop  v. 
Brainerd,  28  Conn.  22!)  ;  Fisher  v. 
New  York  C.  R.  Co.,  40  N.  Y.  644; 
Robertson  v.  Ryckford,  21  111.  457; 
Commonwealth  v.  Atlantic,  etc.,  R. 
Co.,  53  Penu.  St.  9  ;  New  Jersey  M. 
R.  Co.  V.  Strait,  35  N.  J.  L.  322. 

Where  two  corporations  chartered 
before  the  passage  of  a  general  law  of 
the  state  reserving  to  the  legislature 
the  right  to  alter  or  repeal  all  corpo- 
rate charters,  were  consolidated  by 
virtue  of  an  act  passed  after  such  law 
took  effect,  it  was  held  that  the  old 
corporations  were  dissolved,  and  that 
the  new  one  formed  by  the  consoli- 
dation came  into  existence  subject  to 
the  general  law.  Shields  v.  Ohio,  95 
U.  S.  319.  But  where  the  corporations 
were  chartered  after  such  a  law  ex- 
isted, or  where  their  charters  authorize 
consolidation,  such  consolidation  does 
not  necessarily  work  a  dissolution  of 
both,  and  the  creation  of  a  new  corpo- 
ration. The  effect  of  the  change  de- 
pends upon  the  legislative  intent 
manifested  in  the  statute  under  which 
the  consolidation  takes  place.  Central 
R.  R.,  etc.,  Co.  V.  Georgia,  92  U.  S. 
665  ;  South-western  R.  R.  Co.  v. 
Georgia,  id.  676,  note  ;  Muller  v. 
Dows,  94  id.  444. 

Where  a  new  corporation  was 
formed  out  of  two  or  more  previously 
existing  corporations,  and,  by  the  act, 
was  to  "  have  the  powers,  privileges, 
.and  immunities  possessed  by  each  of 


the  corporations"  united  in  it,  and 
these  had  somewhat  different  powers, 
etc.,  the  new  corporation  was  adjudged 
to  have  only  the  privileges,  powers, 
and  immunities  which  each  of  the 
previous  corporations  possessed. 

The  new  corporation  cannot  claim 
an  immunity  from  taxation  enjoyed  by 
the  old  companies,  or  either  of  them, 
if  it  was  dependent  on  conditions 
which  the  new  corporation  is  not  able 
to  perform.  State  v.  Maine  Central 
R.  R.  Co..  66  Me.  488. 

Generally  speaking,  however,  when 
a  new  corporation  is  formed  by  an 
amalgamation,  under  the  authority  of 
the  state,  of  two  or  more  distinct  cor- 
porations into  one,  the  new  body  suc- 
ceeds to  all  the  rights  and  faculties  of 
the  several  components,  and  is  sub- 
ject to  all  the  conditions  and  duties 
imposed  by  the  law  of  their  creation, 
except  so  far  as  the  contrary  may  be 
provided  by  the  act.  Zimmer  v.  State, 
30  Ark.  677;  Chicago,  etc.,  R.  R.  Co. 
V.  MotEt,  75  111.  524. 

Upon  a  legal  consolidation  of  two 
corporations  the  new  one  succeeds  to 
all  the  rights  of  the  old.  Thus  the 
act  of  the  legislature  of  Vermont  con- 
solidating the  University  of  Vermont 
and  the  Vermont  Agricultural  College, 
which  were  previously  independent 
corpcjrations,  into  a  new  corporation 
under  the  name  of  The  University  of 
Vermont  and  State  Agricultural  Col- 
lege, passes  to  the  new  corporation  all 
the  property,  in  the  most  extensive 
sense,  of  the  university,  and  in  ex- 
press terms  gives  the  new  corporation 
the  right  to  maintain  actions  in  its 
own  name  in  relation  to  the  real 
property  vested  in  it  by  the  uni  )n,  but 
is  silent  as  to  the  right  to  Gue  upon 
choses  in  action.  Held,  nevertheless, 
that  as  to  all  choses  in  r.^ction  which 
were  transferred  to  the  new  cori)ora- 
tiou,  it  was  substituted  for  the  original 


AmA-LGAMATION    and    CoNSOLroATION.  555 

In  a  case  where  there  was  a  lawful  consolidation  of  two  railroad 
companies,  under  the  laws  of  Indiana,  and  a  suit  was  brought 
against  the  consolidated  company  for  an  injury  done  by  one  of 
the  original  companies,  the  supreme  court  of  that  state  said: 
"  By  the  consolidation  both  the  old  companies  ceased  to  exist 
separately,  and  all  their  effects  and  franchises  were  vested  in  the 
new  company.  The  two  corporations  became  merged  in  one. 
We  cannot  imagine  how  the  Indianapolis  and  Cincinnati  Railroad 
Company  [the  company  originally  liable]  could  afterward  be 
sued.  Upon  whom  would  process  be  served  ?  It  ceased  to  have 
any  officers  or  agents.  It  ceased  to  be  a  separate  legal  entity. 
Instead  of  two  there  was  now  but  one  corporation,  made  up  of 
the  mingled  elements  of  the  two  pre-existing  companies,  so  com- 
bined and  merged  that  neither  could  be  separately  identified  or 
brought  into  court.  But  what  are  the  rights  of  creditors  and  per- 
sons upon  whom  torts  have  been  committed  by  the  vanished  cor- 
porations ?  A  dead  man  may  have  an  administrator  to  represent 
his  estate  and  answer  to  suits,  but  a  corporation,  lawfully  disap- 
pearing thus,  has  no  estate  to  be  administered.  Its  assets  must 
have  vested  in  the  new  consolidated  corporation.  Must  lawful 
claims  be  lost  then  ?  That  result  cannot  follow.  The  legislature 
has  chosen  to  make  no  provision  upon  the  subject,  and  the  in- 
dustry of  counsel  as  well  as  our  own  examination  of  the  books  has 
failed  to  discover  any  direct  authority  upon  the  question  before 
us.     The  analogies  of  the  law  too  afford  little  aid  in  its  solution. 

*  *  *  Giving  it,  however,  the  best  consideration  we  were 
capable,  under  the  circumstances,  we  have  reached  the  conclusion 

party  without  prejudice  to  tlie  other  contrary,    whenever   one   corporation 

party    to   the    claim  transferred,   and  goes  entirely  out  of  existence,  by  be- 

liad  the  right  to  sue  on  such  claims  in  iug  annexed  to  or  merged  in  another, 

its  own  name.   University  of  Vermont,  the    subsisting    corporation    will     be 

etc.,  V.  Baxter,  43  Vt.  99.  entitled     to     all     the    property,    and 

A  consolidated  corporation,  formed  answerable  for  all  the  liabilities  of  the 

under  an  act  which  vested  in  the  new  extinguished  one.     Tliompson  v.  Ab- 

corporation   all    the    powers,    rights,  bott,  61  Mo.  176. 

franchises,  etc.,  of  tlie  old  corpora-  But  when  two  corporations  unite 
tions,  was  held  entitled,  under  the  cir-  their  property,  and  form  a  new  corpo- 
cumstauces,  to  use  a  patented  inven-  ration,  in  which  no  money  is  paid  by 
tiou  wiiich  both  the  old  corporations  either  party,  the  new  corporation  can- 
had  been  licensed  to  use.  Lightner  v.  not  claim  the  position  of  a  bond  fide 
Boston,  etc.,  R.  R.  Co.,  1  Low.  (U.  S.  purchaser  for  value,  but  takes  the 
C.  C  )  338.  property  subject  to  any  existing  liens. 

The  rule  seems  to  be  that  in  the  ab-  The  Key  City,  14  Wall.  653. 
eence  of  any  express  provision  to  the 


556 


Pkivatk  Cokpokations. 


that,  for  the  purposes  of  answering  for  the  liabilities  of  the  con- 
stituent corporatious,  the  consolidated  company  should  be  deemed 
to  be  merely  the  same  as  each  of  its  constituents,  their  existence 
continued  in  it  under  the  new  form  and  name,  their  liabilities 
still  existing  as  before,  and  capable  of  enforcement  against  the 
new  company  in  the  same  way  as  if  no  change  had  occurred  in 
its  or<i:anization  or  name."^ 


'  Indianapolis    C.    &  L.    R.  Co.   v. 

Jones,  29  lud.  4G5.  Generally  wliere 
two  corporations  consolidate  the  new 
corporation  assumes  all  the  debts  and 
liabilities  of  the  old  as  well  as  all  its 
rights,  and  may  be  sued  thereon,  or 
may  enforce  the  rights  of  the  old  one. 
Miller  v.  Lancaster,  5  Caldw,  514. 
Thus  in  Bishop  v.  Banks,  28  Conn. 
2d9,  the  New  York  and  Boston  Rail- 
road Company,  a  cori)oratiou  chartered 
by  the  legislature  of  Connecticut,  be- 
came consolidated,  under  the  same 
name,  with  a  railroad  corporation  of 
the  state  of  Rhode  Island,  the  charter 
of  the  latter  corporation  specially 
authorizing  such  union,  and  that  of 
the  former  authorizing  the  company 
"  to  connect  and  make  joint-stock 
common  interest  with  any  other  rail- 
road company."  Tlie  charter  of  the 
Connecticut  corporation  was  subject  to 
amendment  by  the  legislature,  which 
afterward  passed  a  resolution  ratify- 
ing and  confirming  the  consolidation. 
By  the  articles  of  union,  the  property 
of  the  original  corporatious  was  trans- 
ferred to  and  vested  in  the  new  corpo- 
ration, which  was  to  pay  the  debts  of 
the  old  corporations.  B.  was  an  origi- 
nal subscriber  to  the  stock  of  the  Con- 
necticut corporation.  A  creditor  of 
that  corporation ,  whose  claim  accrued 
after  the  consolidation,  factorized  B. 
as  the  debtor  of  the  Connecticut  cor- 
poration. 

Upon  a  scire  facias  afterward 
brought  by  him  against  B.,  held  (1) 
that  while  it  was  very  questli^nable 
whether  the  charter  of  the  Connecti- 
cut corporation  would  have  authorized 
such  a  consolidation,  yet  that  the 
transaction  was  validated  by  the  ratify- 
ing act  of  the  legislature,  which  was 
to  be  considered  as  an  amendment  of 
the  charter  as  much  as  if  it  had  been 
expressly  so  declared. 

(2)  That  the  new  corporation,  being 
legally  established  and  having  capac- 


ity to  receive  an  assignment  of  the 
property  of  the  original  corporation, 
and  such  assignment  having  been 
made  on  valuable  consideration,  the 
indebtedness  of  B.  was  legally  trans- 
ferred to,  and  became  vested  in,  the 
new  corporation,  and  he  was,  there- 
fore, no  longer  indebted  to  the  original 
corporation. 

(8)  Tbat  such  transfer  was  not  in- 
valid against  the  claim  of  the  plaintiff 
as  a  creditor  of  the  original  corpora- 
tion, since  his  claim  accrued  after  the 
transfer,  and,  even  if  it  had  accrued 
previously,  yet  the  original  corpora- 
tion, in  the  absence  of  any  fraudulent 
intent,  had  a  right,  for  a  valid  con- 
sideration, to  dispose  of  its  property. 
In  Chase  v.  Vanderbilt,  62  N.  Y. 
307,  it  was  held  that  where  two  or 
more  railroad  corporations  consoli- 
dated and  the  new  corporation  assumed 
the  obligation  of  the  old  one,  the 
directors  of  the  new  corporation  are 
not  necessary  or  even  proper  ])arties 
to  an  action  brought  by  the  holder  of 
preferred  and  guaranteed  stock  of  one 
of  the  old  corporations  to  enforce  an 
alleged  contract  made  by  it  to  pay 
dividends  upon  such  stock,  but  that  if 
the  plaiutiti'had  cause  of  action  at  all, 
it  was  against  the  new  corporation 
alone.  See,  also,  lure  National,  etc., 
Assurance  Co.,   L.  R.,  6  Ch.893. 

But  the  question  as  to  whether  the 
old  corporation  is  absolved  from 
luibility  depends  largely  upon  the 
provisions  of  the  statute  under  which 
the  consolidation  was  effected.  If  the 
act  provides  that  neither  corporation 
by  reason  of  the  consolidation  shall 
thereby  be  relieved  from  any  liability 
then  existing,  the  new  corporation 
does  not  become  liable  directly  to  tlie 
creditors  of  the  old  for  such  liabili- 
ties. Shaw  V.  Norfolk  Co.  R.  R.  Co., 
16  Gray,  407.  In  a  Georgia  case, 
Selma,  etc.,  R.  R.  Co.  v.  Harbin,  40 
Qa.  708,  while  an  action  was  pending 


Amalgamation   and  Consolidation. 


557 


OEC.  395.  Doctrine  as  to  the  rights  of  creditors  of  the  consolidating 
companies.  —  It  is  a  general  doctrine  tlxat,  where  tiie  power  to  con- 
solidate exists,  the  right  so  to  do,  in  accordance  with  the  mode 


against  a  corporation,  it  was  consolida- 
ted with  another,  the  act  providing 
that  each  of  the  companies  was  to 
continue  liable  for  its  liabilities  iu- 
curred  before  the  consolidation,  and 
it  was  held  that  it  was  improper  for 
the  plaiulifl:  in  the  suit  to  take  a  judg- 
ment agaiust  the  cousolidated  com- 
pany in  Its  new  name,  without  proper 
steps  to  bring  the  new  company,  as 
such,  before  the  court,  and  that  a« 
judgment  so  taken  was  void. 

A  section  of  an  amalgamation  act 
provided  that  the  conveyances,  con- 
tracts, bonds,  etc.,  made  or  entered 
into  by  the  dissolved  railway  com- 
panies should  remain  valid  in  favor  of 
the  new  company.  Held,  that  under 
this  provision,  a  person  who  vvas 
surety  by  bond  to  one  of  the  com- 
panies before  amalgamation,  for  the 
conduct  of  an  employee,  was  liable  to 
the  new  company  for  breaches  of  tlie 
bond  committed  after  the  amalgama- 
tion. Eastern  Union  Railway  Co.  v. 
Cochrane,  17  Jur,  1103.  Where  a 
clerk  to  a  railway  company  had  exe- 
cuted a  bond,  with  surety,  for  the 
faithful  discharge  of  his  duty  to  one 
company,  which  was  subsequently 
amalgamated,  by  act  of  parliament, 
with  another  company,  saving  to  the 
consolidated  compauy  all  remedies 
upon  contracts  to  either,  held,  that 
an  action  would  lie  upon  such  bond 
for  a  breach  committed  before  the 
amalgamation,  notwithstanding  the 
new  company  formed  by  the  consolida- 
tion possessed  additional  lines  of  road. 
Loudon,  etc.,  Railway  Co.  v.  Goodwin, 
SExch.  o20,  7o(j.  Defendant  executed 
a  note  to  a  corporation,  containing  an 
agreement  that  "  no  change  in  the 
name,  character,  or  management"  of 
the  corporation  should  affect  the 
liability  of  the  maker.  The  plaintitf 
corporation  changed  its  name  before 
the  action  which  was  brought  in  its 
new  name,  and  the  complaint  stated 
this  fact,  and  that  the  note  was  the 
plaintiffs  property.  Held,  that  a 
good  cause  of  action  was  slated,  and 
that  a  demurrer  could  not  be  sustained. 
Cumberland  College  v.  Ish,  22  Cal. 
641 .     Before  the  new  corporation  can 


levy  any  assessments  upon  the  stock- 
holders of  the  old  corporation,  tlie 
consolidation  must  be  fully  perfected 
in  every  detail,  as  required  by  the 
statute.  Peninsular  Railway  Co.  v. 
Thorp,  28  Mich.  oUG  ;  Mansheld,  etc., 
li.  R.  Co.  v.  Dunker,  80  id.  12-1.  and  it 
seems  an  election  of  directors  of  the 
new  corporation  must  have  been  held. 
Mansdeld,  etc.,  R.  R.  Co.  v.  Dunker, 
ante;  Midland  Great  Western  Rail- 
way V.  Leech,  8  H.  L.  Cas.  872. 

Where  the  preliminary  contracts  by 
which  two  railway  companies  would 
necessarily  interfere  with  each  other's 
business  were  set  on  foot,  each  pro- 
vided, that  tbe  managing  committees, 
or  directors,  might  "  demise  or  sell  the 
undertaking,  or  any  part  thereof,  or 
amalgamate  the  same  or  any  part 
thereof,  with  any  other  railway,  or 
railways,"  and  the  directors  of  the  two 
companies  made,  and  carried  into 
ehect,  an  amalgamation  of  the  two 
companies,  held,  that  the  amalga- 
mation of  the  two  companies  came 
fairly  within  the  preliminary  con- 
tracts, and  that  an  action  for  calls 
might  be  maintained  against  any 
shareholder  in  either  compauy,  who 
had  executed  the  preliminary  con- 
tracts. Cork  &  Youghal  Railway  Co. 
V.  Paterson,  18  C.  B.  414.  Two  com- 
panies competed  for  tender  of  leases 
of  railways  in  France.  Each  proposed 
that  half  the  capital  should  be  sub- 
scribed for  in  England,  and  English 
committees  were  appointed.  Neither 
company  complied  with  the  require- 
ments of  the  French  government  as 
to  deposits  ;  and  they  were  afterward 
united,  and  it  was  agreed  that  the 
then  expenses  of  each  committee 
should  be  separately  paid  by  that 
body.  Being  still  unable  to  make  up 
the  full  amount  of  subscription,  a 
union  was  negotiated  between  the 
united  companies  and  a  third  com- 
pany, and  subsequently  an  agreement 
was  formed.  The  original  united 
compauy  then  determined  to  close 
their  affairs,  and  meetings  were  held, 
at  which  (although  the  mode  of  the 
appropriation  was  variously  repre- 
sented)   certain    shares    were    appro. 


558  Private  Corporations. 

authorized  by  law,  cannot  be  defeated  by  the  creditors  of  the  con- 
solidating cor[)orations. 

And  the  general  rule  is,  that  the  rights  of  creditors  against  the 
old  companies  revive  against  the  new  one,  created  by  the  consoli- 
dation, as  we  have  just  noticed,  and  that  it  becomes  substituted 
for  the  former  ones.  Provision  is  perhaps  generally  made  by 
statute  or  by  articles  of  agreement,  as  provided  by  law,  for  the 
payment  of  the  creditors  and  the  satisfaction  of  the  obligations  of 
the  consolidating  companies  ; '  and  sometimes  these  provide  that 
such  companies  shall  continue  for  the  purpose  of  adjusting  their 
outstanding  obligations,  including  their  torts.'  But  even  where  no 
such  provision  is  made,  but  the  consolidation  is  lawfully  consum- 
mated, the  new  company  has  been  held  liable  to  all  obligations  of 
the  former  ones,  from  the  very  necessity  of  the  case,  and  to  pre- 
vent the  failure  of  justice;^  or  as  the  trustee  of  the  debtor  cor- 
poration, on  account  of  having  its  funds,  which  must  be  held  for 
the  payment  of  its  debts,  and  which  are  properly  chargeable  in 
wliosesoever  hands  they  may  be,  except  a  horiajide  holder  for  value, 
with  the  satisfaction  of  the  same.* 

Sec.   39o.    Consolidation  of  corporations   organized  in  different  states. 

—  Questions  as  to  the  status  of  the  consolidated  company  have 

priated  and  given  to  the  cliairman  general  railroad  law  of  Indiana  of 
of  one  of  the  English  committees,  who  11^53,  which  law  was  by  its  terms  liable 
sold  them  at  a  premium.  Some  mem-  to  "  be  amended  or  repealed  at  tlie 
hers  of  the  English  committee  of  the  discretion  of  the  legislature."  The  de- 
other  of  the  two  original  companies  fendant  subscribed  for  stock  in  this 
filed  their  bill,  praying  an  account  of  company.  Subsequently,  an  act  au- 
the  produce  of  those  shares,  and  for  a  thorizing  the  consolidation  of  railroad 
division  among  those  entitled  after  companies  was  passed  ;  and  in  pur- 
payment  of  all  expenses.  Several  ac-  suance  thereof  the  corporation  in 
counts  were  given  of  what  passed  at  question  consolidated  with  another, 
the  meeting  at  which  the  appropria-  It  appeared,  from  its  articles  of  asso- 
tion  was  made.  The  court,  assuming  ciation,  that  such  consolidation  was 
that  the  persons  present  had  power  to  merely  carrying  out  the  purpose  of  its 
do  what  they  did  (there  being  no  fraud  organization.  Held,  that  the  defend- 
proved),  dismissed  the  bill.  Rossmore  ant  was  not  exonerated  from  his  sub- 
V.  Mo  watt,  15  Jur.  238.  A  railroad  scription.  Hanna  v.  Cincinnati  & 
corporation  was  organized  under  the  Fort  Wayne  R.  R.  Co.,  20  Ind.  30. 

'  Prouty  V.  Lake  Shore,  etc..  R.  Co.,  R.  Co.,  31  id.  283  ;  Columbus,  etc.,  R. 

52  N.  Y.  3G3.  Co.  v.  Powell,  40  id.  37. 

2  Selma,  etc.,  R.    Co.   v.    Harbin,  40  ■'Eaton   &   Hamilton  R.  Co.  v.  Hunt, 

Ga.  70(1.  20    Ind.    463;  Powell   v.    North   Mis- 

*  Indianapolis,  etc.,  R  Co.  v.  Jones,  eouri  R.  Co.,  42  Mo.  63. 
29  lud.  465  ;  Paine  v.  Lake  Erie,  etc.. 


Amalgamation  and  CoNsoLroATioN.  559 

been  raised  principall}^  in  reference  to  its  domicile  and  the  juris- 
diction of  the  federal  courts  in  cases  in  which  it  is  a  party. 
The  general  doctrine  is,  that  for  the  purpose  of  conferring  juris- 
diction, it  may  be  sued  in  the  state  where  its  principal  office  and 
its  records  are  kept.^  We  have  already  considered  the  character 
of  corporations  as  citizens,  and  the  question  as  to  their  domi- 
cile, under  the  provision  of  the  constitution  of  the  United  States, 
and  the  acts  of  congress  relating  to  the  judicial  powers  and  juris- 
diction of  its  courts,  and  the  removal  of  causes  from  the  state  to 
the  federal  courts.^  In  reference  to  this  question  it  is  held,  that 
in  case  of  the  lawful  consolidation  of  corporations  created  in  dif- 
ferent states,  "  the  jurisdictional  eifect  of  the  existence  of  such  a 
corporation,  as  regards  the  federal  courts,  is  the  same  as  that  of  a 
copartnership  of  individual  citizens  residing  in  different  states."  ^ 

Sec.  397.  Same  continued.  —  Where  there  was  a  consolidation  of 
the  stock  of  a  railroad  company  created  in  Wisconsin,  with  one 
in  Illinois,  but  in  so  consolidating  they  failed  to  pursue  the  terms 
of  their  charters,  but  the  contract  of  consolidation  was  subse- 
quently confirmed  by  an  act  of  the  legislatui'e  of  the  state  of  Il- 
linois, it  was  held  that  it  was  recognized  as  a  corporation  of  that 
state,  and  that  a  mortgage  subsequently  executed  by  the  directors 
in  the  name  of  the  consolidated  company,  conveying  the  property 
of  the  corporation  in  the  state  of  Illinois,  was  valid  as  a  mortgage 
of  the  Illinois  corporation. 

In  reference  to  the  effect  of  the  consolidation  in  this  case,  Mr. 
Justice  Lawrence  remarks  :  "  While  it  created  a  community  of 
stock  and  of  interest  between  the  two  companies,  it  did  not  con- 
vert them  into  one  company  in  the  same  way  and  to  the  same 
degree  that  might  follow  a  consolidation  of  two  companies  within 
the  same  state.  Neither  Illinois  nor  Wisconsin,  in  authorizing 
consolidation,  could  have  intended  to  abandon  all  jurisdiction 
over  its  own  corporation  created  by  itself.     Indeed,  neither  state 

'  Culbertson  v.  Wabash  Nav.  Co.,  4  135  ;  Edwards  v.  Union  Bank,  1  Fla. 

McLean,    544  ;  Jenkins   v.   California  136  ;  Cincinnati,  etc.,  R.  Co.  v.  Knowl- 

Sla^e  Co.,  23  Cal.  537.  ton,  11  Ind.  339  ;  Thorn  v.  Central  R. 

The  same  rules  generally  prevail  in  Co.,  26  N.  J.  L.  121. 

reference  to  tlie  venue  of  suits  as  in  '■'  See  ante,  chap.  13. 

case  of  natural  persons.     See  Central  ^  Railroad    Company    v.    Harris,    12 

Bank  of  Georgia  V.  Gibson,  11  Ga.  453  ;  Wall.  65.     See,  also,   Railroad  Co.  v. 

Speer  v.   Atlanta,  etc.,  R.  Co.,  30  id.  Whitton,  18  id.  270. 


560 


Pkivate  Corporations. 


could  take  jurisdiction  over  tlie  property  or  proceedings  of  the 
corporation  beyond  its  own  limits.  *  *  *  A  corporation  can- 
not be  created  by  the  co-operating  legislation  of  two  states  so  as 
to  be  the  same  legal  identity  in  both  states ;  and  where  two 
states  have  each  created  a  corporation  with  the  same  name,  for 
the  same  purposes,  and  composed  of  the  same  natural  persons,  it 
must,  nevertheless,  be  considered  as  a  distinct  corporation  in  each 
state." ' 


1  Racine,  etc.,  R.  Co.  v.  Farmers' 
Loan  &  T.  Co.,  49  111.  331  ;  McGregor 
V.  Erie  R.  Co.,  6  Vroom,  115.  See, 
also,  State  v.  Metz,  3  id.  199  ;  Richard- 
son V.  Vermont,  etc.,  R.  Co.,  44  Vt. 
613  ;  Attorney-General  v.  Boston,  etc., 
R.  Co.,  109  Mass.  99  ;  Sprague  v.  Hart- 
ford, etc.,  R.  Co.,  5  R.  I.  233  ;  Alle- 
gheny Co.  V.  Cleveland,  etc.,  R.  Co.,  51 
Penn.  St.  228  ;  Cleveland,  etc.,  R.  Co.  v. 
Speer,  56  id.  325  ;  Commonwealth  v. 
Pittsburgh,  etc.,  R.  Co.,  58  id.  26 ;  State 


V.  Northern  Cent.  R.  Co.,  18  Md.  193  ; 
Baltimore,  etc.,  R.  Co.  v.  Glenn,  28  id. 
287  ;  Qoshoen  v.  Supervisors,  1  VV.  Va. 
308;  Baltimore,  etc.,  R.  Co.  v.  Super- 
visors, 3  id.  319  :  Farmers'  Bank  v. 
Gettinger,  4  id.  305  ;  Baltimore,  etc., 
R.  Co.  V.  Gallahue,  12  Gratt.  658  ;  As- 
pinwall  V.  Ohio,  etc.,  R.,  20  Ind  492  ; 
Union,, etc.,  R.  Co.  v.  East  Tenn.  R. 
Co.,  14  Qa.  327  ;  Attorney-General  v. 
Railroad,  35  Wis.  425. 


Eminent  Domain.  561 


CHAPTER  XVII. 

EMINENT  DOMAIN. 

Sec.  398.  What  the  right  of  eminent  domain  is. 

Sec.  399.  How  the  right  can  be  enjoyed. 

Sec.  400.  The  authority  to  grant  the  right  is  in  the  legislature. 

Sec.  401.  What  are  public  uses  which  justify  the  exercise  of  the  right. 

Sec.  402.  Who  is  to  determine  the  question  of  public  use. 

Sec.  403.  Limit  of  the  right. 

Sec.  404.  Who  is  to  determine  in  reference  to  the  extent,  amount  or  quan- 
tity of  property  to  be  taken. 

Sec.  405.  Same  continued. 

Sec.  406.  Where  the  corporation  takes  more  land  than  is  required. 

Sec.  407.  Compensation. 

Sec.  408.  Same  continued. 

Sec.  409.  Damages  —  mode  of  estimating. 

Sec.  410.  Elements  of  damages  which  may  be  considered. 

Sec.  411.  Lands  injuriously  affected  but  not  taken. 

Sec.  398.  What  the  right  of  eminent  domain  is.  —  The  right  of 
eminent  domain,  as  applicable  to  private  corporations,  is  the 
power  which  exists  in  the  state  as  the  sovereign  authority,  to 
appropriate  the  property  of  individuals  for  the  public  benefit, 
when  the  public  safety,  convenience,  or  welfare  may  require  it, 
and  on  due  compensation  being  rendered  therefor  to  the  owner. 

The  doctrine  is  sometimes  claimed  to  rest  upon  an  implied  res- 
ervation in  the  sovereign  authority,  from  which,  so  far  as  relates 
to  real  estate,  the  individual  rights  are  derived,  to  resume  the 
rights  thus  conferred  in  the  contingencies  referred  to.  And  it 
consists,  not  only  in  the  authority  to  resume  the  whole  estate,  but 
any  right  or  interest  therein.  It  is  the  rightful  authoritv,  which 
exists  in  every  sovereignty  to  control  and  regulate  those  rights  of 
a  public  nature  which  pertain  to  its  citizens  in  common,  and  to 
appropriate  and  control  individual  property  as  the  public  safety, 
necessity,  convenience  or  welfare  may  demand.' 

>  The  right  of  taking  private  Paine  (U.  S.  C.  C),  688 ;  and  it  is  a 
property  for  public  purposes  is  in-  necessary  incident  of  every  govern- 
separably  attached  to  national  empire  ment,  and  the  necessity  for  the  exer- 
and  sovereignty  ;  Jones  v.  Walker,  3  cise  of  the  right  is  a  matter  of  which. 

71 


562 


Private  Corporations. 


The  constitution  of  tlie  TJnited  States  and  of  the  various  states 
inhibits  the  taking  of  private  property  for  public  purposes, 
under  the  right  of  eminent  domain,  without  just  compensation  ; ' 
but  the  riglit  of  the  sovereign  to  appropriate  individual  property, 
under  the  circumstances  referred  to,  seems  to  be  generally  recog- 
nized, and  to  be  acknowledged  in  the  jurisprudence  of  all  civil- 
ized people." 

This  right  of  eminent  domain,  as  we  have  seen,  is  not  limited 
to  the  real  estate  of  individuals  and  natural  persons,  but  may 
extend  to  and  be  exercised  in  reference  even  to  the  property  and 


tlie  government  must  judge;  the  only 
restraint  upon  the  exercise  of  the  right 
being,  that  just  compensation  must  be 
made  for  property  taken.  Bonaparte  v. 
Camden,  etc.,  H.  R.  Co.,  Bald.  (U.  S. 
C.  C.)  205,  220;  Cooper  v.  Williams,  4 
Ohio,  253;  Spring  v.  Russell,  7  Me.  273; 
M'Masters  v.  Commonwealth,  3  Watts 
(Penn.),  292.  294;  Henry  v.  Underwood. 
1  Dana  (Ky.).  245,  247;  O'Hara  v. 
Lexington,  etc.,  R.  R.  Co.,  id.  232; 
Perrv  v.  Wilson,  7  Mass.  393,  395; 
De  Varaigne  v.  Fox.  2  Blatchf.  95  ; 
Parkham  v.  Decatur  County.  9  Ga. 
341;  Donnaher  v.  State,  10  Miss.  649  ; 
Brown  v.  Beatty,  34  Miss.  227;  Coster 
V.  Tide  Water  Co.,  18  N.  J.  Eq.  54; 
Varick  v.  Smith,  5  Paige  (N.  Y.).  137; 
Harris  v.  Thompson,  9  Barb.  (N.  Y.) 
305.  But,  as  previously  intimated, 
even  the  state  itself  cannot  exercise 
or  delegate  this  power  without  making 
just  compensation  for  the  property 
taken.  Hall  v.  Boyd,  14Gra.  1 ;  Royston  v. 
Royston,  21  id.  161;  Nesbitt  v.  Trumbo, 
39  111.110;  Bruning  V.  New  Orleans, 
etc..  Banking  Co.,  12  La.  Ann.  541  ; 
Hoye  V.  Swan,  5  Md.  237;  Dickey  v. 
Teimison,  27  Mo.  373  ;  Concord  R.   R. 


V.  Greely,  17  N.  H.  47  ;  Dunham  v, 
Williams,  36  Barb.  (N.  Y.)  136;  Grim 
V.  Wissenberg  S.  Dist.,  57  Penn.  St, 
433. 

The  provision  in  the  constitution, 
declaring  that  "  private  property 
shall  npt  be  taken  for  public  uses 
without  just  compensation,"  does  not 
prohibit  the  legislature  from  author- 
izing a  temporary  exclusive  occupation 
of  the  land  of  an  individual,  as  the  in- 
cipient proceeding  to  the  acquisition  of 
a  title  to  it,  or  to  an  easement  in  it  for 
a  public  use,  although  such  occupa- 
tion may  be  more  or  less  injurious  to 
the  owner.  But  suph  occupation 
becomes  unlawful  unless  the  title 
or  the  easement  is  acquired 
within  a  reasonable  time  ;  otherwise 
the  occupiers  become  tresjjassers  ab 
initio.  In  the  case  of  temporary  oc- 
cupation by  a  railroad  company,  two 
years  was  held,  under  the  circumstan- 
ces of  the  case,  not  an  unreasonable 
time.  Nichols  v.  Somerset,  etc.,  R. 
R.  Co.,  43  Me.  356;  Pollard's  Lessees 
V.  Hagen,  3  How.  (U.  S.)  223;  Beek- 
man  v.  Saratoga,  etc.,  R.  Co.,  3  Paige, 
45. 


1  Amend.  Const.  U.  S.,  art.  5;  Vattel, 
B.  1,  chap.  20,  ^  244. 

'^  Field  on  Dam.,  §  845.  See,  also. 
Brown  v.  Beatty,  34  Miss.  227  ;  Taylor 
v.  Porter,  4  Hill,  143;  Hogebocm,  J., 
in  People  v.  Mayor,  etc.,  N.  Y.,  32 
Barb.  113;  Heyward  v.  Mayor,  etc.,N. 
Y..7  N.  Y.  314.  In  the  case  of  Beek- 
man  v.  Saratoga,  etc.,  R.  Co.,  siijjra, 
Chancellor  Walworth  observes: 
"  Notwithstanding  the  grant  to  indi- 
viduals, the  highest  and  most  exact 
idea  of  property  remains  in  the  govern- 


ment, or  in  the  aggregate  body  of  the 
people  in  their  sovereign  capacity  ; 
and  they  have  a  right  to  resume  the 
possession  of  the  property  in  the  man- 
ner directed  by  the  constitution  and 
laws  of  the  state,  whenever  the  public 
interest  requires  it.  This  right  of  re- 
sumption may  be  exercised  not  only 
where  the  safety,  but  also  where  the 
interest  or  even  the  expediency  of  the 
state  is  concerned,  or  where  the  land 
of  the  individual  is  wanted  for  a  road, 
canal  or  other  public  improvement." 


Eminent  Domain. 


;03 


Hg-lits,  francliisGS  and  easements  of  corporations,  liowever  exclu- 
sive the  grant  may  be,  provided,  however,  that  in  all  cases,  ade- 
quate compensation  Le  Urst  made  therefor.^ 


1  Piscataqua  Bridge  v.  N.  II.  Bridge, 

7  N.  H.  y5  ;  Northern  K.  Co,  v.  C.    K. 
Co.,  7  Fost.  188  ;  State  v.  Canterbury, 

8  id.  195  ;  Crosby  v.  Hanover,  oG  N. 
H.  404 ;  Cooler  on  Const.  Lim.  526 
and  notes.  In  relation  to  the  condem- 
nation of  the  rights  of  private  corpo- 
rations acquired  under  and  by  virtue 
of  the  charter  and  contract  with  the 
state,  see  West  River  Bridge  Co.  v. 
Dix.  GIIow.  507;  S.  C,  10  Vt.  446; 
Richmond  R.  Co.  v.  Louisiana  R.  Co., 
18  id.  71 ;  Binghamton  Bridge  case,  3 
Wall.  51;  Boston  &  Lowell  li.  Co.  v. 
Salem  &  Lowell  R.  Co.,  2  Gray,  1 ; 
Bridge  Co.  v.  Lowell,  4  id.  474  ;  Bos- 
ton Water  Power  Co.  v.  Boston  & 
Wor.  R.  Co.,  23  Pick.  360;  Springfield 
V.  Connecticut  R.  Co.,  17  Coim.  40;  id. 
454;  1)1  re  Kerr,  42  Barb.  11!) ;  Bridge 
Co.  V.  Hoboken  Co.,  2  Beas.  81;  Shorter 
V.  Smith,  9  Ga.  529  ;  Railroad  Co,  v. 
Kenney,  39  Ala.  (N.  S.)  307  ;  Califor- 
nia Telegraph  Co.  v.  Alta  Telegraph 
Co.,  22  Cal.  393 ;  Illinois  &  Mich.  C. 
Co.  V.  Chicago  &  R.  I.  R.  Co.,  14  111. 
321.  In  the  West  River  Bridge  case, 
supra,  Daniel,  J.,  says:  *'  No  state, 
it  is  declared,  shall  pass  a  law  impair- 
ing the  obligation  of  contracts  ;  yet, 
with  this  concession  constantly 
yielded,  it  cannot  be  justly  disputed 
that  in  every  political  sovereign  com- 
munity there  inheres  necessarily  the 
right  and  the  duty  of  guarding  its  own 
existence,  and  of  protecting  and  pro- 
moting the  interests  and  welfare  of 
the  community  at  large.  This  power 
and  this  duty  are  to  be  exerted  not 
only  in  the  highest  acts  of  sovereignty 
and  in  the  external  relations  of  gov- 
ernment ;  they  reach  and  comprehend, 
likewise,  the  interior  polity  and  rela- 
tions of  social  life,  which  should 
be  regulated  with  reference  to 
the  advantage  of  the  whole  society. 
This  power,  denominated  the 
eminent  domain  of  the  state,  is, 
as  its  name  imports,  paramount  to 
all  private  rights  vested  under  the 
government,  and  these  last  are,  by 
necessary  implication,  held  in  sub- 
ordination to  this  power,  and  must 
yield  in  every  instance  to  its  proper  ex- 
ercise.  The  constitution  of  the  United 


States,  although  adopted  by  the  sover- 
eign states  of  this  union,  and  proclaimed 
in  its  own  language  to  be  the  supreme 
law  for  their  government,  can,  by  no 
rational  interi)retation,  be  brought  to 
conflict  with  this  attribute  in  the 
states  ;  there  is  no  express  delegatir)a 
of  it  l)y  the  constitution,  and  it  would 
imply  an  incredible  fatuity  in  the 
stales  to  ascribe  to  them  the  intention 
to  relinquish  the  power  of  self-gov- 
ernment and  self-preservation.  A 
correct  view  of  this  matter  must  de- 
monstrate, moreover,  that  the  right  of 
eminent  domain  in  government  in  no- 
wise interferes  with  the  inviolability 
of  contracts  ;  that  the  most  sanctimon- 
ious regard  for  the  one  is  perfectly 
consistent  with  the  possession  and  ex- 
ercise of  the  other. 

"  Under  every  established  govern- 
ment, the  tenure  of  property  is  derived 
mediately  or  immediately  from  the 
sovereign  power  of  the  political  body 
organized  in  such  mode  or  exerted  in 
such  way  as  the  community  or  state 
may  have  thought  proper  to  ordain. 
It  can  rest  on  no  other  foundation,  can 
have  no  other  guarantee.  It  is  owing 
to  these  characteristics  only  in  the 
original  nature  of  tenure  that  appeals 
can  be  made  to  the  laws,  either  for  the 
protection  or  assertion  of  the  rights  of 
property.  Upon  any  other  hypothesis 
the  law  of  property  would  be  simply 
the  law  of  force.  Now,  it  is  undenia- 
ble that  the  investment  of  property  in 
the  citizen  by  the  government,  whether 
made  for  a  pecuniary  consideration  or 
founded  on  conditions  of  civil  or  polit- 
ical duty,  is  a  contract  between  the 
state,  or  the  government  acting  as  its 
agent,  and  the  grantee;  and  both  the 
parties  thereto  are  bound  in  good  faith 
to  fulfill  it.  But  into  all  contracts, 
whether  made  between  states  and  in- 
dividuals, or  between  individuals 
only,  there  enter  conditions  which 
arise  not  out  of  the  literal  terms  of 
the  contract  itself;  they  are  superin- 
duced by  the  pre-existing  and  higher 
authority  of  the  laws  of  nature,  of  na- 
tions, orof  the  community  to  which  the 
parties  belong  ;  they  are  always  pre- 
sumed, and  must  be  presumed  to  be 


564 


PkIVATE    CoRrORATIONS. 


By  virtue  of  tliis  supreme  power  of  the  state,  timber,  gravel,  or 
stone  may  be  taken,*  and  buildings  removed  or  destroyed.^     So 


known  and  recog:nized  by  all,  are  bind- 
ing upon  all,  and  need  never,  there- 
fore, be  carried  into  express  stipula- 
tion, for  this  could  add  nothing  to 
their  force.  Every  contract  is  made  in 
subordination  to  them,  and  must  yield 
to  their  control  as  conditions  inherent 
and  paramount  wherever  a  necessity 
for  their  execution  shall  occur.  Such 
a  condition  is  the  right  of  eminent 
domain.  This  right  does  not  operate 
to  impair  the  contract  affected  by  it, 
but  recognizes  its  obligation  in  the 
fullest  extent,  claiming  only  the  ful- 
fillment of  an  essential  and  inseparable 
condition.  Thus,  in  claiming  the  re- 
sumption or  qualification  of  an  investi- 
ture, it  insists  merely  on  the  true  nature 
and  cliaracter  of  the  right  invested. 
The  impairing  of  contracts  inhibited 
by  the  constitution  can  scarcely,  by  the 
greatest  violence  of  construction,  be 
made  applicable  to  the  enforcing  of  the 
terms  or  necessary  import  of  a  con- 
tract ;  the  language  and  meaning  of 
the  inhibition  were  designed  to  em- 
brace proceedings  attempting  the  in- 
terpolation of  some  new  term  or  con- 
dition foreign  to  the  original  agree- 
ment, and,  therefore,  inconsistent  with 
and  violative  thereof.  It  then  being 
clear  that  the  power  in  question  not 
being  within  the  purview  of  the  re- 
striction imposed  by  the  tenth  section 
of  the  first  article  of  the  constitution, 
it  remains  with  tlie  states  to  the  full 
extent  in  which  it  inheres  in  every 
sovereign  government  to  be  exercised 
by  them  in  that  degree  that  shall  by 
them  be  deemed  commensurate  with 
public  necessity.  So  long  as  they 
shall  steer  clear  of  the  single  predica- 
ment denounced  by  the  constitution ; 
shall  avoid  interference  with  the  obli- 
gation of  contracts,  the  wisdom,  the 
mode,  the  policy,  the  hardship  of  any 
exertion  of  this  power,  are  subjects 
not  within  the  proper  cognizance  of 
this  court.  This  is,  in  truth,  purely 
a  question  of  power  ;  and  conceding 
the  power  to  reside  in  the  state  govern- 

1  Watkins  v.  Walker  Co.,  18  Tex. 
585 ;  Wheelock  v.  Young,  4  Wend. 
647 ;   Lyon    v.   Jerome,    15    id.    5G9  ; 


ment,  this  concession  would  seem  to 
close  the  door  upon  all  further  contro- 
versy in  connection  with  it.  The  in- 
stances of  the  exertion  of  this  power  in 
some  mode  or  other  from  the  very 
foundation  of  civil  government  have 
been  so  numerous  and  familiar,  that  it 
seems  somewhat  strange  at  this  day  to 
raise  a  doubt  or  question  concerning  it. 
In  fact,  the  whole  policy  of  the  country, 
relative  to  roads,  mills,  bridges,  and 
canals,  rests  upon  this  single  power 
under  which  lands  have  been  always 
condemned  ;  and  without  the  exertion 
of  this  power  not  one  of  the  improve- 
ments just  mentioned  could  be  con- 
structed. In  our  country  it  is  believed 
the  power  was  never,  or  at  any  rate 
rarely,  questioned  until  the  opinion 
seems  to  have  obtained  that  the  right 
of  property  in  a  chartered  corporation 
was  more  sacred  and  intangiljle  than 
the  same  right  could  possibly  be  in 
the  person  of  the  citizen  ;  an  opinion 
which  must  be  without  any  grounds 
to  rest  upon,  until  it  can  be  demon- 
strated either  that  the  ideal  creature 
is  more  than  a  person,  or  the  corporeal 
being  is  less.  For,  as  a  question  of 
the  .power  to  appropriate  to  public 
uses  the  property  of  private  persons 
resting  upon  the  ordinary  foundations 
of  private  right  there  would  seem  to  be 
room  neither  for  doubt  nor  ditiaculty. 
A  distinction  has  been  attempted  in 
argument  between  the  power  of  a 
government  to  appropriate  for  public 
uses  property  which  is  corporeal,  or 
may  be  said  to  be  in  being,  and  the 
like  power  in  the  government  to  re- 
sume or  extinguish  a  franchise.  The 
distinction  thus  attempted  we  regard 
as  a  refinement  which  has  no  founda- 
tion in  reason,  and  one  that,  in  truth, 
avoids  the  true  legal  or  constitutional 
question  in  these  causes  ;  namely,  that 
of  the  right  in  private  persons  in  the 
use  or  enjoyment  of  their  private 
property  to  control  and  actually  to 
prohibit  the  power  and  duty  of  the 
government    to   advance   and   protect 

Jerome  v.  Ross,  7  Johns.  Cli.  315 ; 
Bliss  v.  Hosmer,  15  Ohio,  44. 

^  Wells  V.  Somerset,  etc.,  R.  Co.,  47 
Me.  345. 


Eminent  Domain. 


565 


may  legal  and  equitable  interests,  streams  of  water/  coi-porate 
franchises,  and  every  species  of  pro])erty  l>e  appropriated  under 
this  ri^lit." 


the  general  good.  Wo  are  aware  of 
nolliiiig  peculiar  to  a  franchise  which 
can  class  it  higher,  or  naider  it  more 
sacred  than  other  property.  A  fran- 
chise is  pro|)erty  and  iioiliiug  more; 
it  is  incorporeal  propeity,  and  is  so 
defined  by  J  uslice  Blackstone,  when 
treaiiagin  his  second  volume,  chap.  IJ, 
p.  2(j,  of  the  '  Rights  of  Things.'  It  is 
its  character  of  property  only  which 
imparts  to  it  value,  and  ahme  author- 
izes in  individuals  a  right  of  action  for 
invasions  or  disturbances  of  its  enjoy- 
ments. Vide  Bl  Com.,  voh  3,  chap.  10, 
p.  28(J,  as  to  injuries  to  this  descrip- 
tion of  private  property,  and  the  reme- 
dies given  for  redressing  them.  A 
franchise,  therefore,  to  erect  a  bridge, 
to  construct  a  road,  to  keep  a  ferry, 
and  to  collect  tolls  upon  them,  granted 
by  the  authority  of  the  state,  we  re- 
gard as  occupying  the  same  position 
with  respect  to  the  paramount  power 
and  duty  of  the  state  to  promote  and 
protect  the  public  good  as  does  the 
right  of  the  citizen  to  the  possession 
and  enjoyment  of  his  laud  under  his 
patent  or  contract  with  the  state,  and 
it  can  no  more  interpose  any  obstruc- 
tion in  the  way  of  their  just  exertion. 
Such  exertion  we  hold  to  be  not  within 
the  inhibition  of  the  constitution  and 
no  violation  of  a  contract.  The  power 
of  a  state  in  the  exercise  of  eminent 
domain  to  extinguish  immediately  a 
franchise  it  had  granted,  appears 
never  to  have  been  directly  brought 
here  for  adj  udication,  and  consequently 
has  not  been  heretofore  formally  pro- 
pounded from  this  court  ;  but  in  Eng- 
land this  power,  to  the  fullest  extent, 
was  recognized  in  the  case  of  the 
Governor  and  Company  of  the  Cast 
Plate  Manufacturers  v.  Meredith,  4 
T.  li.  71)4,  and  Lord  Kenyon,  espe- 
cially in  that  case,  founded  solely  upon 
this  power  the  entire  policy  and  au- 
thority of  all  the  road  and  canal  laws 
of  the  kingdom." 

'  People  V.  Mayor,  etc.,  of  N.  Y.,  32 
Barb.  102  ;  Bailey  v.  Miltenberger,  31 
Penn.  St.  37  ;  Gardner  v.  Newburgh,  2 
Johns.  Ch.  102. 

-Springfield  v.  Connecticut  Riv.  R. 


And  in  the  same  case  Mr.  Ju.stice 
McLean  says  :  "  The  state  cannot 
modify  or  repeal  a  charter  for  a  bridge, 
a  turn])ike-road,  or  a  bank,  or  any 
other  private  charter,  unless  the  power 
to  do  so  has  been  reserved  in  the  orig- 
inal grant.  But  no  one  doubts  the 
power  of  the  state  to  take  a  banking- 
house  for  public  use,  or  any  other  real 
or  personal  property  owned  by  the 
bank.  In  this  respect,  a  corporation 
holds  property  subject  to  the  eminent 
domain,  the  same  as  citizens.  The 
great  object  of  an  act  of  incorporation 
is  to  enable  a  body  of  men  to  exercise 
the  faculties  of  an  individual.  Pecu- 
liar privileges  are  sometimes  vested 
in  the  body  politic,  with  the  view  of 
advancing  the  convenience  and  inter- 
ests of  the  public. 

"  The  franchise,  no  more  than  a 
grant  for  land,  can  be  annulled  by  the 
state.  These  muniments  of  right  are 
alike  protected.  But  the  property 
held  under  both  is  held  subject  to  a 
public  necessity,  to  be  determined  by 
the  state.  In  either  case,  the  property 
being  taken,  renders  valueless  the 
evidence  of  right.  But  this  does  not, 
in  the  sense  of  the  constitution,  impair 
the  contracts.  The  bridge  and  the 
ground  connected  with  it,  together 
with  the  right  of  exacting  toll,  are  the 
elements  which  constitute  the  value 
of  the  bridge.  The  situation  and  pro- 
ductiveness of  the  soil  constitute  the 
value  of  laud.  In  both  cases  an  esti- 
mate is  made  of  the  value,  under  pre- 
scribed forms,  and  it  is  paid  when  tlie 
property  is  taken  for  public  use.  And 
in  these  cases  the  evidences  of  right 
are  incidents  tq  the  property.  No 
state  could  resume  a  charter,  under 
the  power  of  appropriation,  and  carry 
on  the  functions  of  the  corporation. 
A  bank  charter  could  not  be  thus 
taken  and  the  business  of  the  bank 
continued  for  public  purposes.  Nor 
could  this  bridge  have  been  taken  by 

Co.,  4  Cush.  (Mass.)  03.  A  franchise 
to  build  and  maintain  a  bridge  may  be 
taken  for  a  highway  whenever  the 
legislature  deems  that  a  public  exi- 
gency for  such  new  use  exists.     Cen- 


560 


PkIVATI!;    COKI'ORATIONS. 


Sec.  399.     How  the  right  can  be  enjoyed.  —  The   I'iglll    of   eminent 
domain  is  an  incident  of  sovereignty,  and  can  only  be  enjoyed  by 


the  state  and  kept  by  it  as  a  toll- 
briilgo.  Tliis  could  not  be  called  au 
appropriation  of  private  property  to 
public  purposes.  There  would  be  no 
change  in  tlie  use,  except  the  applica- 
tion of  the  profits,  and  this  would  not 
bring  the  act  within  the  power.  The 
power  must  not  only  be  exercised  ?;««« 
fide  by  a  state,  but  the  property,  not 
its  product,  must  be  applied  to  public 
use. 

"  It  is  argued  that  if  the  state  may 
take  this  bridge,  it  may  transfer  it  to 
other  individuals  under  the  same  or 
different  charter.  This  the  state  can- 
not do.     It  would  be,  in  effect,  taking 


the  property  from  A.  to  carry  it  to  B. 
The  public  purpose  for  which  the 
power  is  exerted  must  be  real  and 
not  pretended.  If,  in  the  course  of 
time,  the  property,  by  a  change  of  cir- 
cumstances, should  no  longer  be  re- 
quired for  public  use,  it  may  be  other- 
wise disposed  of.  But  this  is  a  case 
not  likely  to  occur.  The  legality  of 
the  act  depends  upon  the  facts  and 
circumstances  under  which  it  was 
done.  If  the  use  of  land  taken  by 
the  public  for  a  highway  should  be 
abandoned,  it  would  revert  to  the  orig- 
inal proprietor  and  owner  of  the  fee." 


tral  Bridge  v.  Lowell,  4  Gray,  474 ; 
Young  V.  Harrison,  6  tra.  180.  Indeed, 
it  may  be  stated,  as  a  general  rule,  that, 
although  the  charter  of  a  corporation 
is  a  contract  between  the  state  and  the 
corporators,  yet  it,  like  other  contracts, 
is  made  subject  to  the  right  of  eminent 
domain  in  the  state  ;  and  the  property 
of  a  corporation  and  its  franchises  may 
therefore  be  taken  for  public  uses, 
like  the  property  of  individuals,  with- 
out violating  the  obligation  of  the  con- 
tract. West  River  Bridge  Co.  v.  Dix,  6 
How.  (U.  S.)  507  ;  Alabama,  etc.,  R.  R. 
Co.  V.  Kenny,  39  Ala.  307;  State  v. 
Noyes,  47  Me.  189  ;  Peirce  v.  Somers- 
worth,  10  N.  H.  369;  Crosby  v.  Han- 
over, 36  N.  H.  404  ;  Miller  v.  New  York, 
etc.,  R.  R.  Co.,  21  Barb.  513;  Red 
River  Bridge  Co.  v.  Clarksville,  1 
Sneed,  176;  Armington  v.  Barnett,  15 
Vt.  745  ;  White  River  Turnpike  Co.  v. 
Vermont,  etc.,  R.  R.  Co.,  21  Vt.  590  ; 
James  River,  etc.,  Co.  v.  Thompson,  3 
Gratt.  270.  And  the  state  may  delegate 
this  power  to  a  corporation  either  pub- 
lic or  private,  either  by  special  or  gen- 
eral laws.  Backus  v.  Lebanon,  11 
N.  H.  19,  and  the  right  may  even  be 
conferred  upon  a  foreign  corporation. 
Matter  of  Townsend,  39  N.  Y.  171  ; 
Morris  Canal,  etc.,  Co.  v.  Townsend,  24 
Barb.  658.  The  right  may  be  granted 
conditionally,  and  until  the  conditions 
are  performed,  it  does  not  exist,  or  if 
the  conditions  are  subsequent,  and  not 
performed,  the  right  ceases,  Stanford 
V.  Worn,  27  Cal.  171  ;  and  under  no 
circumstances  can  the  right  be  exam- 
ined without  making  proper  and  just 


compensation  for  the  property  taken. 
Hamilton  v.  Annapolis,  etc.,  R.  R.  Co., 
1  Md.  Ch.  107  ;  Harness  v.  Chesapeake, 
etc.,  R.  R.  Co.,  id.  248  ;  Boston,  etc., 
R.  R.  Co.  V.  Salem,  etc.,  R.  R.  Co.,  2 
Gray,  1 ;  Petition  of  Mount  Washing- 
ton Road  Co.,  35  N.  H.  134  ;  Ten  Eyck 
V.  Delaware,  etc.,  Canal,  18  N.  J.  L. 
200;  Star  v.  Camden  R.  R.  Co.,  24 
N.  J.  L.  592;  Carson  v.  Coleman,  11 
N.  J.  Eq.  106  ;  Gardner  v.  Trustees  of 
Newburgh,  2  Johns.  Ch.  162 ;  Bona- 
parte v.  Camden,  etc.,  R.  R.  Co.,  1 
Baldw.  (U.  S.  C.  C.)205;  Haight  v. 
Aqueduct,  4  Wash.  601  ;  People  v. 
White,  11  Barb.  26  ;  Hartwell  v.  Arm- 
strong, 19  id.  166  ;  Buflfixlo  Bayou,  etc., 
R.  R.  Co.  V.  Terris,  26  Tex.  588. 

In  the  latter  case  the  court  held,  that 
it  was  competent  for  the  legislature, 
under  the  right  of  eminent  domain,  to 
grant  an  authority  to  a  railroad  com- 
pany to  lay  and  maintain  a  railway  over 
a  highway,  longitudinally  ;  but  that  the 
intention  to  grant  laud,  already  appro- 
priated to  a  public  use,  must  be  shown 
by  express  words  or  by  necessary  im- 
plication. 

In  this  case  Chief-Justice  Shaw  ob- 
serves : 

"  We  are  then  brought  to  the  main 
question,  namely,  whether  the  defend- 
ants had  authority,  by  the  act  of  1845, 
chap.  170,  §  1,  granting  them  the  right 
to  build  this  branch,  to  build  it  over 
and  along  a  public  way  previously 
established.  It  is  stated  and  admitted 
that  Front  street,  in  Cabot ville,  is 
partly  a  highway,  laid  out  and  estab- 
lished by  the  county  commissioners, 


Eminent  Domain. 


507 


the  exorcise  of  legislative  authority.     The  right  may,  however, 
be  conferred  by  the  legisluture,  representing  the  supreme  author- 


and  partly  a  townvvay,  laid  out  by  the 
selectmen,  and  the  laying  out  ratified 
by  the  vote  of  the  town.  These  two 
modes  of  establishing  ways  are  both 
legal ;  and  though  one  is  called  a  high- 
way, and  the  other  a  town  way,  yet,  for 
most  purposes,  both  are  regarded  as 
public  ways,  for  obstructing  whicli  any 
party  is  liable  to  indictment,  as  for  a 
nuisance,  and  for  damage  in  conse- 
quence of  any  defect  in  which  the 
town  is  liable  to  the  sufferer.  For 
all  purposes  of  this  inquiry,  there- 
fore, there  is  no  distinction  between 
them. 

"As  the  giving  of  authority  to  build 
and  maintain  a  railroad  is  the  grant  of 
a  right  to  take  private  property  for  a 
public  use,  and  to  deal  with  property 
appropriated  to  other  public  easements 
and  uses,  it  is  manifestly  a  high  exer- 
cise of  the  sovereign  right  of  eminent 
domain,  and  can  only  be  effected  by 
the  clear  and  unequivocal  authority  of 
the  legislature,  who  are  constituted  the 
judges  of  what  the  public  good  re- 
quires. 

"  It  is  somewhat  remarkable  that, 
in  a  matter  so  deeply  affecting  private 
rights  and  interests,  the  precise  loca- 
tion or  line  of  railroad  on  the  ground 
is  not  fixed  by  the  act  granting  the 
power,  nor  is  it  provided  that  it  shall 
be  fixed  by  any  board  of  public  ofiicers, 
who  may  be  supposed  to  act  impar- 
tially. In  laying  out  highways,  the 
precise  course  of  location  is  fixed  by 
the  county  commissioners,  formerly 
the  court  of  sessions,  a  public  body  of 
disinterested  otficers,  supposed  to  act 
as  impartial  arbitrators  between  the 
public  and  individual  proprietors. 

"  But  in  railroads,  the  authority  to 
the  corporation  is  to  locate,  construct, 
and  complete  a  railroad  within  certain 
termini,  giving  the  general  direction, 
but  leaving  the  precise  location  to  be 
determined,  not  by  the  county  commis- 
sioners, but  by  the  company.  The  cor- 
poration must  file  their  location  with 
the  commissioners  within  one  year, 
defining  the  courses,  distances,  and 
boundaries,  but  the  commissioners 
have  no  power  of  prescribing  or  alter- 
ing it.  Rev.  Stats. ,  chap.  37,  §  75.  So,  af- 
ter having  made  a  location,  the  corpora- 


tion may  vary  it,  and  take  other  lands 
within  the  limits  prescribed  by  their 
act  of  incorporation,  and  file  a  location 
of  such  variations.  Rev.  Stats.,  chap. 
3t),  j^  73.  Aud.on  the  petition  of  any  rail- 
road corporation,  the  commissioners 
may  authorize  an  original  location,  or 
an  existing  location,  to  be  altered, 
without  the  limits  prescribed  by  the 
charter  of  such  corporation.  Rev.fcjtats., 
chap.  39,  ^5  <4.  Considering  how  large 
the  powers  are  which  are  thus  ve.sted  in 
railroad  corporations,  the  court  are  of 
opinion  that  they  ought  to  be  con- 
strued with  a  good  degree^  of  strict- 
ness, and  not  enlarged  by  construc- 
tion. 

"  The  authority,  under  which  the  de- 
fendants claim  to  have  located  and  laid 
out  the  railroad  in  question,  is  found 
in  the  act  of  1S15,  chap.  170,  which  was 
passed  in  addition  to  the  act  of  1842, 
chap.  41,  by  which  this  company  was 
incorporated.  The  act  of  Iblo  pro- 
vides (§  1)  that  the  company  may  con- 
struct and  open  for  use  a  branch  rail- 
road from  the  main  track  of  the  road, 
in  Cabotville,  to  and  near  the  mills  in 
said  village,  passing  up  the  south  bank 
of  Chicopee  river,  near  the  same,  and 
thence  extending  up  said  river  to  the 
Chicopee  Falls  village  ;  the  location  of 
that  part  of  the  branch  now  in  question, 
from  the  main  road  to  the  mills  in 
Cabotville,  to  be  filed  in  one  year  from 
the  passage  of  the  act,  and  that  to 
Chicopee  Falls  village  in  five  years. 
The  act  further  provides  (§  3)  that  said 
corporation,  in  the  construction  of 
their  railroad  and  branch,  shall  have 
all  the  powers  and  privileges,  and  be 
subject  to  all  the  duties,  restrictions, 
and  liabilities  set  forth  in  the  Rev. 
Stats.,  chap.  44,  and  in  that  part  of 
cha)>.  39  wliich  relates  to  railroads. 

"  It  is  the  common  case  of  an  act, 
authorizing  the  location  and  construc- 
tion of  a  railroad  between  termini,  one 
of  which,  the  j  unction,  as  the  terminus 
a  quo  is  fixed,  and  the  other,  the  tei'- 
viiuus  ad  quern, '  to  and  near  the  mills 
in  Cabotville  ; '  and  the  course  or  line 
is  no  more  exactly  designated  than 
by  the  terms  '  passing  up  the  south 
bank  of  Chicopee  river,  and  near  the 
same,'  and  thence  extending  up  said 


5GS 


Private  Coepokations. 


ity  of  the  state  ;  and  authority  is  usually  conferred  by  it,  by  some 
general  statutes  upon  corporations,  by  means  of  which  delegated. 


river  to  Chicopee  Falls  village.  The 
beautiful  and  apparently  accurate  sur- 
vey and  a  plan  of  a  part  of  Cabotville, 
and  of  the  river,  the  streets,  and  the 
track  of  the  railroad,  exhibit  all  these 
localities  to  great  advantage,  and  pre- 
sent the  question  at  a  single  glance. 

"  As  no  company  or  persons  have 
authority  to  lay  out  a  railroad,  except 
so  far  as  such  power  is  conferred  by 
the  legislature,  the  court  are  of  opin- 
ion, that  by  a  grant  of  power  by  a 
legislative  act,  to  lay  out  a  railroad 
between  certain  termini,  where  the 
precise  course  and  direction  are  not 
prescribed,  but  are  left  to  the  cor- 
pora iion  to  be  located  between  the 
termini,  no  authority  is  given  prima 
facie  to  lay  such  railroad  on  and  along 
an  existing  public  highway  longitu- 
dinally or,  in  other  words,  to  take 
the  road-bed  of  such  highway  as 
the  track  of  their  railroad.  The 
two  uses  are  almost,  if  not  wholly,  in- 
consistent with  each  other;  so  that 
taking  the  highway  for  a  railroad  will 
nearly  supersede  the  former  use  to 
which  it  had  been  legally  appropriated. 
The  whole  course  of  legislation,  on 
the  subject  of  railroads,  is  opposed  to 
such  a  construction.  The  crossing  of 
public  highways  by  railroads  is  ob- 
viously necessary  and,  of  course,  war- 
ranted; and  numerous  provisions  are 
industriously  made  to  regulate  such 
crossings  by  determining  when  they 
shall  be  on  the  same  and  when  on  dif- 
ferent levels,  in  order  to  avoid  collis- 
ion ;  and  when  on  the  same  level, 
what  gates,  fences  and  barriers  shall 
be  made  and  what  guards  shall  be 
kept  to  insure  safety.  Had  it  been 
intended  that  railroad  companies,  un- 
der a  general  grant,  should  have  i)ower 
to  lay  a  railroad  over  a  highway 
longitudinally,  which  ordinarily  is  not 
necessary,  we  think  that  would  have 
been  done  in  express  terms,  accom- 
panied with  full  legislative  provisions 
for  maintaining  such  barriers  and 
modes  of  separation  as  would  tend  to 
make  the  use  of  the  same  road,  for 
both  modes  of  travel,  consistent  with 
the  safety  of  travelers  on  both.  The 
absence  of  any  such  provisions  affords 
a  strong  inference  that,  under  genera] 


terras,  it  was  not  intended  that  such  a 
power  should  be  given. 

"  But  the  court  are  of  opinion  that 
it  is  competent  for  the  legislature,  un- 
der the  right  of  eminent  domain,  to 
grant  such  an  authority.  The  power 
of  eminent  domain  is  a  high  preroga- 
tive of  sovereignty,  founded  upon  pub- 
lic exigency,  according  to  the  maxim  : 
Salus  reipublicm  lex  mprema  est,  to 
which  all  minor  considerations  must 
yield  and  which  can  only  be  limited 
by  such  exigency.  The  grant  of  land 
for  one  public  use  must  yield  to  that 
of  another  more  urgent.  Land  appro- 
priated to  a  public  walk  or  training- 
field  may,  in  case  of  war,  be  required 
for  a  citadel  when  it  is  the  only 
ground  which,  in  a  military  point  of 
view,  will  command  all  the  defenses 
of  a  place  in  case  of  a  hostile  attack. 
Chesapeake  &  Ohio  Canal  Co.  v.  Balti- 
more &  Ohio  Railroad  Co.,  4  G.  & 
J.  1  ;  Boston  Water-Power  Co.  v. 
Boston  &  Worcester  Railroad  Corp., 
23  Pick.  380  ;  Wellington  et  al..  Peti- 
tioners, 16  id.  87,  100. 

"  But  when  it  is  the  intention  of  the 
legislature  to  grant  a  power  to  take 
laud  already  appropriated  to  another 
public  use,  such  intention  must  be 
shown  by  express  words  or  by  neces- 
sary implication.  There  may  be  such 
a  necessary  implication.  Every  grant 
of  power  is  intended  to  be  efficacious 
and  beneficial  and  to  accomplish  its 
declared  object  ;  and  carries  with  it 
such  incidental  powers  as  are  requisite 
to  its  exercise.  If  then  the  exercise 
of  the  power  granted  draws  after  it  a 
necessary  consequence,  the  law  con- 
templates and  sanctions  that  conse- 
quence. Take  the  familiar  case  of  the 
Notch  of  the  White  Mountains,  a  very 
narrow  gorge,  which  affords  the  only 
practicable  passage  for  many  miles 
through  that  mountain  range.  A  turn- 
pike road  through  it  has  already  been 
granted.  Suppose  the  gorge  not  wide 
enough  to  accommodate  another  road 
but  the  legislature  of  New  Hampshire, 
in  order  to  accommodate  a  great  line  of 
public  travel,  should  grant  power  to 
lay  a  railroad  on  that  line  they  would, 
by  necessary  implication,  grant  a 
power  to  take  some  portion  of  the  road- 
bed of  the  turnpike." 


Eminent  Domain.  569 

authority  such  corporations,  constituted  for  various  purposes,  are 
enabled  to  prosecute  various  enterprises  of  public  as  well  as  of 
private  interest.^  The  right  to  delegate  this  authority  rests  upon 
the  supposed  public  benefit  to  be  derived  from  the  exercise  of  the 
power  by  the  corporation  on  which  it  is  conferred.  "  Upon  the 
principle  of  public  benefit,"  observes  Chancellor  Walworth, 
''not  only  the  agents  of  the  government  but  also  individuals  and 
corporate  bodies  have  been  authorized  to  take  private  property 
for  the  purpose  of  making  highways,  turnpike  roads  and  canals  ; 
of  erecting  and  constructing  wharves  and  basins  ;  of  establishing 
ferries ;  of  draining  swamps  and  marshes  and  of  bringing  water 
to  cities  and  villages.  In  all  such  cases  the  object  of  the  legisla- 
tive grant  of  power  is  the  public  advantage  expected  from  the 
contemplated  improvement  or  enterprise,  whether  it  be  efiected 
directly  by  the  agents  of  the  government,  or  through  the  medium 
of  corporate  bodies  or  of  individual  enterprise."  ^ 

Sec.  400.  The  authority  to  grant  the  right  is  in  the  legislature. — 
The  authority  to  grant  the  exercise  of  the  right  of  eminent  domain 
resides  in  the  legislature  as  the  representative  of  the  state.  It  is 
a  legislative  function  to  determine  whether  the  enterprise  under- 
taken on  the  part  of  an  individual  or  corporate  body  is  of  suffi- 
cient pubHc  interest  and  utility  to  justify  the  transferring  of  the 
sovereign  power  to  take  private  property  for  the  purpose  of 
carrying  out  such  enterprise.'^ 

And,   with  the  legislative  determination  in  this  respect,  the 

'  Buflfalo,  etc.,  R.  Co.   V.  Brainard,  Dam  v.  Newman,  12  Pick.  464;  Gil- 

9  N.   Y.  100  ;  People  v.  Smith,  21   id.  mer  v.  Lime  Paint,  18  Cal.  229  :  Arm- 

595  ;  Wilson  v.  Marsh  Co.,  2  Pet.  251  ;  ingtou  v.    Barnet,  15  Vt.  750  ;  White 

Bloodgood  V.  Railroad  Co.,  18   Wend.  River  Turnpike  Co.  v.  Central  R.,  21 

9;    West    River   Bridge   Co.  v.  Dix,  6  id.  590  ;  Bradley  v.  New   York    &    N. 

How.  507;  Mercer  v.  Railroad  Co.,  36  H.  R.  Co.,  21  Conn.  294  ;  Olmstead  v. 

Penn.  St.  99  ;  Scudder  v.  Trenton,  etc..  Camp,  33  id.  532  ;  Eaton  v.  Boston  C. 

Falls  Co.,  Saxt.  (N.  J.)  694  ;  Swan  v.  &  M.  R.  Co.,  51  N.  H.  504. 

Williams,   2    Mich.    427;  Embury   v.  •  Beekman  v.  Saratoga,  etc.,  R.  Co., 

Connor,  3  N.  Y.    511;  Alexander   v.  3  Paige,  73  ;  Rensselaer,  etc.,  R.  Co.  v. 

Baltimore,    5    Gill,   383;    Sedgw.   on  Davis,  43  N.  Y.  137;  Railroad  Co.  v. 

Const.  Law,  517;  Curry  v.  Mt.   Ster-  Kip,    46   id.    546;    In  re   Fowler,   58 

ling,  15   111.    320;  West   v.    Blake,  4  id.  60  ;  Kramer  v.  C.  &   P.   R.  Co.,  5 

Blackf.  (Ind.)  234;  Stevens  v.  Middle-  Ohio  St.  146. 

sex  Canal,  12  Mass.  466  ;  Boston  Mill  =*  People  v.  Smith,  21  N.  Y.  595. 

72  --  ■  '   ' 


570  Pkivate  Cokporations. 

judiciary  department  oftiie  government  cannot  interfere.  Whether 
the  contemplated  project,  be  it  a  matter  of  individual  or  of  corpo- 
rate action,  is  of  sufficient  public  interest  to  authorize  the  con- 
ferring of  the  right  to  exercise  the  power  of  eminent  domain,  is 
for  the  legislature  alone,  and  with  the  exercise  of  its  discretion 
the  judiciary  of  the  state  has  no  right  to  interfere.^  But  if 
attempts  are  made  under  the  authority  granted  to  take  property 
under  the  claim  of  right  of  eminent  doniain,  when  in  fact  it  is 
not  warranted  by  the-  circumstances  of  the  case,  or  the  appropria- 
tion would  not  subserve  public  purposes  or  be  of  public  utility, 
the  courts  have  power  to  interfere.^  If,  however,  the  use  for 
which  it  is  taken  has  been  declared  by  the  legislature  to  be  of 
public  utility,  the  courts  will  hold  it  to  be  such  unless  the  con- 
trary clearly  appears/ 

Sec.  401.   What  are  public  uses  which  justify  the  exercise  of  the  right. 

—  There  is  a  class  of  pursuits,  purposes  and  enterprises,  usually 
the  object  of  private  corporate  undertakings,  that  are  generally, 
if  not  universally,  conceded  to  be  of  such  public  use  and  utility 
as  to  authorize  the  grant  of  the  right  of  eminent  domain  to  such 
persons  or  associations  as  undertake  to  carry  them  out.  Thus  it 
is  held  that  the  building  or  construction  of  turnpike  and  plank- 
roads,  canals,  railroads,  aqueducts,  sewers,  water-works,  telegraph 
lines  and  gas-works,  are  of  public  use  and  advantage,  and  that  in 
reference  to  these  various  objects,  as  well  as  many  others,  the 
public  have  such  an  interest,  although  projected  and  under- 
taken by  private  associations  or  corporations,  as  to  authorize  the 
conferring  upon  such  bodies  the  power  to  exercise  the  right  of 
eminent  domain  ;  and  under  this  power  to  condemn  private  prop- 
erty of  any  kind  that  may  be  required  to  accomplish  the  object." 

1  Tidewater  Co  v.  Coster,   18  N.  J.  452  ;  Bankbead  v.  Brown.  25  Iowa,  540  ; 

Eq.  518  ;  S.  C,  id.  55  ;  2  Kent's  Com.  Spear  v.  Blairsville,  50  Penn.  St.  150  ; 

340;    Sedgw.    on    Const.    Law,    511,  Sadler  v.  Langham,  34  Ala.  311. 

514.  3  Bankhead  v.  Brown,  25  Iowa,  540  ; 

•^Talbot  V.  Hudson,   16  Gray,  417 ;  Olmstead    v.    Camp,    33    Conn.    551; 

Water-Works  Co.  v.  Burkbart,  41  Ind.  Tyler  v  Beacber,  44  Vt.   648  ;  Lough- 

364  ;  Scudder  v.    Trenton  D.  F.   Co.,  bridge  v.  Harris,  42  Ga.  500. 

Saxt.  (N.  J.)  694  ;  Cottrill  v.  Myrick,  •*  Id.  ;  New  York  &  H.  R.  R.  Co.  v. 

13  Me.  222  ;  Concord  R.  Co.  v.  Greely,  Kip,  46  N.  Y.   546  ;  Buffalo,  etc. ,  R. 

17N.  H.47;  People  v.  Salem ,  20  Mich.  Co.  v.  Brainard,  9  id.  100;  Olcott  v. 


Eminent  Domain. 


571 


On  the  other  hand,  there  is  a  cUiss  of  private  enterprises,  in 
relation  to  which  tlie  pubhc  benefit  to  be  derived  from  their  prose- 
cution is  not  so  manifest. 


Supervisors,  10  Wall.  078  ;  Bonaparte 
V.  C.  &  A.  K.  Co.,  Bald.  2u5  ;  Bradley 
V.  New  York,  etc.,  K.  Co.,  21  Coiiu. 
391  ;  Davis  V.  Tuscumbia,  etc.,  II.  Co., 
4  S.  &  P.  421  ;  Brown  v.  Beatty,  34 
Miss.  227  ;  Swan  v.  Williams,  2  Mich. 
427;  Weir  v.  St.  Paul  R.  Co.,  18 
Minu.  lo.j ;  Harvey  v.  Thomas,  10 
Walts,  05  ;  New  Central  Coal  Co.  v. 
CJeo/ge's  Creek  Coal,  etc.,  Co.,  '37  Md. 
537;  Sau  Francisco  A.  &  S.  11.  Co.  v. 
Caldwell,  31  Cal.  307;  Gibson  v.  Ma- 
son, 5  Nev.  283. 

See,  also,  Bloomfield  Gas  Co.  v.  Bicb- 
ardsou,  03  Barb.  437,  where  the  ques- 
tion of  public  use  in  relation  to  a  gas 
for  illuminating  a  city  is  considered, 
and  the  power  to  confer  the  right  of 
eminent  domain  upon  a  corporation 
organized  for  the  manufacture  of  gas 
for  such  a  purpose  is  discussed  ;  and 
where  it  is  lield  that  the  legislature  is 
authorized  to  confer  the  right  in  such 
cases. 

All  purely  governmental  purposes, 
whether  carried  by  the  state  itself 
through  some  of  its  departments  or  by 
local  governments  such  as  those  of 
counties  and  towns.  Under  tiiis  class 
are  public  school-houses;  Williams  v. 
School  District,  33  Vt.  271  ;  forts;  Gil- 
mer V.  Lime  Paiut,  19  Cal.  229  ;  and 
this  class  would  undoubtedly  include 
buildings  for  state-houses,  capitols, 
court-houses,  public  prisons  and  the 
like.  All  means  atid  methods  for  the 
transit  of  passengers  or  goods,  whether 
constructed  by  the  state  or  by  private 
enterprise.  This  class  includes  public 
highways,  turnpikes,  bridges,  rail- 
roads, canals,  docks  and  wharves. 
Measures  of  police,  and  especially 
those  designed  to  promote  health.  In 
this  class  there  are  several  particular 
instances  not  resembling  each  other  in 
their  outward  and  physical  features, 
but  it  will  be  seen  that  in  all  of  them 
the  element  which  makes  the  use 
"public"  belongs  to  that  brancli  of 
governmental  functions  termed  "  po- 
lice," and  in  most  of  them  this  ele- 
ment is  purely  sanitary.  This  class 
includes  water- works  to  supply  cities 


with  water.  Reddall  v.  Bryan,  14  Md. 
444:  Burden  v.  Stein,  27  Ala.  104; 
liumbard  v.  Stearns,  4  Cush.  60;  Mayor, 
etc.,  v.  Bailey,  2  Denio,  4.52  ;  per  Gar- 
diner, President.  Provision  and  means 
for  draining  swamps,  marshes  and  low- 
lands. Harlwell  v.  Armstrong,  19 
Barb.  100;*  People  v.  Nearing,  27 
N.  Y  .  300  ;  Anderson  v.  Kerns  Drain- 
ing Co.,  14  lud.  199,  202.  This  last 
case  expressly  holds  that  draining  for 
sanitary  purposes  is  a  public  use,  but 
for  other  purposes  is  not.  Provisions 
and  means  for  removing  dams  and  per- 
mitting stagnant  and  offensive  waters 
to  How  otf ,  thus  abating  a  great  public 
nuisance  and  rendering  a  whole  dis- 
trict salubrious  which  was  before  pes- 
tilential. Miller  v.  Craig,  12  N.  J. 
Eq.  175  ;  Talbot  v.  Hudson,  IG  Gray, 
417  ;  Dingley  v.  Boston,  100  Mass. 
5-14.  Drains  and  sewers  in  cities. 
Hildreth  v.  Lowell,  11  Gray,  345. 
Public  burying-grounds.  Edwards  v. 
Stonington  Cemetery  Assoc,  20  Conn. 
400.  The  cases  generally,  that  is 
throughout  the  United  States,  gone 
further  than  the  foregoing.  In  Mas- 
sachusetts, Connecticut,  and  perhaps 
in  a  very  few  other  state's,  statutes 
have  existed  from  a  very  early  day 
known  as  the  "  flowage  acts,"  by  which 
land  is  permitted  to  be  taken  for  mill- 
dams,  etc.  These  statutes  form  part 
of  the  j)eculiar  local  systems  of  those 
states,  and  have  been  sustained  on 
the  ground  that  the  means  of  pro- 
moting manufacture  was  a  public 
use.  See  Hazen  v.  Essex  Co.,  12 
Cush.  475;  Boston  Mill  Dam  Co.  v. 
Newman,  12  Pick.  407,  and  many 
other  Massachusetts  cases  ;  Olmstead 
V.  Camp.  33  Conn.  532 ;  Todd  v.  Austin, 
34  id.  78.  In  the  latter  case  the  neces- 
sities of  the  position  and  the  logic  of 
the  judge  force  him  to  hold  that 
"  whenever  a  person  carries  on  any 
business,  and  furnishes  articles  which 
members  of  the  community  find  it 
convenient  or  advantageous  to  buy, 
then  his  business  is  a  public  use." 
This  is  the  reductio  ad  ahsurdum.  It 
is   saying  tliat   the    legislature    may 


572  Private  Corpokatioxs. 

Tims,  in  tlio  case  of  companies  or  private  corpoi-ations,  organ- 
ized for  manufacturing  purposes,  the  right  to  authorize  them  to 
take  private  property,  necessary  or  convenient  for  carrying  out 
their  purposes,  has  been  a  question  on  which  the  authorities  are 
divided.^  Saw-mills,  grist-mills,  and  various  other  manufactories, 
are  certainly  a  public  necessity ;  and  while  the  country  is  new 
and  capital  not  easily  attainable  for  their  erection,  it  sometimes 
seems  to  be  essential  that  the  government  should  offer  large  in- 
ducements to  parties  who  Avill  sujiply  this  necessity.  Before 
steam  came  into  use,  water  was  almost  the  sole  reliance  for  motive 
power ;  and,  as  i-eservoirs  were  generally  necessary  for  this  pur- 
pose, it  would  sometimes  happen  that  the  owner  of  a  valuable 
mill- site  was  unable  to  render  it  available,  because  the  owners  of 
lands  which  must  be  flowed  to  obtain  a  reservoir  would  neither 
consent  to  the  construction  of  a  dam,  nor  sell  their  lands  except 
at  extravagant  and  inadmissible  prices.  The  legislatures  in  some 
of  the  states  have  taken  the  matter  in  hand,  and  have  surmounted 
the  difficulty,  some  by  authorizing  the  land  to  be  appropriated, 
and  at  other  times  permitting  the  erection  of  the  dam,  but  re- 
quiring the  mill-owner  to  pay  annually  to  the  proprietor  of  the 
land  the  damages  caused  by  the  flowing,  to  be  assessed  in  some 
impartial  mode.    The  reasons  of  such  statutes  have  been  growing 


ipower  a  person  to  take  private  land  doctrine  has  been  expressly  re- 
operty  to  carry  on  every  trade  or  pudiated  in  New  York.  Hay  v.  Co- 
cupation     conceivable.     It,     utterly     hoes  Co.,  3  Barb.  42.     The  object,  to 


em} 
proi 
occupa 

abolishes  the  word  "public"  from  the  be  a  public  use,  must  either  be,  first, 
constitutional  provisions.  These  doc-  something  which  ipso  facto,  by  its 
trines  have  not  been  followed  to  any  mere  existence  and  of  necessity,  pro- 
extent  in  other  states.  In  Alabama  a  duces  some  great  common  good  to  all 
similar  statute  was  recently  declared  the  inhabitants  of  a  particular  district, 
void,  although  it  had  stood  for  a  long  such  as  sanitary  measures  for  drain- 
time.  Sadler  v.  Langham,  34  Ala.  ing,  water  supply  and  the  like  ;  or, 
311.  In  Tennessee  a  very  early  case  second,  it  must  be  something  in  whicli 
had  held  that  a  grist-mill  was  a  pub-  the  public  at  large  —  that  is,  every 
lie  use,  but  that  a  saw-mill  or  a  paper-  individual,  if  he  please  —  has  a  legal 
mill  was  not.  Harding  v.  Goodlett,  3  interest  or  right  such  as  a  highway, 
Yerg.  41.  And  even  the  former  part  railroad,  and  the  like  ;  or,  third,  it 
of  this  decision  was  recently  overruled  must  be  something  directly  govern- 
in  Memphis  Freight  Co.  v.  Memphis,  mental,  such  as  a  fort,  state-house  and 
4  Cold.  41D.     Finally  this  New  Eng-  the  like. 

'Great  Falls  Man.  Co.  v.    Fernald,  47   N.   H.   444;   French  v.   Braintree 
Man.  Co.,  23  Pick.  220. 


Eminent  Domain. 


573 


weaker,  with  the  introduction  of  steam  power  and  the  progress 
of  improvement,  but  their  validity  has  repeatedly  been  recognized 
in  some  of  the  states,  and  probably  the  same  courts  would  con- 
tinue still  to  recognize  it,  notwithstanding  the  public  necessity 
may  no  longer  appear  to  demand  such  laws.^ 


'  ADf^ell  on  Water-Courses,  cliap. 
12  ;  Wolcott  Woolen  Man.  Co.  v. 
Uphani,  5  Pick.  294;  Shaw,  J.,  in 
French  v.  Braintree  Man.  Co.,  26  id. 
220. 

In  Hay  v.  Colioes  Co.,  3  Barb.  47, 
H.VND,  J.,  observed  :  "  Tlie  legi^<lature 
of  New  York,  it  is  believed,  lia.s  never 
exercised  the  right  of  eminent  domain 
in  favor  of  mills  of  any  kind  ;  sites 
for  steam  engines,  hotels,  churches, 
and  other  public  conveniences,  might 
as  well  be  taken  by  the  exercise  of 
this  extraordinary  power." 

But  in  the  cape  of  Hazen  v.  Essex 
Company,  12  Cash.  477,  which  was  an 
action  to  recover  damages  sustained 
by  the  raining  of  a  dam  across  the 
Merrimac  river,  whereby  a  stream 
emptying  into  that  river  above  said 
dam  was  set  back  and  land  over- 
flowed, and  a  mill  on  said  latter  stream 
was  damaged  and  destroyed,  and  in 
which  the  defendants  claimed  that 
they  were  justified  in  so  doing  by  vir- 
tue of  an  act  of  the  legislature  of 
Massachusetts  authorizing  such  ap- 
propriation and  use  of  the  rights  and 
privileges  of  the  plaintitF,  and  that 
the  remedy  of  the  plaintiff  was  a 
claim  of  damages,  under  said  act,  and 
not  by  action  at  common  law,  for  the 
wrongful  encroachment  upon  and  in- 
jury to  the  plaiutitTs  rights  in  the 
premises.  Chief  Justice  SriAW  ob- 
served as  follows  :  "  It  is  contended 
that  if  this  act  was  intended  to  author- 
ize the  defendant's  company  to  take 
the  mill-power  of  the  plaintiff  it  was 
void  because  it  was  not  taken  for  pub- 
lic use,  and  is  not  within  the  power 
of  the  government  in  the  exercise  of 
the  right  of  eminent  domain.  This  is 
the  main  question.  In  determining  it, 
we  must  look  to  the  declared  purpose 
of  the  act  ;  and,  if  a  public  use  is  de- 
clared, it  will  be  so  held,  unless  it  man- 
ifestly appears  by  the  provisions  of 
the  act  that  they  can  have  no  tendency 
to  advance  and  promote  such  public 
use.  The  declared  purposes  are  to 
improve  the  navigation  of  the  Merri- 


mac river,  and  to  create  a  large  mill- 
power  for  mechanical  and  manufactur- 
ing purposes. 

"  In  general,  whether  a  particular 
structure,  as  a  bridge,  or  a  lock,  or  a 
canal,  or  road  is  for  the  public  use,  ia 
for  the  legishiture,  and  which  may  be 
presumed  to  have  been  correctly  de- 
cided by  them.  Commonwealth  v. 
Breed,  4  Pick.  468.  Tliat  the  improve- 
ment of  the  navigation  of  a  river  is 
done  for  public  use  has  been  too 
frequently  decided  and  acted  upon  to 
require  authorities.  And  so  to  create 
a  wholly  artificial  navigation  by  ca- 
nals. The  establishment  of  a  great 
mill-power  for  manufacturing  pur- 
poses, as  an  object  of  great  public  in- 
terest, especially  as  manufacturing 
has  come  to  be  one  of  the  great  indus- 
trial pursuits  of  the  commonwealth, 
and,  in  our  judgement,  rightly  so,  in 
determining  what  is  a  public  use,  jus- 
tifying the  exercise  of  the  right  of 
eminent  domain."  See  Stat.  Mass., 
1825,  chap.  148  ;  Boston  and  Roxbury 
Mill-Dam.  Co.  v.  Newman,  13  Pick. 
467  ;  Hazen  v.  Essex  Co.,  12  Cash. 
477  ;  Harding  v.  Goodlett,  3  Yerg.  41 : 
Newcomb  v.  Smith,  1  Chand.  (Wis.) 
71.  See,  also,  Olmstead  v.  Camp,  33 
Conn.  5o3  ;  Jordan  v.  Woodward,  40 
Me.  317;  Miller  v.  Frost.  14  Minn. 
365  ;  Burgess  v.  Clark,  13  Ired.  L.  109  ; 
McAfee's  Heirs  v.  Kennedy,  1  Litt. 
93  ;  Smith  v.  Connellv,  1  T.  B.  Monr. 
58;  Shackleford  v.'CoflFey,  4  J.  J. 
Marsh.  40 ;  Crenshaw  v.  State  Riv. 
Co.,  0  Rand.  245;  Great  Falls  Man. 
Co.  V.  Fernald,  47  N.  H.  444  ;  Ash  v. 
Cummings,  50  id.  591.  But  see  con- 
trary doctrine  in  Loughbridge  v.  Har- 
ris, 42  Oa.  500;  Newell  v.  Smith,  15 
Wis.  101;  Fisher  v.  Horicon  Co.,  10 
id.  351. 

Under  the  constitution  of  California, 
and  under  the  constitutions  of  other 
states,  substantially  the  same,  rail- 
roads, though  operated  by  private  com- 
panies, are  by  mere  legal  conclusion 
for  puljlic  use.  The  power  of  eminent 
domain  may  therefore  be   exerted  in 


574 


Pkivate  Coepoeations. 


It  is  quite  possible  that  in  any  state,  in  which  this  question 
would  be  entirely  a  new  one,  and  where  it  would  not  be  embar- 
rassed by  long  acquiescence,  or  by  either  judicial  or  legislative 


behalf  of  railroads  under  legislativw 
permission ;  and,  as  fostering  tlie  pub- 
lic use,  aid  may  be  extended  To  the 
construction  of  such  roads  by  means 
of  the  power  of  eminent  domain,  or  of 
subscription  to  capital  stock,  and  by 
donations  made  by  cities  and  other 
political  subdivisions  of  the  state,  un- 
der the  authority  of  the  legislature 
first  given,  or  subsequently  obtained. 
Such  is  the  purport  of  the  judicial  de- 
cisions of  the  highest  courts  of  Vir- 
ginia, Connecticut,  Pennsylvania,  Ohio, 
Indiana,  Tennessee,  Illinois,  Kentucky, 
New  York,  Georgia,  Florida,  Texas, 
,  Mississippi,  Missouri,  South  Carolina, 
and  other  states.  Stockton,  etc.,  R. 
R.  Co.  V.  Stockton,  41  Cal.  147.  And 
see  Secombe  v.  Railroad  Co.,  23  Wall, 
108. 

A  company  formed  for  the  purpose 
of  constructing  and  maintaining  a  line 
or  lines  of  tubing,  for  the  purpose  of 
transporting  petroleum  or  other  oils, 
through  pipes  of  iron  or  other  mate- 
rials, to  any  railroad,  navigable  stream, 
etc.  ;  and  to  transport  from  the  ter- 
mini of  such  pipes,  petroleum,  etc.,  in 
tank  cars,  boats,  or  other  receptacles 
belonging  to  such  company,  is  formed 
for  purposes  of  "internal  improve- 
ments," and  may,  therefore,  under  the 
constitution  of  West  Virgmia,  be  au- 
thorized to  appropriate  lands  neces- 
sary for  the  corporate  use,  in  virtue  of 
the  righjt  of  eminent  domain .  West 
Virginia  Transp.  Co.  v.  Volcanic  Oil, 
etc.,  Co., 5  W.  Va.  382.  As  the  right 
of  eminent  domain  is  established  in 
Nev?  Hampshire,  the  legislature  have 
power  to  authorize  a  corporation  estab- 
lished for  manufacturing  purposes  to 
flow  back  water  on  land  in  order  to 
improve  their  water-power,  on  miaking 
compensation.  This  is  a  public  use. 
Great  Falls  Manuf.  Co.  v.  Fernald,  47 
N.  H.  444. 

A  statute  authorizing  a  corporation 
to  acquire  the  fee  of  private  property 
for  the  purpose  of  constructing  a  boom 
upon  the  Mississippi  river,  is  within 
the  constitutional  powers  of  the  legis- 
lature of  Minnesota.  So  held,  in  view 
of  the  large  logging  and  lumber  inter- 


ests of  that  state  upon  the  Mississippi 
river,  and  of  special  jjrovisions  of  tlie 
charter  of  the  boom  company  reserv- 
ing legislative  control  over  the  com- 
pany and  its  tolls  and  charges.  Pat- 
terson V.  Mississippi,  etc..  Boom  Co.,  3 
Dill.  465.  Some  appropriation  of  the 
bed  of  the  stream  being  essential  to 
the  reasonable  operation  of  booming 
companies,  if  the  legislature  author- 
izes, by  a  general  law,  the  organization 
of  sucli  companies,  and  regulates  their 
operation,  it  must  be  deemed  to  have 
waived  the  right  of  the  public  to  com- 
plain of  any  such  appropriation  which 
is  not  unreasonable.  Attorney-General 
v.  Evart  Booming  Co.,  34  Mich.  402, 

Land  taken,  in  a  city,  for  public 
parks  and  squares,  by  authority  of  law, 
whether  advantageous  to  the  public 
for  recreation,  health  or  business,  is 
taken  for  a  public  use.  N.  Y.  Supreme 
Ct. ,  1872,  Matter  of  Commissioners  of 
Central  Park,  63  Barb.  282. 

The  provisions  of  the  Ohio  law, 
authorizing  the  construction  of  drains 
in  townships,  come  within  the  princi- 
ple allowing  private  property  to  be 
taken  for  public  use,  when  the  public 
health, convenience, or  welfare  demand 
it.  Sessions  v.  Crunkilton,  20  Ohio  St. 
849.  So,  under  the  provisions  of  the 
Code  in  Iowa,  authorizing  the  con- 
struction of  ditches  in  counties,  the 
work  is  not  to  be  undertaken  for  the 
private  advantage  of  land-holders  or 
residents  of  the  neighborhood,  but  only 
for  the  public  good.  The  supervisors 
can  order  the  work  only  after  a  peti- 
tion is  presented,  signed  by  a  majority 
of  persons  residing  iu  the  county  and 
owning  land  adjacent  to  the  proposed 
improvements.  Paterson  v.  Baumer, 
43  Iowa,  477. 

The  power  delegated,  being  in  dero- 
gation of  common  riglit,  must  be 
strictly  pursued.  State  v.  Jersey  City, 
25N.J.  L.  309;  Doughty  v.  Hope,*3 
Den.  249 ;  Van  Wickle  v.  Camden  & 
Amboy  R.  R.  Co.,  14  N.  J.  L.  162.  The 
rule  may  be  said  to  be  that  persons  or 
corporations  obtaining  from  the  legis- 
lature power  to  interfere  with  the 
rights  of  property  are   bound  strictly 


Eminfnt  Domain.  575 

precedents,  it  might  be  held  tliat  these  laws  are  not  sound  in  prin- 
ciple, and  that  there  is  no  such  necessity,  and,  consequently,  no 
such  imperative  reasons  of  public  policy,  as  would  be  essential  to 
support  an  exercise  of  the  right  of  eminent  domain.^  But  the 
question,  whether  the  objects  and  purposes  of  a  private  corpora- 
tion are  of  sufficient  public  use  to  warrant  the  exercise  of  the  right 
of  eminent  domain,  is  frequently  a  difficult  one  to  determine.  It 
is  generally  held,  that  it  may  be  granted  to  private  corporations 
for  the  manufacture  of  illuminating  gas  for  cities,  or  those  organ- 
ized for  the  supply  of  such  cities  with  water,  on  the  ground  of  the 
general  public  benefit  and  the  sanitary  advantages  thereby  afforded. 
So,  also,  there  seems  to  be  no  controversy  as  to  the  exercise  of 
this  right,  by  railroad  corporations,  under  authority  conferred  by 
the  legislature  in  order  to  enable  them  to  accom])lish  the  objects  of 
their  institution,  on  the  ground  that  they  are  of  public  use.  But, 
where  is  the  distinction  to  be  drawn  between  such  corporations 
and  those  organized  for  manufacturing  purposes  ?  Take,  for  in- 
stance, those  created  to  manufacture  flour,  or  lumber.  They  are 
usually  of  public  benefit  like  gas  and  water-works  companies,  to 
the  inhabitants  of  the  locality  where  the  business  is  carried 
on.  Where  shall  the  line  be  drawn,  and  who  shall  draw  it  ? 
What  is  the  distinction,  resting  upon  principle,  between  the  public 
use  and  utility  of  corporations  for  the  manufacture  of  gas  in  our 
cities,  and  corporations,  in  the  city  or  country,  organized  for  the 
grinding  of  the  produce  of  the  country  for  the  general  benefit  in 
various-ways  of  the  people,  at  least,  in  the  vicinity  where  such 
business  is  carried  on  ?  If,  in  the  former  case,  the  use  of  land  may 
be  required  for  the  erection  of  the  necessary  buildings  and  ma- 
chinery and  for  the  laying  of  pipes,  so  in  the'  latter  case,  the  same 
necessity  may  exist  for  the  use  of  lands  to  carry  on  the  business. 
If  there  is  any  difference,  it  would  seem  to  be  one  of  degree  and 
not  in  principle.  And  under  all  the  perplexing  difficulties  which 
surround  the  exercise  of  this  riojht  in  the  various  cases  where  it 


to  adhere  to  tlie  powers  so  conceded  to  a  court  of  equity,  to  restrain  tlie  viola- 

them.to  done  more  than  the  legislature  tiou  of  such  a  contract  with  the  legis- 

has  sauctioued,  and  to  proceed  only  in  lature,  is  bound  to  show  that  he  has  a 

the  mode  which   the   legislature  has  private  interest  in  the  matter.  Mayor 

pointed  out ;  but  (except  in  a  proceed-  of  Liverpool  v.  Cborley  Water- Works, 

ingat  the  instance  of  the  attoruey-geu-  3  De  G.,  M.  &  G.  853. 
eral),  any  one  seeking  the  assistance  of 


576  Pkivate  Cokpoeations. 

may  be  claimed  or  conferred,  it  would  appear  the  most  judicious 
and  practicable  to  allow  the  legislature  to  determine  in  its  dis- 
cretion those  cases  where  it  is  proper  to  confer  the  power  to  exer- 
cise it,  and  unless  there  is  a  manifest  abuse  of  the  discretion,  to 
allow  no  interference  on  the  part  of  the  courts  with  such  dis- 
cretion. That  grist-mills  are  of  public  use  and  interest,  and, 
therefore,  subject  to  legislative  control  in  relation  to  the  tolls 
which  may  be  taken  by  the  ^proprietors  of  the  same,  is  perhaps  a 
generally  recognized  doctrine  of  the  courts.  And  statutory  pro- 
visions, relating  to  tolls,  are  quite  common  in  the  various  states.^ 
And  in  Alabama  it  has  been  held,  that  lands  might  under  proper 
legislative  regulations  be  taken  for  grist-mills,  which  grind  for 
tolls,  under  the  right  of  eminent  domain.' 

Sec.  402.  Who  to  determine  the  question  of  public  use.  —  Chancel- 
lor Walworth,  on  this  subject,  makes  the  following  observations  : 
"  If  the  public  interest  can  be  in  any  way  promoted  by  the  taking 
of  private  property,  it  must  rest  in  the  wisdom  of  the  legislature 
to  determine  whether  the  benefit  to  the  public  will  be  of  sufficient 
importance  to  render  it  expedient  for  them  to  exercise  the  right  of 
eminent  domain  and  to  authorize  an  interference  with  the  private 
rights  of  individuals  for  that  purpose."'  And  Mr.  Dillon,  on 
this  subject,  observes :  "  As  the  legislature  is  the  sole  judge  of  the 
necessity  which  requires  or  renders  expedient  the  exercise  of  the 
power  of  eminent  domain,  without  the  owner's  consent,  so  it  is 
the  exclusive  judge  of  the  amount  of  land  or  the  estate  in  land 
which  the  public  end  to  be  subserved  requires  shall  be  taken. 
But  as  the  right  originates  in  necessity,  so  it  is  limited  by  it."  * 


^Fora  discussion  of  the  subject  in  '^Sadler  v.   Langham,  34   Ala.  311. 
relation  to  the  right  to  regulate  the  But  see  a  contrary  doctrine  in  Lough- 
charges  of  even  a  private   business,  bridge  v.  Harris,  43  Ga.  500  ;  Tj'ler  v. 
which  is   of   general   public  interest,  Beacher,  44  Vt.  648. 
see  aft^e,  chap.  3,  §89,  and  notes.  As  to  ^  Beekman  v.  Saratoga  and  Sch.  R. 
the  rii^ht  of  parties  in  Iowa,  desiring  Co.,  3  Paige,  73.     See,  also,  Wilson  v. 
to  utilize  water  power,  for  the  purpose  Blackbird  Creek  Marsh  Co.,  2  Pet.  251; 
of  propelling  any  mill  or  machinery,  Cooley  on  Const.  Lim.  532  ;  2  Kent's 
and  of  proceeding  to  exercise  the  right  Com.  340. 
of  eminent  domain,  and  to  determine  '*Dill  on  Corp.,  §  456. 
the  amount  of  damao-es  in  such  cases, 
see  Code  of  Iowa  (1873),  chap.  10. 


Eminent  Domain. 


577 


From  the  foregoing  it  would  appear  the  appropriate  if  not 
exchisive  function  of  the  legishiturc  to  determine  the  questioTi  of 
the  necessity  or  expediency  of  exercising  the  right  in  favor  of  any 
enterprise,  or  of  conferring,  in  a  general  way,  authority  upon  cor- 
porations, to  exercise  the  right,  and  that  its  determination  is  con- 
clusive upon  the  question,  as  it  is  one  of  a  political,  and  not 
judicial  character.' 

But  whether  the  appropriation  sought  by  the  person  or  corpo- 
ration in  a  particular  case,  under  the  statutes  providing  for  the 
exercise  of  the  right,  and  whether  the  use  in  such  a  case  is  one  of 
sufficient  public  interest,  and  required  for  corporate  purposes,  is 
ordinarily  a  question  to  be  determined  by  the  courts." 


•People  V.  Smith,  21  N.  Y.  597; 
Giesy  v.  Railroad  Co.,  4  Ohio  St.  308  ; 
Varick  v.  Smith,  5  Paige,  137. 

^  The  legislature  must  determine  in 
the  first  instance  whether  the  general 
objects  and  purposes  of  a  corporation 
warrant  the  grant  of  the  power  to  ex- 
ercise the  right  of  eminent  domain  on 
the  part  of  the  corporation.  But,  in 
relation  to  the  particular  circumstances 
under  which  the  exercise  of  the  gen- 
eral power  is  claimed,  the  courts  may 
properly  determine  the  justice  atid 
sufficiency  of  the  claim.  2  Kent's 
Com.  340.  But  if  the  legislature  de- 
termine in  a  particular  case  that  prop- 
erty may  be  taken,  this  is,  at  least, 
ordinarily,  final.  Varick  v.  Smith,  5 
Paige,  137  ;  Armington  v.  Barnet,  15 
Vt.  745. 

"  But  the  question  whether  the  speci- 
fied use  is  a  public  use  or  purpose,  or 
such  use  or  purpose  as  will  justify  or 
sustain  the  compulsory  taking  of  pri- 
vate property,  is  perhaps  ultimately 
a  judicial  one,  and  if  so  the  courts  can- 
not be  absolutely  concluded  by  the 
action  or  opinion  of  the  legislative  de- 
partment. But  if  the  legislature  has 
declared  the  use  or  purpose  to  be  a 
public  one,  its  judgment  will  be  re- 
spected by  the  courts,  unless  the  use 
be  palpably  private,  or  the  necessity 
for  the  taking  is  plainly  without 
reasonable  foundation.     But  if  the  use 

73 


is  public,  or  if  it  be  so  doubtful  that 
the  courts  cannot  pronounce  it  not  to 
be  such  as  to  justify  the  compulsory 
taking  of  private  property  the  decision 
of  the  legislature  embodied  in  the  en- 
actment giving  the  power  that  a  neces- 
sity exists  to  take  the  property,  is  final 
and  conclusive."  Rensselaer,  etc.,  R. 
Co.  V.  Davis,  43  N.  Y.  137  ;  Common- 
wealth V.  Breed,  4  Pick.  463 ;  Bank- 
head  v.  Brown,  25  Iowa,  540  ;  Hanson  v. 
Vernon,  27  id.  28  ;  Concord  Railroad 
V.  Greely,  17  N.  H.  47  ;  2  Kent's  Com. 
340  ;  Memphis  Freight  Co.  v.  3Iem- 
phis,  4  Cold.  (Tenn.)  419  ;  Taylor  v. 
Porter,  4  Hill,  143  ;  Hazen  v.  Essex 
Co.,  12  Gush.  477,  where  Shaw,  J., 
said  :  "  It  is  contended  that  if  this  act 
was  intended  to  authorize  the  de- 
fendant company  to  take  the  mill- 
power  and  mill  of  the  plaintiff  it  was 
void  because  it  was  not  taken  for  pub- 
lic use,  and  it  was  not  within  the 
power  of  the  government  in  the  ex- 
ercise of  the  right  of  eminent  domain. 
This  is  the  main  question.  In  de- 
termining it  we  must  look  to  the  de- 
clared purpose  of  the  act,  and  if  a  pub- 
lic use  is  declared  it  will  be  so  held, 
xinless  it  manifestly  appears  by  the 
provisions  of  the  act  that  they  can 
have  no  tendency  to  advance  and  pro- 
mote the  public  use."  See,  also, 
Talbot  V.  Hudson,  16  Gray,  417. 


578  Private  Cokpokations. 

Sec.  403,  Limit  of  the  right.  —  That  tlie  sovereign  power  to  ex- 
ercise the  right  of  eminent  domain  is  universally  recognized,  we 
have  already  noticed.  But  this  right  is  limited  to  the  actual 
necessities  of  the  case,  and  no  more  property  or  rights  can  be 
thereby  acquired  than  is  essential  to  accomplish  the  purposes 
intended.'  And  where  the  circumstances  only  require  the  j)artial 
use  of  land,  as  a  limited  quantity  of  soil,  or  stone,  or  other  mate- 
rials, such  quantity  may  be  taken.  But  a  railroad  or  other  coi"- 
poration  cannot  acquire,  by  virtue  of  statutes  conferring  this  right, 
an  interest  in  lands,  soil,  stone  or  other  material,  for  the  purpose  of 
speculation,  or  any  other  object  than  that  of  the  execution  of  the 
enterprise  or  business  for  which  it  was  erected.'''  I^or  can  the  right, 
as  a  general  rule,  be  exercised,  except  to  promote  objects  that  are 
useful,  as  contra- distinguished  from  such  as  are  merely  ornamen- 
tal.^ The  line,  however,  between  such  cases  may  be  indefinite 
and  difficult  to  determine,  for  it  is  sometimes  the  case  that  those 
objects  which  are  really  ornamental  may  also  include  those  which 
are  useful.  And  so,  vice  versa^  those  which  are  strictly  useful 
may  also  include  those  which  are  ornamental.  It  has  been  said, 
since  pubhc  necessity  is  the  basis  of  the  right  of  eminent  do- 
main, that  the  right  cannot  be  exercised  except  where  the  pur- 
pose is  useful,  and,  therefore,  that  property  cannot  be  compulso- 
rily  acquired  against  the  owner's  consent  when  wanted  merely  for 
ornamental  purposes." 

'  Stacey  V.  Vermont  Cent.  R.  Co.,  27  with  precise  localities,  not  difficult  to 
Vt.  39;  Hill  v.  Western  Vermont  R.  be  provided  for  without  the  power  of 
Co.,  32  id.  68  ;  Rensselaer  &  Saratoga  eminent  domain,  and  in  places  where 
R.  Co.  V.  Davis,  43  N.  Y.  137  ;  Lance's  it  would  only  be  convenient  but  not 
Appeal,  55  Penn.  St.  16  ;  Oregon  Cas-  necessary,  I  entertain  strong  doubts 
cade  Co.  V.  Bailey,  3  Or.  164;  Giesyv.  of  its  applicability."  See,  also,  Bos- 
Cincinnati,  etc.,  R.  Co.,  4  Ohio  St.  ton  Mill  Co.  v.  Newman,  12  Pick. 
308;  Miami  Coal  Co.  v.  Wigton,  19  476;  Bankhead  v.  Brown,  25  Iowa, 
id.  560;  Union  Bridge  Co.  v.  Troy, etc.,  540;  Eldridge  v.  Smith,  34  Vt.  484. 
R.  Co.,  7  Lans.  240.  ^  Angell  on  Highwavs,  §85  ;  Smith's 

2  Aldrich  v.  Drury,  8  R.  I.  554;  Com.  on  Stat,  and  Const.  Law,  §  335. 
Blake  v.  Rich,  34  N.  H.  282;  Chapin  See,  also,  Memphis  Freight  Co.  v. 
v.  Sullivan  R.  Co.,  39  id.  564  ;  Henry  Memphis,  4  Coldw.  (Tenn.)4l9. 

V.  Dubuque  &  Pac.  R.  Co. ,  2  Iowa,  288.  But  the  whole  fee  may  be  taken. 

3  Woodstock  V.  Gallup,  28  Vt.  587;  In  New  York,  under  the  general 
S.  C,  29  id.  347  ;  West  River  Bridge  railroad  act,  the  corporation  has  a 
Co.  v.  Dix,  6  How.  545.  In  the  case  large  discretion  in  reference  to  the 
last  cited,  Woodbury,  J.,  after  a  measure  of  its  wants.  In  re  N.  Y. 
learned  consideration  of  the  subject,  Central,  etc.,  v.  Metropolitan  Gas-light 
says  :    ' '  When  we  go  to  other  public  Co.,  63  N.  Y .  826. 

uses,    not    so    urgent,    not   connected 


Eminent  Domain.  579 

If  only  a  portion  of  another's  premises  are  required  for  public 
use,  tliis  will  not  justify  taking  the  whole ;  but  if,  under  the 
claim  of  eminent  domain,  premises  are  taken  and  compensa- 
tion provided  for  the  taking,  and  the  owner  accepts  the  compen- 
sation without  objection,  he  will  not  be  permitted  to  say  after- 
ward that  more  was  taken  than  was  required  for  the  public's  use. 
And  he  would  be  estopped  from  reclaiming  the  premises  thus 
taken,  as  his  assent  thereto  would  be  presumed.'  Although  suffi- 
cient land  may  be  taken,  by  virtue  of  this  right,  that  is  not  only 
absolutely  necessary  for  the  accomplishment  of  the  object,  and 
also  such  as  will  be  incidentally  convenient,  but,  if  only  part  of 
a  lot  is  required  for  the  purpose,  a  whole  lot  cannot  bo  appropri- 
ated, even  though  compensation  be  made  therefor.  Thus,  in  New 
York,  where  a  statute  provided  that,  whenever  a  pai't  of  a  lot 
was  required  for  a  street  in  a  city,  the  whole  lot  luight  be  valued, 
and  that  after  its  valuation  and  compensation  made  as  provided 
by  law,  the  title  should  vest  in  the  city,  which  might  appropriate 
the  same  to  a  public  use,  or  sell  the  same,  it  was  held  by  the 
supreme  court  of  that  state  that  such  appropriation  was  not  jus- 
tified by  any  principles  which  relate  to  the  right  of  eminent 
domain.^ 

'  Embury  v.  Conner,  3  N.  Y.  511.  in  violation  of  the  letter  of  the  consti- 

'  Matter  of  Albany  Street,  11  Wend,  tution,  it  is  of  its  spirit  and  cannot  be 

151.     In  this  case  Savage,  C.  J.,  re-  supported.     This  power  has  been  sup- 

fers   to   the  provision   of    the  statute  posed    to    be    convenient    when    the 

under   which    the   claim   to  take  the  greater  part  of  a  lot  is  taken,  and  only 

property    was    based,    and    observes  :  a  small  part  left,  not  required  for  pub- 

' '  If     this     provision    was     intended  lie  use,   and  that  small  part  of  little 

merely  to  give  the  corporation  capacity  value  in  the  liands  of  the  owner.     In 

to  take  property  under  such  circum-  such   case   the    corporation   has   been 

stances  with  the  consent  of  the  owner,  supposed  best  qualified  to  take  and  dis- 

and  then  to  dispose  of  the  same,  there  pose   of    such    parcels,  or    gores,    as 

can  be  no  objection  to  it  ;  but  if  it  is  they  have  sometimes  been  called  ;  and 

to  be  taken  literally,  that  the  commis-  probably    this    assumption   of    power 

sioners  may,  against  the  consent  of  the  has  been  acquiesced  in  by  the  proprie- 

owner,  take  the  whole  lot  when  only  tors.     I    know   of  no   case  where  the 

a  part  is  required  for  public  use,  and  power  has  been  questioned,  and  where 

the  residue  to  be  applied  to  private  it  has  received  a  deliberate  sanction  of 

use,    it  assumes  a  power  which  with  this    court.     Suppose    a    case    where 

all  respect  the  legislature  did  not  pos-  only  a  few  feet,   or   even  inches,   are 

sess.    The  constitution,  by  authorizing  wanted  from  one  end  of  a  lot  to  widen 

the  appropriation  of  property  to  public  a    street,    and    a    valuable     building 

use,   impliedly  declares  that    for  any  stands  upon  the  other  end  of  such  lot, 

other  use  private  property  shall  not  be  would  the  power  be  conceded  to  exist 

taken   from   one   and   applied   to   the  to  take   the   whole    lot,    whether  the 

private  use  of  another.     It  is  in  viola-  owner  consented  or  not?     The  quan- 

tion  of  natural  right  ;  and  if  it  is  not  tity  of  the  residue  of  any  lot  cannot 


580  Private  Corporations. 

Sec.  404:.  who  is  to  determine,  as  to  the  extent,  amount  or  quzintity 
of  land  or  other  property  that  may  be  taken.  —  It  has  already  been  said 
that  the  legislature  may,  by  general  laws,  provide  that  corpora- 
tions or  other  persons  may  take  lands  or  other  private  property, 
for  the  execution  of  their  private  puq^oses,  provided  they  are  of 
public  interest  and  benefit ;  and  that  it  is  the  appropriate  func- 
tion of  the  legislature,  as  the  representative  in  this  respect  of  the 
state  and  of  the  public  interests,  to  determine,  generally,  the  ques- 
tion as  to  the  public  use  of  any  private  enterprise  ;  and  that  unless 
there  is  a  manifest  and  flagrant  abuse  of  the  discretion  of  the  leg- 
islature in  this  respect,  the  courts  will  not  interfere  with  it.  But 
the  question  may  arise,  as  we  have  seen,  as  to  the  right  as  well  as 
the  extent  of  the  right  of  condemnation,  in  particular  cases. 

The  legislature  may  provide  by  general  statutes  for  the  con- 
demnation, and  allow  private  corporations  to  take  such  property, 
to  carry  out  the  purposes  for  which  they  were  organized,  provided 
they  are  also  of  public  use,  of  which  it  is  the  principal  if  not  the 
sole  judge,  provided  they  render  compensation  therefor.  But  who 
shall  determine  what  quantity  or  amount  of  property  or  interests 
may  be  taken  under  such  general  laws,  for  the  purpose  of  carry- 
ing out  corporate  objects  ? 

Under  the  general  laws  referred  to,  corjDorations  may  proceed 
to  take  private  property  by  having  the  same  appraised  as  provided 
by  the  statute  and  on  the  payment  of  the  value  thereof.  But  where 
is  the  limit  to  the  property  which  may  be  taken  1  And  who  shall 
determine  the  amount  or  extent  of  the  same  ?  And  what  is  the 
nature  and  extent  of  the  interest  acquired  by  such  corporations  ?  ^ 

vary  the  principle.     The  owner  may  pose  of  private  property,  whether  feet 

be  very  unwilling  to  part  with  only  or  acres  are  the  subject  of  this  assumed 

a  few  feet  ;  and  I  hold  it  equally  in-  power." 
competent  for  the  legislature  to  dis- 

'  In  Beekman  v.   Saratoga,  etc.,  R.  was  competent  for  the  legislature  to 

Co.,  3  Paige's  Ch.  (N.    Y.)  45,  it  was  authorize  the  company  to  agree  with 

held  that  it  rested  in  the  sound  discre-  the  owners  of  land  through  which  the 

tion  of  the   legislature   to  determine  road  was  to  run  for  a  conveyance  or 

whether  the  benelit  to  the  public  would  donation   of   the  lands  necessary  for 

be  of  sufficient  public  importance  to  that  purpose  ;  and  it  would  be  both 

render  it  expedient  for  them  to  exer-  inequitable  and  unjust  for  an  individ- 

cise  the  right  of  eminent  domain.     In  ual  who  had  consented  to  give  the  site 

this  case.  Chancellor  Walworth  ob-  of  the  road,  provided  it  should   run 

served:   "There  is   no  doubt  that  it  through     his     land,    to    retract    that 


Eminent  Domain. 


581 


Sec.  405.  Same  continued.  —  Under  these  general  statutes,  the 
title  in  fee-simple  is  not,  perhaps,  generally  transferred  to,  or 
vested  in,  the  corporation,  Ijj  its  express  provisions  ;  but  the  gen- 
eral principles  applicable  to  the  measure  of   damages  for   the 


consent  after  the  company  had,  in  ref- 
erence to  such  agreement,  contracted 
with  the  owners  of  other  lands  on 
that  particular  route.  And  if  such 
consent  was  not  in  fact  retracted  be- 
fore the  directors  of  the  company  had 
made  their  certificate  of  location,  so 
as  to  preclude  themselves  from  laying 
out  the  road  elsewhere,  it  would  be 
the  duty  of  this  court  to  compel  a 
specific  performance  of  the  verbal 
agreement  made  with  them  before 
that  time.  I  infer,  however,  from  the 
affidavits  in  this  case,  that  the  com- 
plainant altered  his  mind,  and  re- 
tracted his  consent  to  the  location  of 
the  road  on  his  premises  at  any  place 
west  of  the  barn,  before  the  second  of 
September,  when  the  certificate  of  lo- 
cation was  signed  by  the  directors. 

"The  constitution  of  the  United 
States  does  not  come  in  question  in 
this  cause.  It  is  admitted  that  the 
complainant  held  the  laud  in  fee  ;  and 
probably  under  a  title  derived  from 
the  crown,  to  the  riglits  of  which  the 
people  have  now  succeeded.  A  law 
declaring  the  grant  from  the  crovvu 
void,  and  divesting  his  title  on  that 
ground,  would  impair  the  obligation 
of  the  contract.  But  it  was  no  part  of 
the  contract  between  the  crown  and 
its  grantees  or  their  assigns,  that  the 
property  should  not  be  taken  for  pub- 
lic use,  upon  paying  a  fair  compensa- 
tion therefor,  whenever  the  public 
interest  or  necessities  required  that  it 
should  be  so  taken.  All  separate  in- 
terests of  individuals  in  property  are 
held  of  the  government  under  this 
tacit  agreement  or  implied  reservation. 
Notwithstanding  the  grant  to  individ- 
uals, the  eminent  domain,  the  highest 
and  most  exact  idea  of  property,  re- 
mains in  the  government,  or  in  the 
aggregate  body  of  the  people  in  their 
sovereign  capacity  ;  and  they  have  a 
right  to  resume  the  possession  of  the 
property,  in  the  manner  directed  by 
the  constitution  and  laws  of  the  state, 
whenever  the  public  interest  requires 
it.  This  right  of  resumption  may  be 
exercised  not  only  where  the  safety, 
but  also  where  the  interest  or   even 


the  expediency,  of  the  state  is  con- 
cerned; as  where  tlie  land  of  the  indi- 
vidual is  wanted  for  a  road,  canal,  or 
other  public  improvement.  The  only 
restriction  upon  this  posver,  in  cases 
where  the  public  or  the  inhabitants  of 
any  particular  section  of  the  state 
have  an  interest  in  the  contemplated 
improvement  as  citizens  merely,  is 
that  the  property  shall  not  be  taken 
for  the  public  use  without  just  com- 
pensation to  the  owner,  and  in  the 
mode  prescribed  by  law.  Tlie  right 
of  eminent  domain  does  not,  however, 
imply  a  right  in  the  sovereign  power 
to  take  the  property  of  one  citizen 
and  transfer  it  to  another,  even  for  a 
full  compensation,  where  the  public 
interest  will  be  in  no  way  promoted 
by  such  transfer.  And  if  the  legisla- 
ture should  attempt  thus  to  transfer 
the  property  of  one  individual  to  an- 
other, where  there  could  be  no  pre- 
tense of  benefit  to  the  public  by  such 
exchange,  it  would  probably  be  a  vio- 
lation of  the  contract  by  which  the 
land  was  granted  by  the  government 
to  the  individual,  or  to  those  under 
whom  he  claimed  title,  and  repugnant 
to  the  constitution  of  the  United 
States.  But  if  the  public  interest  can 
be  in  any  way  promoted  by  the  taking 
of  private  property,  it  must  rest  in 
the"  wisdom  of  the  legislature  to  de- 
termine whether  the  benefit  to  the 
public  will  be  of  sufficient  importance 
to  render  it  expedient  for  them  to  ex- 
ercise the'  right  of  eminent  domain, 
and  to  authorize  an  interference  with 
the  private  rights  of  individuals  for 
that  purpose.  3  Kent's  Com.  340.  It 
is  upon  this  principle  that  the  legisla- 
tures of  several  of  the  states  have 
authorized  the  condemnation  of  the 
lands  of  individuals  for  mill-sites, 
where  from  the  nature  of  the  country 
such  mill-sites  could  not  be  obtained 
for  the  accommodation  of  the  inhabit- 
ants without  overflowing  the  lands 
thus  condemned.  Upon  the  same 
principle  of  public  benefit,  not  only 
the  agents  of  the  government,  but 
also  individuals  and  corporate  bodies, 
have  been  authorized  to  take  private 


582 


Private  Coepoeations. 


taking  contemplate  a  valuation  of  the  entire  interest.  And  it  is 
probable,  at  least,  that  the  interest  or  estate  vested  in  the  eoi-pora- 
tion,  bj  virtue  of  the  statutes,  is  the  whole  estate  for  any  purpose 
required  by  the  corporation  in  carrying  out  the  objects  of  its  crea- 
tion, subject,  however,  in  most  cases,  to  a  reversion  to  the  original 
owner,  or  his  heirs  or  assigns,  in  case  such  corporation  shall  cease 
to  use  or  occupy  such  property  for  corporate  purposes.* 


property  for  the  purpose  of  making 
public  highways,  turnpike  roads,  and 
canals ;  of  erecting  and  constructing 
wharves  and  basins ;  of  establishing 
ferries  ;  of  draining  swamps  and 
marshes ;  and  of  bringing  water  to 
cities  and  villages.  In  all  such  cases 
the  object  of  the  legislative  grant  of 
power  is  the  public  benefit  derived 
from  the  contemplated  improvement, 
whether  such  improvement  is  to  be 
effected  directly  by  the  agents  of  the 
government,  or  through  the  medium 
of  corporate  bodies,  or  of  individual 
enterprise.  And  according  to  the 
opinion  of  Chief  Justice  Marshall,  in 
the  case  of  Willson  v.  The  Black  Bird 
Creek  Marsh  Company,  2  Pet.  251, 
measures  calculated  to  produce  such 
benefits  to  the  public,  though  eifected 
through  the  medium  of  a  private  in- 
corporation, are  undoubtedly  within 
the  powers  reserved  to  the  states,  pro- 
vided they  do  not  come  in  collision 
with  those  of  the  general  government. 
It  is  objected,  however,  that  a  railroad 
differs  from  other  public  improve- 
ments, and  particularly  from  turn- 
pikes and  canals,  because  travelers 
cannot  use  it  with  their  own  carriages, 
and  farmers  cannot  transport  their 
produce  in  their  own  vehicles  ;  that 
the  company  in  this  case  are  under  no 
obligation  to  accommodate  the  public 
with  transportation  ;  and  that  they  are 
unlimited  in  the  amount  of  tolls 
which  they  are  authorized  to  take.  If 
the  making  of  a  railroad  will  enable 
the  traveler  to  go  from  one  place  to 
another  without  the  expense  of  a  car- 
riage and  horses,  he  derives  a  greater 
benefit  from  the  improvement  than  if 
he  was  compelled  to  travel  with  his 
own  conveyance  over  a  turnpike  road 
at  the  same  expense.     And  if  a  mode 


of  conveyance  has  been  discovered  by 
which  the  farmer  can  procure  his  pro- 
duce to  be  transported  to  market  at 
half  the  expense  which  it  would  cost 
him  to  carry  it  there  with  his  own 
wagon  and  horses,  there  is  no  reason 
why  the  public  should  not  enjoy  the 
benefit  of  the  discovery.  And  if  any 
individual  is  so  unreasonable  as  to 
refuse  to  have  the  railroad  made 
through  his  lands  for  a  fair  compensa- 
tion, the  legislature  may  lawfully  ap- 
propriate a  portion  of  his  property  for 
this  public  benefit,  or  may  authorize 
an  individual  or  corporation  thus  to 
appropriate  it,  upon  paying  a  just 
compensation  to  the  owner  of  the  land 
for  the  damage  sustained.  The  ob- 
jection that  the  corporation  is  under 
no  legal  obligation  to  transport  pro- 
duce or  passengers  upon  this  road, 
and  at  a  reasonable  expense,  is  un- 
founded in  fact.  The  privilege  of 
making  a  road  and  taking  tolls  thereon 
is  a  franchise,  as  much  as  the  estab- 
lishment of  a  ferry  or  a  public  wharf, 
and  taking  tolls  for  the  use  of  the 
same.  The  public  have  an  interest  in 
the  use  of  the  railroad,  and  the  own- 
ers may  be  prosecuted  for  the  damages 
sustained,  if  they  should  refuse  to 
transport  an  individual,  or  his  prop- 
erty, without  any  reasonable  excuse, 
upon  being  paid  the  usual  rate  of 
fare.  The  legislature  may  also  from 
time  to  time  regulate  the  use  of  the 
franchise  and  limit  the  amount  of 
toll  which  it  shall  be  lawful  to  take, 
in  the  same  manner  as  they  may  regu- 
late the  amount  of  tolls  to  be  taken 
at  a  ferry,  or  for  grinding  at  a  mill, 
unless  they  have  deprived  themselves 
of  that  power  by  a  legislative  contract 
with  the  owners  of  the  road." 


'  See  1  Redf.  on  Rail.,§  69;  Connect!-  of  the  various  states,  giving  the  power 
cut,  etc.,  R.  Co.  V.  Holton,  33  Vt.  43.  to  exercise  the  right  of  eminent  domain, 
J    The  provisions  of  the  general  statutes     are  perhaps    quite    similar  ;    and  the 


Eminent  Domain. 


583 


In  Massacliusetts  the  supreme  court  of  that  state  in  one  case 
say:  "The  right  acquiredby  the  corporation,  although  technically 
an  easement,  yet  requires  for  its  enjoyment  a  use  of  the  land  per- 


rights  acquired  thereby,  as  well  as  the 
extent  of  the  same,  would  be  similar 
under  the  various  statutes. 

The  Code  of  Iowa  on  this  subject 
provides  : 

"§  1241.  Any  railroad  corporation 
organized  in  this  state  may  take  and 
hold,  under  the  provisions  of  this 
chapter,  so  much  real  estate  as  may  be 
necessary  for  the  location,  construc- 
tion, and  convenient  use  of  its  rail- 
way, and  may  also  take,  remove  and 
use  for  the  construction  and  repair  of 
said  railway  and  its  appurtenances 
any  earth,  gravel,  stone,  timber  or 
other  materials,  on  or  from  the  laud  so 
taken  ;  and  the  land  so  taken  other- 
wise than  by  the  consent  of  the  own- 
ers, shall  not  exceed  one  hundred  feet 
in  width,  except  for  wood  and  water 
stations,  unless  where  greater  width 
is  necessary  for  excavation,  embank- 
ment, or  depositing  waste  earth. 

"  §  1243.  It  may  also  take  and  hold 
additional  real  estate  at  its  water  sta- 
tions, for  the  purpose  of  constructing 
dams  and  forming  reservoirs  of  water 
to  supply  its  engines.  Such  real  es- 
tate shall,  if  the  owner  requests  it,  be 
set  apart  in  a  square  or  rectangular 
shape,  including  all  the  overflowed 
land,  by  the  commissioners,  as  herein- 
after provided  ;  but  the  owner  of  the 
land  shall  not  be  deprived  of  access  to 
the  water  or  the  use  thereof  in  com- 
mon with  the  company  on  his  own 
land.  And  the  dwelling-house,  out- 
house, orchards  and  gardens  of  any 
persons  shall  not  be  overflowed  or 
otherwise  injuriously  affected  by  any 
proceeding  under  this  section. 

"  §  1243.  Any  such  railway  corpora- 
tion may  lay  down  pipes  through  any 
land  adjoining  the  track  of  the  rail- 
way, not  a  greater  distance  than  three- 
fourths  of  a  mile  therefrom,  unless  by 
consent  of  the  owners  of  the  land 
through  which  the  pipes  may  pass 
beyond  that  distance,  and  maintain  and 
repair  such  pipes,  and  thereby  conduct 
water  for  the  supply  of  its  engines  from 
any  running  stream,  and  shall,  without 
unnecessary  delay,  after  laying  down 
or  repairing  such  pipes,  cover  the 
same  so  as  to  restore  the  surface  of 
,  the  land  through  which  tlie  same  may 


pass  to  its  natural  grade,  and  shall,  as 
soon  as  practicable,  replace  any  fence 
that  it  may  be  necessary  to  open  in 
laying  down  or  repairing  such  pipes, 
and  the  owner  of  the  land,  through 
which  the  same  may  be  laid,  shall 
have  a  right  to  use  the  land  through 
which  such  pipes  pass  in  any  manner 
so  as  not  to  interfere  therewith  ;  said 
pipes  shall  not  be  laid  to  any  spring,  nor 
be  used  so  as  injuriously  to  witlidraw 
the  water  from  any  farm  ;  provided, 
that  such  corporation  shall  be  liable  to 
the  owner  of  any  such  lands  for  any 
damages  occasioned  by  laying  down, 
regulating,  keeping  open,  or  repairing 
such  pipes,  such  damages  to  be  recov- 
erable from  time  to  time  as  they  may 
accrue  in  any  ordinary  action  in  any 
court  of  competent  jurisdiction.  Otlier 
provisions  of  the  statute  point  out  the 
mode  in  which  the  compensation  to 
the  owner  must  be  ascertained,  and 
for  an  appeal  from  the  determination 
of  the  commissioners,  selected  by  the 
sheriff  for  that  purpose.  The  report 
of  the  commissioners,  where  not  ap- 
pealed from,  and  the  amount  of  dam- 
ages assessed  is  deposited  with  tbe 
sheriff,  may  be  filed  with  and  recorded 
in  the  office  of  the  recorder  of  deeds 
in  the  county  wbere  the  lands  are 
situate,  and  such  record  is  presump- 
tive evidence  of  title  in  the  corporation 
to  the  property  so  taken,  and  is  con- 
structive notice  of  the  rights  of  the 
corporation  therein."  Iowa  Code  (1873), 
^  1253. 

Mr.  Kedfield  thinks  it  very  question- 
able, whether  a  railroad  company  in 
such  cases  is  entitled  to  the  herbage 
growing  upon  the  land,  or  to  cultivate 
the  same,  or  dig  for  stone  or  minerals 
in  the  land  beyond  what  is  necessary 
for  their  purposes  in  construction. 
Redf.  on  Rail.,  §  69.  And  the  express 
provision  of  the  English  statute  on 
tbis  subject  is  to  the  same  effect.     8  and 

9  Vict.,  chap.  20,  §  17.  See,  also.  Baker 
V.  Johnson,  2  Hill,  342  ;  Preston  v. 
Dubuque, etc.,  R.  Co.,  11  Iowa,  15.  But 
see  Chicago,  etc.,   R.  Co.   v.    Patchin, 

10  111.  198. 

In  Evans  v.  Haefner,  29  Mo.  141,  it 
was  held  that  earth  and  minerals  above 
grade  might  be  used  by  the  company. 


584 


Private  Cokporations. 


manent  in  its  nature  and  practically  exclusive."  ^  And  in  another 
case,  in  reference  to  the  riglits  of  raih-oad  corporations,  Shaw,  C. 
J.,  observes:  "  The  railroad  company  are  authorized  to  do  all  acts 


but  that  those  below  belonged  to  the 
owuer. 

lu  Hill  V.  Western  Vermont  Rail- 
way Company,  33  Vt.  68,  the  facts 
were  as  follows:  The  Western  Ver- 
mont Railway  Company,  before  their 
road  was  laid  out  or  surveyed,  pro- 
cured a  bond  from  B.  to  sell  them 
such  lands  owned  by  him  as  should 
be  required  for  their  road.  Their 
charter  provided  that  the  directors 
might  cause  such  surveys  of  the 
road  to  be  made  as  they  deemed  neces- 
sary and  fix  the  line  of  the  same,  and 
that  the  company  might  enter  upon 
and  take  possession  of  such  lands 
as  were  necessary  for  the  construction 
of  their  road  and  requisite  accommoda- 
tions.  The  survey  of  the  road,  made 
by  order  of  the  directors,  designated 
certain  land  belonging  to  B.  as  depot 
grounds,  and  the  company  paid  him 
for  and  took  the  same,  but  never 
received  any  conveyance  thereof  from 
him.  The  plaintiff,  having  recovered 
a  judgment  against  the  company,  lev- 
ied his  execution  upon  a  portion  of 
this  land  and  brought  ejectment 
against  the  company  to  recover  pos- 
session thereof.  The  referee,  to  whom 
the  case  was  referred,  found  that  a 
part  of  the  land  embraced  in  the  levy 
was  never  necessary  to  the  company 
for  railroad  purposes  and  would  not 
become  so  prospectively.  It  was  held 
that  by  B.'s  contract  with  the  company 
he  was  not  bound  to  convey  to  them 
any  greater  quantity  of,  or  estate  in, 
his  laud  than  they  required  for  depot 
accommodations  ;  that  under  their 
charter  the  company  could  not  com- 
pulsorily  acquire  any  more  land,  or 
any  greater  estate  therein,  for  the 
purposes  of  a  road-bed  or  stations  than 
was  really  requisite  for  such  uses ; 
that  the  estate  so  requisite  was  not 
one  in  fee-simple,  but  merely  an  ease- 
ment, and  was,  therefore,  not  subject 
to  be  levied  upon  by  the  creditors  of 
the  company ;  that  when  taken  for 
such  purposes  the  rule  was  the  same, 
whether  the  land  was  taken  compul- 
sorily  by  condemnation  and  the  award 


of  commissioners,  as  to  its  extent  and 
price,  or  under  the  agreement  of  the 
parties  as  to  one  or  both  of  these  par- 
ticulars ;  that  under  their  charter  the 
directors  had  power  to  lay  out  their 
road  and  stations  as  they  saw  fit,  and 
that  so  long  as  they  acted  in  good 
faith,  and  not  recklessly,  their  decision 
as  to  the  quantity  of  land  required  for 
depot  accommodations  would  be  re- 
garded as  conclusive. 

Redfield,  C.  J.,  said:  "  This  is  an 
action  of  ejectment  to  recover  posses- 
sion of  certain  lands  which  the  defend- 
ants purchased  of  one  Burton  for 
depot  purposes  about  one  of  their 
stations  and  which  the  referee,  in  this 
case,  has'found  were  not  necessary  for 
the  present  or  prosjiective  use  of  the 
company  for  that  purpose  ;  the  excess, 
according  to  the  opinion  of  the  referee, 
being  some  acres.  The  plaintiff, 
being  a  creditor  of  the  company,  levied 
upon  this  excess  together  with  a  con- 
siderable number  of  acres  more  which 
the  referee  finds  are  necessary  for  the 
use  of  the  company  for  the  purposes 
for  which  they  were  procured.  The 
appraisal  and  levy  was  upon  the  en- 
tire portion  of  land,  both  that  which 
was  and  that  which  was  not  necessary 
for  the  uses  of  the  company. 

"  The  company,  before  they  sur- 
veyed their  road,  contracted  with  Bur- 
ton for  the  conveyance  of  ' such  lands ' 
owned  by  him  '  as  shall  be  required  ' 
for  the  company's  road  '  on  reasonable 
request.'  The  land  was  subsequently 
designated  by  metes  and  bounds,  and 
the  money  paid  for  the  piece,  but  the 
land  has  never  been  conveyed  to  the 
company. 

"  The  first  question  arising  in  the 
case  is  as  to  the  extent  of  estate  which 
Burton  is  bound  to  convey  to  the  com- 
pany. The  plaintiff  claims  that  this  is 
an  estate  in  fee-simple  as  the  contract 
binds  him  to  convey  such  lands 
'  owned  by  him  '  as  shall  be  required 
by  the  company.  This  is  no  doubt 
the  fair  and  natural  construction  of 
such  a  contract  between  ordinary  par- 
ties.    If  the  land  is  to  be  conveyed 


'  Hazen  v.  Boston,  etc.,  R.  Co.,  3  Gray,  574. 


Eminent  Domain. 


585 


within  five  rods,  which  by  law  constitute  their  limits  in  taking 
away  or  leaving  gravel,  trees,  stones  or  other  objects,  which  in  their 
judgment  may  be  necessary  and  proper  to  the  grading  and  level- 


and  is  defined  as  land  '  owned  '  by  the 
obligor  nothing  less  could  be  fairly 
intended,  in  ordinary  cases,  than  an 
estate  in  fee-simple.  But  here  the  land 
is  purchased  and  to  be  conveyed  to 
the  company  for  their  use  'such  as 
shall  be  required  by  them.'  We  do 
not  understand  by  this  all  the  lands 
they  might  ask  for  but  such  as  their 
powers  and  functions  and  business  re- 
quired. We  do  not  think  the  scope  of 
the  bond  could  fairly  be  made  to  ex- 
tend beyond  this.  It  would  be  very 
unreasonable,  as  it  seems  to  us,  to  con- 
strue this  bond  as  extending  beyond 
this,  and  including  at  the  election  of 
the  defendants,  all  the  land  owned  by 
Burton  and  lying  near  the  line  of  the 
railway. 

"  So,  too,  it  seems  to  us,  that  as  Bur- 
ton, by  the  fair  construction  of  the 
bond,  was  only  bound  to  convey  such 
lands  as  were  reasonably  required  for 
the  legitimate  uses  of  the  company  so 
he  was  only  bound  to  convey  such  es- 
tate therein  as  they  required  for  those 
uses.  If  the  extent  of  territory  could 
fairly  be  defined  and  limited  by  the 
general  objects  and  purposes  of  the 
contract,  which  is  a  general  rule  of 
construing  all  contracts,  and  as  applied 
to  a  case  of  this  character,  a  most  sig- 
nificant and  unquestionable  one,  we 
think  the  same  rule  also  applies  with 
equal  force  to  the  estate  to  be  con- 
veyed. A  contract  to  convey  land  for 
a  particular  use  or  to  a  party  having 
capacity  to  acquire  a  certain  estate  in 
land  for  a  particular  use,  must,  of  ne- 
cessity, carry  the  implication  of  such 
limitation  upon  the  estate  to  be  con- 
veyed. 

"  We  think,  therefore,  that  the  bond, 
as  orignally  given,  would  not  have 
bound  the  party  to  convey  more  laud 
than  the  company  fairly  required  for 
their  legitimate  uses  under  tlieir  char- 
ter or  any  greater  estate  in  the  land 
than  such  uses  justly  required.  That 
is  just  what  the  company  were  em- 
powered to  take  conipulsorily.  And 
their  charter,  as  we  think,  was  not  in- 
tended to  give  them  power  to  acquire 
any  more  land  or  any  greater  estate 
in   such   land,  for    the  purpose   of    a 

74 


road-bed  or  stations,  than  was  really 
requisite  for  such  uses  under  their 
charter.  We  do  not  intend  to  say  tliat 
if  they  purchased  and  took  the  con- 
veyance of  the  fee  of  land  for  tlie.se 
purposes,  they  could  not  hold  it  or  con- 
vey it,  although  some  courts  have  so 
held.  Nor  do  we  intend  to  intimate 
any  decided  opinion  that  they  may  do 
this.  The  general  provisions  of  the 
charter  of  this  company  are  much  like 
other  charters  in  this  and  the  other 
states,  and  similar  to  the  general  rail- 
way act,  and  seem  to  have  reference 
to  acquiring  the  right  to  such  an  estate 
in  the  necessary  lands  as  is  requisite 
for  the  road-bed  and  other  incidental 
use  and  accommodation  of  the  com- 
l^any  in  their  prescribed  and  necessary 
business. 

"  The  company  may  purchase  lands 
for  wood  and  timber  for  their  ordinary 
uses  and  may,  no  doubt,  purchase, 
take  and  hold  and  also  convey  the  fee- 
simple  of  such  lands.  We  are  not 
inclined  here  to  question  the  right  of 
this  company  to  take  the  fee  of  lands 
by  way  of  gift  or  in  payment  of  debts 
due  them,  either  by  voluntary  convey- 
ance or  by  levy,  in  invitum.  It  is  not 
important  to  discuss  these  propositions 
here.     They  may  all  be  conceded. 

"  But  they  do  not  aSect  the  question 
what  extent  of  land  and  what  estate 
the  company  were  expected  to  take, 
by  purchase  or  gift  or  by  condemna- 
tion, for  their  road-bed  and  depots. 
We  think  it  very  obvious,  from  this 
charter  and  many  others  we  have  ex- 
amined where  the  quantity  of  estate 
is  not  defined,  that  it  should  be  con- 
strued as  we  have  already  intimated 
in  regard  to  the  bond  of  Burton,  ac- 
cording to  the  object  and  purport  of 
the  grant,  and  the  necessities  or  wants 
of  the  corporation  thereby  created.  It 
seems  to  us  to  be  leaving  all  just  limits 
of  construction  to  go  beyond  this.  It 
is  certain,  as  already  intimated,  that 
this  is  the  ordinary  rule  of  construing 
contracts.  And  statutes  are  generally 
construed  much  after  the  same  rules  as 
contracts  and  especially  statutes  of  this 
character  which  are  much  in  tlie  nature 
of  contracts  between  the  sovereignty 


686 


Private  Corporations/ 


iiig  of  the  road,  in  adjusting  and  adapting  it  to  other  roads, 
brid^'-es,  buildings,  and  the  like,  so  as  to  render  it  most  conducive 
to  the  public  uses  which  the  railway  is  intended  to  accomplish. 


and  the  slaareholders,  or,  strictly 
speaking,  between  the  sovereignty  and 
the  corporation.  In  other  words,  the 
charter  is  a  grant  of  certain  franchises 
and  immunities,  upon  certain  terms 
and  conditions,  and  with  certain  speci- 
fied or  implied  limitations.  These  con- 
ditions and  limitations  are  the  consid- 
eration and  the  counterpart,  so  to 
speak,  of  the  grant.  By  accepting  the 
grant  the  corporation  bind  themselves 
to  perform  the  obligations  and  duties 
reasonably  and  fairly  implied  by  the 
conditions  of  the  grant,  so  that  the 
charter  should  receive  the  same  con- 
struction as  any  other  contract  of  a 
similar  character. 

"  One  of  the  important  franchises  of 
railway  corporations,  and  the  one 
which  distinguishes  corporations  of 
this  public  character  from  ordinary 
business  corporations,  on  account  of 
its  sovereign  or  prerogative  character, 
is  that  right  which  in  the  sovereign  is 
called  eminent  domain,  which  is  the 
power  to  invade  private  property  and 
appropriate  it  to  its  own  purposes. 
The  right  to  exercise  this  function  is 
made  dependent  upon  rendering  an 
equivalent  in  money,  and  the  implied 
compact  not  to  acquire  more  land  than 
they  need.  And  the  charters  or  gen- 
eral laws,  in  most  of  the  American 
states,  allow  the  details  of  the  appro- 
priation of  lands  to  the  use  of  railways 
to  be  arranged  either  by  the  judgment 
of  certain  public  functionaries  desig- 
nated for  thai  purpose,  or  by  the  con- 
sent of  the  land-owner.  But  in  the 
latter  mode  even  the  proceeding  is,  in 
some  sense,  compulsory.  The  land- 
owner does  not  stand  precisely  in  the 
position  of  an  ordinary  proprietor  in 
the  market.  He  has  no  election 
whether  he  will  part  with  his  land  or 
not,  but  only  whether  he  will  fix  the 
terms  by  negotiation  or  by  the  ap- 
praisal of  the  commissioners  or  the 
court.  In  either  mode  of  appropriat- 
ing land  for  the  purposes  of  the  com- 
pany, where  they  have  by  their  char- 
ter the  power  to  take  it  compulsorily, 
there  is  this  implied  limitation  upon 
the  power  that  the  company  will  take 
only  so  much  land  or  estate  therein  as 


is  necessary  for  their  public  purposes. 
It  does  not  seem  to  us  to  make  much 
diflfereuce  in  regard  to  either  the  quan- 
tity or  the  estate,  whether  the  price  is 
fixed  by  the  commissioners  or  by  the 
parties.  For  under  this  charter  it  is 
the  act  of  the  directors  which  desig- 
nates the  extent  of  land  to  be  taken, 
and  thus  far  the  taking  is  compulsory 
and  strictly  under  the  powers  granted 
by  the  charter. 

"In  regard  to  the  mode  of  appro- 
priating land  to  the  purposes  of  the 
road-bed  and  depots  of  a  railway  com- 
pany, it  is  obvious  that  it  should  be 
done  in  some  way  which  shall  be 
judicial  and  final,  for  the  time  at  least. 
This  is  necessary  both  for  the  com- 
pany and  the  land-owner,  and  when 
done  in  the  mode  pointed  out  in  the 
charter,  it  must  be  final,  or  should  be 
so,  unless  some  power  is  reserved, 
either  expressly  or  impliedly,  to 
change  the  location  of  the  road,  as  in 
the  defendants'  charter  seems  to  be 
given,  or  to  enlarge  its  facilities  with 
the  advancement  of  business,  which 
this  charter  does  not  give  in  terms. 
This  is  not  ordinarily  reserved  to  rail- 
ways. When  once  located,  the  loca- 
tion is  commonly  regarded  as  final. 
They  must  take  such  lands  as  will  be 
likely  to  accommodate  their  business, 
both  present  and  prospective.  In  do- 
ing this  it  would  not  be  wonderful  if 
they  should  take  more,  sometimes, 
than  every  one  regarded  as  necessary. 
The  same  may  be  true  of  their  road- 
bed. A  jury  or  referee  might  well 
consider,  in  many  cases,  no  doubt,  that 
at  many  points  four  or  five  rods,  or 
even  three  rods  in  width,  was  just  as 
beneficial  for  all  the  purposes  of  the 
road  as  six  rods,  which  some  of  the 
early  chartered  roads  in  this  state  are 
allowed  to  take  and  do  take.  The 
same  may  be  often  true  of  the  land 
taken  for  depot  accommodations. 

"  But  if  the  road-bed  or  land  for  sta- 
tions is  taken  in  the  mode  prescribed 
in  the  charter  and  general  law  of  the 
state,  whether  by  the  judgment  of  the 
commissioners,  as  to  its  extent  as  well 
as  the  land  damages,  or  by  the  act  of 
the  directors  through  their  surveyors 


Eminent  Domain. 


587 


Whatever  acts,  therefore,  are  requisite  to  the  safety  of  passengers 
on  the  railway,  to  the  agents,  servants,  and  persons  employed  by 
the  company,  and  to  the  safe  passage  of  travelers  on  and  across 
highways  and  roads  connected  with  it,  and  wliicli  can  be  done 
within  the  five  rods,  the  company  have  a  right,  under  their  act  of 
incorporation,  to  do.  Tiiis  is  embraced  in  the  idea  of  taking  land 
for  public  use."  ^ 

But  it  may  be  affirmed  that  the  current  of  decisions  in  tliis 


and  engineers,  as  to  its  extent,  and 
the  appraisal  of  the  commissioners  as 
to  its  value,  or  by  the  directors  as  to 
its  extent,  or  the  agreement  of  parties 
as  to  the  price,  as  in  this  case,  when 
once  taken  in  the  mode  prescribed  in 
the  charter,  as  this  land  was  taken,  it 
is  regarded  as  well  settled  that  the 
land  so  taken  is  not  subject  to  the  levy 
of  an  execution.  This  is  put  upon  the 
ground,  and  justly,  we  think,  that  the 
estate,  being  a  mere  easement  for  a 
particular  use,  is  not  of  the  quality 
and  character  which  by  the  statute  is 
made  subject  to  a  levy.  This  is  not 
an  estate  in  fee,  or  for  life,  or  years, 
or  indefinitely,  or  an  equity  of  redemp- 
tion, which  are  the  estates  defined  in 
the  statute.  But  it  is  an  easement,  a 
right  to  use  the  land  in  a  particular 
mode  for  a  particular  purpose,  and 
which  cannot  be  transferred  to  an  or- 
dinary person  having  no  right  to  use 
it  in  that  mode  or  for  that  purpose, 
since  the  estate  would  cease  and  the 
land  revert  the  moment  it  was  put  to 
any  other  use  than  the  one  designated 
in  the  charter  or  statute  by  or  under 
which  the  appropriation  was  made. 

"  So  that  whether  the  company  take 
more  or  less,  if  taken  for  these  pur- 
poses and  no  other,  and  only  an  ease- 
ment is  acquired  by  the  company,  it  is 
not  an  estate  which  can  be  transferred 
by  a  levy  to  the  creditors  of  the  com- 
pany, or  by  any  conveyance,  in  par- 
cels, probably.  But  of  this  we  need 
not  speak.  It  is  certain  the  statute 
has  not  provided  for  levying  upon  any 
such  estate.  And  this,  we  think,  is 
tlie  only  estate  for  which  the  company 
contracted  with  Burton,  or  which  he 
is  bound  to  convey  to  them. 


"  And  as  to  the  quantity  of  land 
taken,  if  the  directors  of  the  company 
have  power  to  lay  out  their  own  road 
in  any  place  they  choose,  and  to  tlie 
extent  of  five  rods  in  width,  and  to 
take  such  lands  for  depot  purposes  as 
they  deem  expedient,  and  they  have 
acted  in  good  faith,  we  do  not  see  very 
well  how  their  proceedings  can  be 
brought  in  question  by  any  one.  It 
may  have  been  the  folly  of  the  legisla- 
ture to  grant  any  such  power  to  the 
directors  of  the  company,  but  if  they 
have  done  so,  and  this  power  is  alto- 
gether unlimited, unless  they  act  rashly 
or  in  bad  faith,  it  is  not  very  obvious 
how  they  are  to  be  controlled  in  the 
matter.  No  doubt  if  they  act  reck- 
lessly or  extravagantly,  so  as  to  indi- 
cate either  utter  incompetence,  or  cor- 
ruption, or  undue  influence,  or  bad 
faith,  a  court  of  equity,  at  the  suit  of 
the  land-owner  or  the  stockholders, 
would  set  the  matter  right.  But  this 
would  thus  be  done  in  such  a  mode  as 
to  settle  it  definitely  and  not  to  leave 
it  subject  to  the  confusion  consequent 
upon  subjecting  it  to  the  action  of  in- 
dependent tribunals,  in  regard  to  por- 
tions of  the  land  taken  for  the  same 
purpose,  whose  decisions  would  al- 
most inevitably  produce  more  or  less 
confusion  and  uncertainty.  But  so 
long  as  the  land  is  appropriated  to  the 
road-bed  and  depot  purposes  in  the 
very  mode  prescribed  in  the  statute, 
w'e  do  not  very  well  comprehend  how 
it  can  be  appropriated  in  parcels  to  the 
payment  of  the  debts  of  the  company, 
by  means  of  levies,  even  if  the  fee 
had  been  conveyed  to  the  company." 


'  Brainard   v.    Clapp,    10   Cush. 
chin,  16  111.  198. 


6.     See,  also,  Chicago,  etc.,  R.  Co.  v.  Pat- 


588 


Private  Corporations. 


country  as  well  as  in  England,  in  regard  to  the  title  acquired  by 
the  exercise  of  the  right  of  eminent  domain,  is  that  the  former 
owner  retains  the  title,  subject  to  the  proper  use  of  the  corporation 
for  the  purposes  for  which  it  was  authorized  to  be  taken,  and  that 
the  owner  may  still  maintain  an  action  of  trespass  for  any  use  or 
injury  of  the  freehold,  not  authorized  by  the  proper  use  or  exercise 
of  corporate  powers  or  any  injury  to  the  freehold  by  a  stranger.^ 
It  is  a  matter  which  is  usually  the  subject  of  statutory  regula- 
tion, and  the  (|uestion  depends  largely  upon  the  construction 
put  by  the  courts  upon  such  local  statutes.  The  rights  acquired 
by  corporations  under  such  statutes  must  depend  upon  such  local 
construction.  But  it  would  appear  reasonable  that,  where  under 
such  provisions  the  corporations  are  required  to  pay  the  full  value 
of  the  propei'ty  taken  for  corporate  purposes,  they  should  be 
vested  with  the  whole  interest  subject-  to  reversion  in  case  of 
abandonment  as  before  stated.^ 


1  Dovaston  v.  Payne,  2  H.  Bl.  527;  2 
Roll.  Abr.  566,  p.  1  ;  Rust  v.  Low, 6 
Mass.  90;  Jackson  v.  Rutland,  etc.,  R. 
Co.,  25  Vt.  151  ;  Redf .  on  Rail.,  §  69, 
and  notes.  But  see  Nicoll  v.  New 
York  &  Erie  R.  Co.,  12  Barb.  460, 
where  a  more  extended  doctrine  of  the 
rights  of  railroad  corporations  on  this 
question  is  held,  viz.  :  "Corporations 
have  a  fee-simple  for  purposes  of 
alienation,  but  they  have  only  a  deter- 
minable fee  for  purposes  of  enjoy- 
ment " 

•^  In  Blake  v.  Rich,  34  N.  H.  285,  it  is 
held  that  a  railway  takes  but  a  mere 
easement  in  lands.  Fowx,ER,  J.,  says: 
"Does  the  railroad  corporation  ac- 
quire any  such  higher,  more  extensive 
and  more  exclusive  right  V  "  (than  the 
public  and  the  public  authorities  gain 
by  the  laying  out  of  such  lands  as  a 
public  highway.)  "A  careful  exami- 
nation of  the  various  statutes  authoriz- 
ing the  taking  of  lands  for  railroads, 
and  a  comparison  of  the  language  with 
that  of  those  statutes  providing  for  the 
taking  of  land  for  highways,  satisfies 
us  it  does  not,  and  we  see  nothing  in 
the  use  to  which  the  land  is  appro- 
priated in  the  one  case,  and  the  other 
requiring  the  same  phraseology  to  be 
differently  construed  in  the  two  cases. 
By  the  theory  as  well  as  the  letter  of 
the  law  the  taking  in  both  cases  is 
for  the  public  use,  and  that  use  is  no 


more  inconsistent  with  the  continuance 
of  the  fee  in  the  original  owner  in  the 
case  of  a  railroad  than  in  that  of  a 
highway."  But  in  Railroad  Company 
V.  Davis,  2  Dev,  &  Bat.  467,  Rufpin, 
C.  J.,  says:  "  The  doctrine  of  the  com- 
mon law  is,  that  the  public  has  only 
an  easement  in  the  land  over  which  a 
road  passes,  and  that  the  right  of  soil 
is  undisturbed  thereby.  The  reason 
is,  that  ordinarily  the  interest  of  the 
public  requires  no  more.  Every  bene- 
ficial use  is  included  in  the  easement, 
in  respect  at  least  to  such  highways  as 
exist  at  the  time  the  principle  was 
adopted,  and  to  which  it  had  reference. 
But  if  the  use  requisite  to  the  public 
be  such  a  one  as  requires  the  whole 
thing,  the  same  principle  which  gives 
to  the  public  the  right  to  any  use 
gives  the  right  to  the  entire  use,  upon 
paying  adequate  compensation  for  the 
whole.  It  is  for  the  legislature  to 
judge  in  cases  in  which  it  map  be  for 
the  public  interest  to  have  the  use  of 
private  property,  whether  in  fact  the 
public  good  requires  the  property, 
and  to  what  extent.  From  the  great 
cost  of  this  road  (a  railway),  from  its 
nature  and  supposed  utility,  it  seems 
to  be  contemplated  to  preserve  it  per- 
petually, or  for  a  great  and  indefinite 
period.  All  persons  are  excluded  from 
going  on  it,  unless  in  the  vehicles  pro- 
vided by  the  public  or  its  agents  ;  and 


Eminent  Domain. 


589 


Sec.  40G.  Where  the  corporation  takes  more  land  than  is  required.  — 
Under  various  statutes  provided  for  tlie  mode  of  proeeediiig  to 
secure  the  lands  of  others  for  corporate  purposes,  under  the  right  of 
eminent  domain,  it  is  evident  that  the  corporation  may  claim  the 
condemnation  of  more  land  than  is  required  for  the  corporate  pur- 
pose, and  if  allowed  to  proceed  unrestrained  and  an  appraisement  is 
made,  the  value  paid  and  the  proper  papers  in  the  case  recorded  as 
provided  by  the  statutes,^  the  corporation  would  thereby  secure  a 
prima  facie  right  to  all  the  lands  thus  appraised.  "What  then 
would  be  the  remedy  where  the  claim  was  for  more  land  than 


to  enforce  that  provision  and  ade- 
quately protect  the  erections  from  in- 
juries, it  may  be  requisite  to  divest 
the  property  out  of  individuals."  See, 
also,  Giesey  v.  Cincinnati,  Wilm.  &Z. 
Railway,  4  Ohio  (N.  S.),  308. 

In  Nicoll  V.  The  New  York  &  Erie 
Railway,  12  N.  Y.  128,  it  was  objected 
that  because  by  the  act  of  incorpora- 
tion there  was  given  to  the  defendant 
only  a  term  of  existence  of  fifty  years, 
therefore  the  grant  of  land  in  question, 
which  was  a  piece  six  rods  in  width 
across  the  grantor's  farm  for  the  site 
of  the  defendants'  railway,  should  be 
deemed  to  have  conveyed  an  estate 
for  years,  not  in  fee.  But  the  court 
said  that  the  unsoundness  of  that 
position  was  easily  shown;  that  it  was 
never  yet  held  that  a  grant  in  fee  in 
express  terms  could  be  restricted  by 
the  fact  that  the  grantee  had  but  a 
limited  term  of  existence.  And  "  it  is 
erroneous  to  say  that  an  estate  in  fee 
cannot  be  fully  enjoyed  by  a  natural 
person,  or  by  a  corporation  of  limited 
duration.  It  is  an  enjoyment  of  the 
fee  to  possess  it,  and  to  have  the  full 
control  of  it,  including  the  power  of 
alienation,  by  which  its  full  value  may 
at  once  be  realized." 

It  is  well  settled  that  corporations, 
though  limited  in  their  duration,  may 
purchase  and  hold  a  fee,  and  they  may 
sell  such  real  estatewhenever  they  shall 
find  it  no  longer  necessary  or  conven- 
ient. 2  Preston  on  Estates,  50.  Kent 
says  :  "  Corporations  have  a  fee-sim- 
ple for  the  purpose  of  alienation,  but 
they  have  only  a  determinable  fee, 
for  the  purpose  of  enjoyment.  On  the 
dissolution  of  the  corporation,  the   re- 


verter is  to  the  original  grantor  or 
his  heirs,  but  the  grantor  will  be 
excluded  by  the  alienation  in  fee, 
and  in  that  way  the  corporation  may 
defeat  the  possibility  of  a  reverter. 
2  Kent,  282;  5  Denio,  389;  1  Comst. 
509.  Large  sums  of  money  are  ac- 
cordingly expended  by  railroad  com- 
panies in  erecting  extensive  station- 
houses  and  depots  and  by  banking 
corporations  in  erecting  banking- 
houses,  because,  holding  the  land  in 
fee,  they  may  be  able  to  reimburse 
themselves  for  the  outlay  by  selling 
the  fee  before  the  termination  of  their 
corporate  existence." 

But  the  right  of  a  railway  company 
to  the  exclusive  possession  of  the  land, 
taken  for  the  purposes  of  their  road, 
differs  very  essentially  from  that  of 
the  public  in  the  land  taken  for  a  com- 
mon highway.  The  railway  com- 
pany must,  from  the  very  nature  of 
their  operations,  for  the  security  of 
their  passengers,  workmen,  and  the 
enjoyment  of  the  road,  have  the  right 
at  all  times  to  the  exclusive  occupancy 
of  the  land  taken,  and  to  exclude  all 
concurrent  occupancy,  by  the  former 
owners  in  any  mode  and  for  any  pur- 
pose. Jackson  v.  R.  &  B.  R.  R.,  25  Vt. 
150;  Conn.  &  Pass.  Rivers  R.  R.  v. 
Holton,  32  Vt.  47. 

Thomas,  J.,  says,  in  Hazen  v.  Bos- 
ton &  M.  R.  R.,  2  Gray,  580:  "  The 
right  acquired  by  the  corporation  "  (a 
railway  company)  "  though  technically 
an  easement,  yet  requires  for  its  en- 
joyment a  use  of  the  land,  permanent 
in  its  nature,  and  practically  exclu- 
sive." 


'  See  Code  of  Iowa,  supra. 


500 


Private  Corporations. 


is  required  (  The  corporation,  as  we  have  seen,  would  only  be 
entitled  to  take  so  much  as  is  necessary  to  accomplish  the  contem- 
plated purpose.'  And  if,  under  color  of  the  powers  conferred 
npon  them  for  this  purpose,  a  corporation  attempts  to  take  more 
tlian  is  required,  it  could  undoubtedly  be  restrained  by  injunction, 
and  the  question  as  to  the  proper  extent  or  amount  be  determined 
in  court.'' 

The  remedy  by  injunction  in  sucli  a  case  would  be  the  most 
effectual  of  any,  and  the  modern  practice  would  enable  the  com- 
plainant to  have  the  extent  of  the  rights  of  the  corporation  in  the 
land  claimed,  determined  in  the  same  proceedings.  "  It  has  be- 
come a  well-settled  head  of  equity,  that  any  company  authori;5ed 
by  the  legislature  to  take  compulsorily  the  land  of  another  for  a 
definite  purpose,  wnll,  if  attempting  to  take  it  for  any  other  ob- 
ject, be  restrained  by  the  injunction  of  a  court  of  chancery  from 
sodoinof."  ' 


1  Stacey  v.  Vermont  Cent.  R.  Co.,  27 
Vt.  39  ;  Hill  v.  Western  Vt.  R.  Co., 
'62  id.  68  ;  Rensselaer,  etc.,  R.  Co.  v. 
Davis,  43  N.  Y.  137  ;  Lance's  Appeal, 
55  Penn.  St.  16. 

^  See  ante,  %  444,  note  3. 

^  Green's  Brice's  Ultra  Vires,  285 ; 
citing  L.  R.,  1  H.  L.  43  ;  Crossman  v. 
Bristol,  etc.,  R.  Co.,  1  H.  &  M.  531. 
This  principle  is,  witk  the  qualification 
mentioned  below,  strictly  enforced. 
Whatever  be  the  purposes  for  which 
special  powers  and  authorities  are 
given  to  the  attainment  of  these  pur- 
poses alone  can  they  be  devoted,  no 
deviation  therefrom  being  permitted, 
however  slight  and  however  much 
the  corporation  would  thereby  be  bene- 
fited. Brice's  Ultra  Vires,  286.  He 
further  says  :  In  Bentinck  v.  Norfolk 
Estuary  Company,  8  De  G.,  M.  &  G. 
714;  26  L.  J.  Ch.  404;  Webb  v. 
Manchester,  etc.,  R.  Co.,  4  N.  Y.  Sup. 
Ct.  116  ;  Cothier  v.  Midland  R.  Co., 
17  L.  J.  Ch.  235;  Flower  v.  London, 
etc.,  R.  Co.,  34  id.  450;  Edinburgh, 
etc.,  R.  Co.  V.  Campbell,  9  L.  T.  (N.  S.) 
H.  L.  157.  See  Eversfield  v.  Mid- 
Sussex,  etc.,  R.  Co.,  3  D.  G.  &  J.  286  ; 
28  L.  J.  Ch.  107,  the  defendants  had 
power  to  make  and  maintain  certain 
cuts  and  works  with  authority  to  take 
and  use  such  of  certain  lands  "  as 
might  be  necessary  or  proper  for  them 
to  enter  for  the  purpose  of  executing 


these  works."  Within  the  limits  of 
their  line  of  deviation  they  proceeded 
to  take  lands  for  the  purpose  not  of 
forming  works,  but  of  digging  ma- 
terials for  the  same.  It  was  held  by 
Page- Wood,  V.  C,  that  they  had  no 
authority  to  do  so  ;  and  this  judgment, 
on  appeal,  was  affirmed,  and,  there- 
fore, an  injunction  granted  by  the 
Vice-chancellor  against  them  was 
made  perpetual.  *  *  *  There  have 
been  many  subsequent  decisions  on 
this  subject.  The  latest  is  that  of 
Lord  Carrington  v,  Wycombe  Railway 
Company,  L.  R.,  2  Eq.  825;  L.  R.,  3 
Ch.  277  ;  Beauchamp  v.  Great  West- 
ern Railway  Company,  id.  745.  The 
defendant's  company  gave  to  land- 
owners notice  to  treat  in  respect  to  a 
close  of  land  containing  one  acre, 
twenty-seven  perches,  part  of  the  C. 
estate.  The  price  was  settled  between 
the  parties,  and  the  land  conveyed  to 
the  company  by  a  deed  not  in  the 
statutory  form,  including  the  mines 
and  all  the  estate  of  the  vendors.  The 
company  used  about  three  perches  of 
the  land  for  their  railway  ;  and  about 
two  years  after  their  purchase  they, 
in  pursuance  of  a  contract  which,  be- 
fore the  notice  to  treat,  they  had  made 
with  Mr.  Terry  to  convey  to  him  all 
such  part  of  the  C.  estate  as  lay  be- 
tween his  land  and  the  railway,  con- 
veyed the  remaining  one  acre,  twenty- 


Eminent  Domain. 


591 


Other  modes  may  be  adopted  to  secure  parties  from  the  wrong 
referred  to.  But  it  is  not  properly  within  the  scope  of  this 
treatise  to  consider  very  fully  the  subject  of  remedies  by  or  against 
corporations. 

Sec.  407.  Compensation.  —  The  authority  to  take  land  for  jiub- 
lic  purposes  under  the  right  of  eminent  domain  can  only  be  con- 
ferred by  the  legislature  in  this  country,  or  by  parliament  in  Great 
Britain,  and  this  right  can  only  be  exercised  on  making  full  com- 
pensation for  the  land  or  other  property  taken.  The  constitution 
of  the  United  States  inhibits  the  taking  of  private  property  for 
public  use  without  just  compensation/  which  would  render  any 
authority  the  states  might  attempt  to  confer,  for  the  taking  of 
private  property  under  the  right  of  eminent  domain  without  just 
compensation,  null  and  void.  And  the  powers  of  parliament  in 
this  respect  are  equally  limited.* 


four  perches  to  him  by  a  deed,  which, 
recited  that  it  was  superfluous  land. 
The  landwas  situate  within  the  limits 
of  a  borough,  but  was  at  some  distance 
from  the  mass  of  houses  forming  the 
town.  There  were  two  cottages  upon  it. 
The  lords  justices  held,  that  apart 
from  other  considerations,  the  vendors 
would  have  been  entitled  to  relief  on 
the  ground  that  the  company  had 
taken  the  land,  not  for  the  purposes  of 
their  act,  but  in  order  to  enable  them 
to  fulfill  their  coutract  with  Terry. 
Lord  Justice  Cairns,  in  his  judgment, 
said  :  "  There  is  no  controversy  as  to 
the  facts  ;  and  it  appears  to  me  that  a 
more  distinct  and  more  openly  avowed 
case  of  the  use  of  parliamentary 
powers  for  purposes  not  intended  by 
parliament  never  has  been  presented 
to  the  court  ;  and  this  is  exactly  one 
of  those  cases  which  were  described  bv 


Lord  Cranworth  in  Galloway  v. 
Mayor  and  Commonalty  of  London, 
L.  R.,  1  H.  L.  34,  43,  where  his  lord- 
ship said  :  '  The  principle  is  this,  that 
when  persons  embarking  in  great  un- 
dertakings for  the  accomplishment  of 
which  those  engaged  in  them  have 
received  authority  from  the  legisla- 
ture to  take  compulsorily  the  lands  of 
others,  making  to  the  latter  proper 
compensation,  the  persons  so  author- 
ized canuot  be  allowed  to  exercise  the 
powers  conferred  on  them  for  any  col- 
lateral object.'  The  land  here,  in  my 
opinion,  was  taken,  and  is  avowed  to 
have  been  taken  for  that  which  was 
an  object  entirely  collateral,  namely, 
to  give  to  Mr.  Terry  that  which  he 
had  bargained  for  as  part  of  the  con- 
sideration for  the  sale  of  the  £20,000 
stock." 


'  Amendment  to  Const.  U.  S.,  art.  5. 

"  The  Queen  v.  The  Eastern  Coun- 
ties Railway,  2  Q.  B.  347;  2  Rail.  C. 
736.  On  this  subject  of  the  power  in 
the  sovereignty  to  exercise  the  right 
of  eminent  domain  and  the  necessity 
of  compensation  in  such  cases,  to  the 
parties  whose  property  is  taken.  Red- 
field.  J.,  observes  :  "  It  seems  to  have 
been  accurately  defined,,  and  distinctly 
recognized,  in  the  Roman  Empire,  in 


the  days  of  Augustus,  and  his  imme- 
diate successors,  although  from  con- 
siderations of  policy  and  personal  in- 
fluence and  esteem,  they  did  not  always 
choose  to  exei'cise  the  right  to  demolish 
the  dwellings  of  the  inhabitants,  either 
in  the  construction  of  public  roads  or 
aqueducts  or  ornamental  columns,  but 
to  purchase  the  right  of  way." 

"  But  in  the  states  of  Europe  and  in 
the  written  constitution  of  the  United 


592 


Private  Corporations. 


The  constitutions  of  most,  if  not  all,  of  the  various  states  con- 
tain similar  provisions.  The  duty  of  making  compensation  in 
such  cases  seems  to  be  in  accordance  with  reason  and  principles  of 
natural  justice;  and  is  recognized  in  the  jurisprudence  of  all 
civilized  people.     On  this  subject  Mr.  Redfield  observes  : 

"  The  duty  to  make  compensation  for  property,  taken  for  pub- 
lic use,  is  regarded  by  the  most  enlightened  jurists  as  founded  in 
the  fundamental  principles  of  natural  right  and  justice,  and  as 
lying  at  the  basis  of  all  wise  and  just  government,  independent 
of  all  written  constitutions  or  positive  law."  * 

Sec.  408.  Same  continued.  —  The  mode  of  proceeding  to  deter- 
mine the  amount  of  compensation  is  also  usually,  if  not  univer- 
sally, provided  for  by  statute  ;  and  where  it  is  thus  provided  for 
it  is  treated  as  not  only  directory  but  exclusive  of  any  other 
mode  ;  and  no  rights  can  be  obtained  by  the  proceedings  to  con- 
demn property  for  the  public  use,  unless  the  provisions  of  the 
statute  are  complied  with  in  this  and  all  other  respects.'^ 


States,  and  in  those  of  most  of  the 
American  states  an  express  limitation 
of  the  exercise  of  the  right  makes  it 
depend  upon  compensation  to  the 
owner.      But    this    provision    in    the 


United  States  constitution  is  intended 
only  as  a  limitation  upon  the  exercise 
of  that  power  by  the  government  of 
the  United  States."  1  Kedf.  on  Kail., 
§63. 


•  1  Redf.  on  Rail.,  §  65 ;  Gillinwater 
V.  The  Miss.  &  A.  R.  Co.,  13  111.  1  ; 
Reitenbaugh  v.  Chester  Valley  R. 
Co.,  21  Penn.  St.  100;  Atlantic,  etc., 
R.  Co.  V.  Sullivant,  5  Ohio  (N.  S.), 
276. 

**  As  to  the  compensation  for  lauds 
taken,  and  the  right  to  enter,  lor  the 
purposes  of  a  survey,  see  Bloodgood  v. 
Mohawk,  etc.,  R.  Co.,  18  Wend.  9; 
Cushman  v.  Smith,  34  Me.  247. 

In  the  former  case  Chancellor  Wal- 
worth says;  'Another  very  impor- 
tant question  which  arises  in  this 
case  is,  whether  the  legislature  in  fact 
authorized  the  defendants  to  enter 
upon  the  private  property  of  the  plain- 
tiff and  to  construct  their  railroad 
thereon  before  his  damages  were  ac- 
tually assessed  and  paid  or  offered  to 
be  paid  to  him  ;  and  if  such  is  the 
construction  of  the  law,  whether  such 
a  power  is  authorized  by  the  constitu- 
tion. In  the  case  of  Rogers  v.  Brad- 
shaw,  20  Johns.  735,  this  court  decided 
that  where  private  property  was  taken 


for  public  use  it  was  not  necessary 
that  the  amount  of  the  compensation 
should  be  actually  ascertained  and 
paid  before  such  property  was  appro- 
priated to  the  public  use  ;  that  it  was 
sufficient  if  a  certain  and  adequate 
remedy  was  provided  by  which  the  in- 
dividual could  obtain  such  compensa- 
tion without  any  unreasonable  delay. 
This  decision  has  been  followed  by  the 
courts  of  several  of  our  sister  states. 
To  this  extent  the  opinion  of  Chan- 
cellor Kent,  in  the  case  of  Rogers  v. 
Bradshaw,  must  be  considered  as  the 
settled  construction  of  the  constitu- 
tional provision  on  this  subject,  at 
least  in  this  state .  I  cannot,  however, 
agree  with  my  learned  predecessor  in 
his  subsequent  reasoning  in  that  case, 
upon  which  he  afterward  acted  in 
the  case  of  Jerome  v.  Ross ,  7  Johns. 
Ch.  344,  that  it  is  not  necessary  to 
the  validity  of  a  statute  authorizing 
private  property  to  be  taken  for  the 
public  use  that  a  remedy  for  obtaining 
compensation  by  the  owner  should  be 


Eminent  Domain. 


593 


Ko  titla.  can  vest  under  the  provisions  of  statutes  authorizing 
the  condemnation  of  property  under  the  right  of  eminent  domain, 


provided.  On  the  contrary,  I  hold  that 
before  the  legislature  can  authorize 
the  agents  of  the  state  and  others  to 
enter  upon  and  occupy,  or  destroy  or 
materially  injure  the  private  property 
of  an  individual,  except  in  cases  ojf 
actual  necessity  which  will  not  admit 
of  any  delay,  an  adequate  and  certain 
remedy  must  be  provided  whereby  the 
owner  of  such  property  may  compel 
the  payment  of  his  damages,  or  com- 
pensation ;  and  that  he  is  not  bound  to 
trust  to  the  justice  of  the  government 
to  make  provision  for  such  compensa- 
tion by  future  legislation.  I  do  not 
mean  to  be  understood  that  the  legisla- 
ture may  not  authorize  a  mere  entry 
upon  the  laud  of  another  for  the  pur- 
pose of  examination,  or  of  making  pre- 
liminary surveys,  etc.,  which  would 
otherwise  be  a  technical  trespass,  but 
no  real  inj  ury  to  the  o  vvner  of  the  land, 
although  no  previous  provision  was 
made  by  law  to  compensate  the  indi- 
vidual for  his  property  if  it  should 
afterward  be  taken  for  the  public 
use.  But  it  certainly  was  not  the  in- 
tention of  the  framers  of  the  consti- 
tution to  authorize  the  property  of  a 
citizen  to  be  taken  and  actually  appro- 
priated to  the  use  of  the  public,  and 
thus  to  compel  him  to  trust  to  the 
future  justice  of  the  legislature  to 
provide  him  a  compensation  therefor. 
The  compensation  must  be  either  as- 
certained and  paid  to  him  before  his 
property  is  thus  appropriated,  or  an 
appropriate  remedy  must  be  provided 
and  upon  an  adequate  fund,  whereby 
he  may  obtain  such  compensation 
through  the  medium  of  the  courts  of 
justice  if  those  whose  duty  it  is  to 
make  such  compensation  refuse  to  do 
so.  lu  the  ordinary  case  of  lands 
taken  for  the  making  of  public  high- 
ways, or  for  the  use  of  the  state  canal, 
such  a  remedy  is  provided  ,  and  if  the 
town,  county,  or  state  officers  refuse 
to  do  their  duty  in  ascertaining,  rais- 
ing, or  paying  such  compensation  in 
the  mode  prescribed  bylaw,  the  owner 
of  the  property  has  a  remedy  by  man- 
damus to  compel  them  to  perform 
their  duty.  The  public  purse,  or  the 
property  of  the  town  or  county  upon 
which  the  assessment  is  to  be  made, 
may  justly  be  considered  an  adequate 
fund.     He  has  no  such  remedy,  how- 

75 


ever,  against  the  legislature  to  compel 
the  passage  of  the  necessary  laws  to 
ascertain  the  amount  of  compensation 
he  is  to  receive,  or  the  fund  out  of 
which  he  is  to  be  paid.  In  the  case 
under  consideration,  if  this  company 
were  authorized  to  take  possession  of 
the  plaintifiTs  property  and  complete 
the  construction  of  their  road  before 
his  damages  were  assessed  and  paid, 
or  offered  to  be  paid  to  him,  he  might 
have  been  wholly  without  redress,  as 
he  has  no  power  to  compel  the  assess- 
ment of  damages,  and  no  adequate 
fund  was  provided  for  the  payment  of 
the  damages  when  ascertained.  The 
citizen  whose  property  is  thus  taken 
from  him  without  his  consent  is  not 
bound  to  trust  to  the  solvency  of  an 
individual,  or  even  of  an  incorporated 
company,  for  corporations  as  well  as 
individuals  are  sometimes  unable  to 
pay  all  their  just  debts  ;  especially 
those  corporations  which  are  author- 
ized to  incur  heavy  responsibilities  in 
anticipation  of  the  payment  of  their 
capital  by  the  subscribers  for  tlie 
stock  ;  and  if  the  true  construction  of 
this  charter  was  such  as  is  contended 
for  by  the  defendants'  counsel,  I 
should  hold  that  the  provision,  which 
authorized  the  appropriation  of  the 
plaintiffs  property  to  the  use  of  the 
corporation  before  the  damages  had 
been  ascertained  and  paid,  was  uncon- 
stitutional and  void. 

"  I  cannot,  however,  agree  with  the 
learned  judge  who  delivered  the  opin- 
ion of  the  supreme  court  in  this  case, 
that  such  is  the  fair  and  legitimate 
construction  and  meaning  of  the  de- 
fendants'charter.  It  is  a  primary  rule 
in  the  construction  of  statutes  in  those 
countries  where  the  limits  of  the  leg- 
islative power  are  restricted  by  the 
provisions  of  a  written  constitution, 
to  endeavor,  if  possible,  to  interpret 
the  language  of  the  legislature  in  such 
a  manner  as  to  make  it  consistent  with 
the  constitution  or  fundamental  law. 
Applying  that  principle  to  the  statute 
under  consideration,  and  having  as- 
certained that  it  would  be  inconsistent 
with  the  fundamental  law  of  the  state 
to  authorize  the  defendants  to  take 
possession  of  the  lands  of  an  individ- 
ual without  having  made  an  adequare 
and  certain  provision  for  the  recovery 


694 


Private  Corporations. 


and  providiii^i^forcoiupensiition,  until  the  provisions  of  the  statute 
in  reference  to  compensation  are  complied  with.^     And  it  may 


of  the  damages  wliicli  he  would  nec- 
essarily sustain  by  such  permanent 
occupjition  of  his  property  for  the 
purposes  of  the  road,  there  appears  to 
be  no  dilKculty  in  giving  such  a  con- 
struction to  this  statute  as  will  be 
consistent  with  the  constitution  and 
also  with  the  ])robable  intention  of 
the  legislature.  This  may  be  done 
effectually  by  considering  what  is  very 
iuartificially  appended  as  a  proviso  to 
the  seventh  section,  as  in  the  nature 
of  a  condition  precedent,  not  only  to 
the  acquisition  of  the  legal  title  to  the 
land,  but  also  to  the  riglit  to  enter  and 
take  the  permanent  possession  of  the 
land  for  the  use  of  the  corporation. 
Indeed,  such  appears  to  me  to  be  the 
more  reasonable  and  fair  construction 
of  this  section,  independent  of  any 
constitutional  difficulty  in  the  way  of 
a  different  construction.  For,  upon 
the  supposition  that  no  injustice  was 
intended  l)y  the  legi'slature,  it  can 
hardly  be  presumed  they  meant  to  au- 
thorize the  com[)any  to  enter  upon  the 
lands  of  individuals,  pull  down  their 
buildings,  etc.,  and  then  take  their 
own  time  to  get  the  damages  appraised 
and  to  pay  the  same,  leaving  the  in- 
dividuals injured  thereby  to  seek  for 

'  Baltimore  &  Susquehanna  li.  Co.  v. 
Nesbit,  10  How.  393  ;  Compton  v.  Sus- 
quehanna R.  Co.,  3  Bland,  386;  Van 
Wickle  V.  Railway  Co.,  14  N.  J.  L. 
163;  Stacey  v.  Vermont  C.  R.  Co.,  27 
Vt.  39;  Levering  V.  Railway  Co.,  8  W. 
&  S.  4.-)9  ;  1  Redf.  on  Rail.,  §  65. 

In  Cushman  v.  Smith,  34  Me.  247, 
Chief  Justice  Shapley  says  :  "  There 
has  been  a  serious  difference  of  opinioia 
respecting  the  requirements  and  con- 
struction of  those  constitutional  pro- 
visions, which  declare  in  the  same  or 
similar  terms  that  '  private  property 
shall  not  be  taken  for  public  uses 
without  just  compensation. '  How  far 
legislation  may  proceed  to  authorize 
acts  to  be  done  without  first  making 
or  tendering  compensation,  and  where 
it  becomes  arrested  by  the  provision, 
has  been  considered  by  many  of  the 
ablest  men  and  most  distinguished 
jurists  of  the  country.  And  yet  there 
is  an  indication  arising  out  of  the  con- 


sorae  uncertain  remedy  by  action,  if 
the  company  neglected  to  get  the 
damages  assessed  within  a  reasonable 
time. 

"  The  conclusion  at  which  I  have 
arrived,  therefore,  in  that  the  defend- 
ants" plea  is  imperfect  in  not  averring 
that  the  damages  had  been  regularly 
assessed  and  paid  before  the  defend- 
ants entered  upon  the  plaintiff's  land 
and  appropriated  it  to  the  use  of  the 
road  ;  and  that  if  they  in  fact  entered 
and  commenced  the  construction  of 
the  road  before  the  damages  were 
actually  assessed  and  paid,  the  plain- 
ti!f  has  a  technical  right  to  recover  in 
this  action  for  all  damages  which  he 
really  sustained  by  such  unauthorized 
entry,  although  these  requisites  of  the 
statute  were  afterward  complied  with. 
In  that  case  the  defense  arising  from 
the  subsequent  assessment  and  pay- 
ment of  the  damages  can  only  be 
pleaded  to  that  part  of  the  declaration 
which  charges  a  continuance  of  the 
trespass  after  the  damages  were 
assessed  and  paid  as  required  by  the 
statute." 

In  Cushman  v.  Smith,  supra,  Shep- 
LEY,  C.  J.,  says  :  "  The  exclusive 
occupation  of  that  estate  temporarily, 

flict  of  opinion,  and  the  difficulty  of 
reconciling  the  positions  attempted  to 
be  established  with  each  other,  and 
with  any  sound  and  pervading  princi- 
ple, that  the  whole  truth  has  not  been 
reached.  The  most  thoroughly  it  has 
been  examined  in  connection  with 
legislative  enactments,  the  more 
clearly  has  it  been  perceived  that 
serious  difficulties  or  inconveniences 
or  losses  may  arise  in  the  rigid  and 
uniform  application  of  any  suggested 
construction  to  the  proceedings  re- 
quired in  all  classes  of  public  im- 
provements. How  can  a  construc- 
tion be  correct  which  will  allow  acts 
to  be  done  for  the  purpose  of  mak- 
ing one  kind  of  public  improvement, 
and  prohibit  the  like  acts  to  be 
df)ne  under  like  circumstances  for  the 
purpose  of  making  another  kind  of 
public  improvement  ;  which  will  au- 
thorize acts  for  the  purpose  of  mak- 
ing a  public   highway,   and   prohibit 


Eminent  Domain. 


595 


be  afRnnecl,  as  a  general  principle,  that  no  right  or  title  to  prop- 
erty can  be  acquired  under  tins  right,  until  compensation  for  the 


as  an  initiatory  proceeding  to  an  ac- 
quisition of  a  title  to  it,  or  to  an  ease- 
ment in  it,  cannot  amount  to  a  taking 
of  it  in  that  sense.  The  title  of  the 
owner  is  thereby  in  no  degree  extin- 
guished. He  can  convey  that  title 
while  thus  exclusively  occupied  as  he 
could  have  done  before.  Should  he 
do  so  by  a  conveyance  containing  a 
covenant  that  it  was  free  of  all  in- 
cumbrances, that  covenant  would  not 
make  him  liable  for  such  an  exclusive 
occupation  unless  it  be  admitted  that 
a  title  to  the  land  or  to  an  easement  in 
it  can  be  acquired  without  making 
compensation,  and  this  is  denied. 

"  A  construction  of  the  provision 
which  would  permit  legislation  au- 
thorizing private  property  to  be  exclu- 
sively occupied  without  first  making 
compensation  as  an  incipient  proceed- 
ing to  the  acquisition  of  a  title  to  it, 
or  to  au  easement  in  it,  and  which 
would  not  authorize  the  title  of  the 
owner  to  be  established  or  impaired 
without  compensation,  may  be  some- 
what novel,  but  it  will  not  be  found 
to   be    unsupported    by  positions    as- 

them  for  the  purpose  of  making  a  rail- 
way ;  which  will  authorize  them  for 
the  purpose  of  making  a  canal  or  rail- 
way, when  made  by  a  state,  county, 
city, or  town,  and  prohibit  them  when 
the  same  public  improvement  is  made 
by  a  private  corporation?  And  yet  such 
may  be  the  eti'ect  of  many,  if  not  of 
most,  of  the  constructions  suggested 
or  insisted  upon.  If,  upon  principle 
and  sound  reasoning,  the  provision 
must  operate  alike  upon  the  construc- 
tion of  all  classes  of  public  im- 
provements made  by  the  appropriation 
of  private  property  to  public  use,  the 
effect  of  any  proposed  construction  of 
the  clause  may  be  examined  in  its 
practical  operation,  to  ascertain  if 
such  could  have  been  the  intention  of 
the  framers  of  the  constitution. 

•'  If  the  construction  be  such  as  to 
require  payment  in  all  cases  for  pri- 
vate property  so  taken  before  it  can 
be  exclusively  occupied  for  public  use, 
the  result  must  be  that  no  such  im- 
provement can  be  effectually  or  bene- 
ficially commenced  even  by  a  state, 
county,  city,  or  town,  without  waiting 


serted  and  maintained  in  judicial 
opinions.  It  is  generally  admitted  in 
them,  that  examinations  and  surveys 
may  be  authorized  by  legislative  en- 
actments without  a  violation  of  the 
constitutional  provision,  and  without 
provision  for  previous  compensation, 
passes  is  to  be  found  the  limit  of  the 
legislative  power  to  authorize  tres- 
Whereof  a  more  extensive  and  injuri- 
ous character,  which  do  not  extin- 
guish or  intrench  upon  the  title  of  the 
owner?  Does  that  provision  of  the 
constitution  permit  the  legislative 
power  to  authorize  trespasses  not 
very  injurious  to  private  property 
without  providing  for  previous  com- 
pensation, and  prohibit  it  from  au- 
thorizing those  of  a  little  more  or 
much  more  injurious  character,  which 
do  not  in  any  degree  impair  or  affect 
the  title  of  the  owner?  It  was  not  the 
intention  to  make  the  exercise  of  the 
legislative  power  depend  upon  the  ex- 
tent of  the  injury,  which  the  author- 
ized acts  might  occasion,  if  the  title 
was  not  invaded. 

"  There  are  cases  in  which  an  opin- 
io have  an  assessment  of  damages  first 
made  for  each  person,  whose  estate  is 
in  some  degree  to  be  occupied  upon 
the  whole  line  of  the  contemplated 
improvement. 

"  Such  a  construction  would  prevent 
the  laying  out  and  making  of  high- 
ways and  streets  over  private  estates 
believed  to  be  benefited  and  not  in- 
jured thereby,  before  there  had  been 
an  adjudication  obtained,  that  no  dam- 
ages were  occasioned;  and  it  would  de- 
prive persons  thinking  themselves  ag- 
grieved by  such  an  adjudication  or  by 
one  estimating  the  damages  to  be  too 
little  in  their  judgment,  from  having 
such  adjudications  revised  and  finally 
determined  by  some  other  tribunal 
without  delaying  the  progress  of  the 
public  improvement. 

"  It  is  believed  to  have  been  the  long 
established  course  of  proceeding,  in 
this  part  of  the  country  at  least,  to 
authorize  the  exclusive  occupation  of 
land  required  for  such  public  uses  as 
the  laying  out  of  highways  and  streets, 
by  making  provision  by  law  for  com- 
pensation  to  the  owner,  to  be  subse- 


596 


Private  Corporations, 


property  taken  is  made.     If  proceedings  under  the  statute  have 
been  had,  and  the  vahie  of  the  land  assessed,  the  amount  must 


ion  ig  expressed  that  all  injuries  to 
private  property  authorized  by  the 
legislative  power  can  only  be  author- 
ized by  the  exercise  of  the  right  of 
eminent  domain  ;  and  that  a  temporary 
injury  or  occupation  amounts  to  a  tak- 
ing of  the  property. 

"  If  it  be  admitted  that  such  an  in- 
jury or  occupation  of  the  property 
amounts  to  a  taking  of  it,  in  the  sense 
in  wliich  the  word  taken  is  used  in  the 
constitution,  it  will  follow  that  meas- 
ures must  be  taken  to  ascertain  the 
damages  occasioned  thereby,  and  that 
compensation  must  be  actually  made 
before  it  can  be  so  injured  or  occupied, 
or  that  the  right  to  do  it  without  com- 
pensation first  made  must  be  admit- 
ted, leaving  the  party  injured  to  the 
chance  of  obtaining  compensation  as 
he  may  best  be  able.  If  the  former 
alternative  be  adopted,  private  prop- 
erty cannot  be  injured  or  temporarily 
occupied,  however  urgent  and  imme- 
diate may  be  the  public  necessity, 
without  waiting  for  the  final  comple- 
tion of  all  proceedings  to  ascertain  the 
compensation.     And  how  the  amount 

quently  paid,  and  in  many  cases 
authorizing  the  damages  to  be  finally 
ascertained  as  well  as  paid  subse- 
quently. This  course  of  proceeding 
existed,  so  far  as  is  known,  without 
complaint,  long  before  the  Revolution, 
whicii  cast  off  the  British  dominion  ; 
and  of  course  was  well  known  to  the 
framers  of  the  constitution  which  first 
contained  this  prohibitory  clause  for 
the  protection  of  private  property. 
Was  it  the  intention  to  interrupt  such 
course  of  proceeding  and  to  provide  a 
remedy  for  a  grievance  already  expe- 
rienced, or  only  to  prevent  private 
property  from  being  taken  from  the 
owner  and  permanently  appropriated 
to  public  use  without  compensation? 
Constitutional  provisions  are  often  and 
legitimately  explained  by  consider- 
ing the  actual  state  of  facts  at  the 
time  of  their  adoption.  Thus  the 
provision  in  the  constitution  of  the 
United  States  for  the  regulation  of 
commerce  is  explained  to  include  navi- 
gation, by  reference  to  the  state  of 
facts  existing  at  the  time.  By  these, 
or  other  considerations,  many   minds 


of  compensation  can  be  satisfactorily 
ascertained  before  the  acts  occasion- 
ing damages  have  been  performed,  it 
is  not  easy  to  perceive. 

"  If  the  latter  alternative  be  adopted 
and  the  right  to  cause  a  temporary 
occupation  or  injury  be  admitted  be- 
fore compensation  is  made,  the  party 
injured  must  depend  upon  a  legisla- 
tive provision  for  his  compensation, 
and  the  prohibitory  clause  of  the  con- 
stitution will  fail  to  secure  to  him, 
with  entire  certainty,  a  compensation. 
In  other  words,  it  will  of  itself  afford 
him  no  protection  against  such  tem- 
porary injury  or  occupation,  and 
would  leave  him  in  the  position  iu 
which  he  would  be  by  a  construction 
of  that  clause,  which  woitld  only  pro-, 
tect  him  against  a  permanent  appro- 
priation of  his  property,  or  an  extin- 
guishment or  diminution  of  his  title 
to  it. 

"  Many  of  the  judicial  opinions  ur- 
gently restrictive  of  the  legislative 
power  assert  that  the  title  to  land 
taken  or  to  an  easement  in  it  cannot 
be  transferred  from  the  owner  to  oth- 

appear  to  have  been  led  to  the  conclu- 
sion that  private  property  might  be 
absolutely  taken  and  permanently  ap- 
propriated to  public  use  without  com- 
pensation being  first  made,  when  pro- 
vision was  made  by  law  for  compen- 
sation to  be  subsequently  made  from 
the  treasury  of  the  state,  or  of  a  coun- 
ty, city,  or  town. 

"  Does  experience  teach  that  the 
owner  in  such  cases  will  always  be 
certain  to  obtain  compensation  ?  His- 
tory informs  us  that  kingdoms  and 
states  have  not  always  paid  their  just 
debts  in  full,  that  they  have  often 
])aid  them  only  in  promises  which 
would  not  command  gold  or  silver 
without  a  large  discount. 

"  When  the  private  property  of  citi- 
zens residing  in  a  county,  city  or  town, 
may  be  taken  to  pay  the  debts  of  the 
corporation,  there  may  be  reason  to 
expect  that  its  debts  will  be  certainly 
paid.  But  the  law  making  private 
property  liable  to  bo  taken  for  pay- 
ment of  the  debts  of  such  corporations 
may  at  any  time  be  repealed  or  al- 
tered ;  and  the  corporation  in  its  cor- 


Eminent  Domain. 


597 


be  paid,  or  deposited  for  the  use  of  the  owner  as  provided  by  law. 
"  Tlie  payment  or  deposit  of  the  money  awarded  is  a  condition 


ers  for  public  use  witliout  compensa- 
tion actually  made,  that  the  acts  of 
payment  and  of  transfer  are  simnlta- 
ueous.  If  this  be  true,  it  is  immaterial, 
so  far  as  it  respects  the  acquisition  of 
a  title  to  laud,  or  to  au  easement  in  it 
for  public  use,  when  compensation  is 
made.  It  can  only  be  material  to  in- 
sist that  compensation  shall  be  made 
before  an  exclusive  occupation  is  per- 
mitted, to  prevent  a  temporary  incon- 
venience and  loss.  An  attempt  has 
already  been  made  to  show  that  such 
was  not  the  design  of  the  prohibitory 
clause. 

"  In  the  case  of  Callander  v.  Marsh, 
1  Pick.  430,  the  opinion  states  that  the 
clause  '  has  ever  been  confined  in  judi- 
cial application  to  the  case  of  property 
actually  taken  and  appropriated  by 
the  government.' 

"  In  the  case  of  Hooker  v.  The  New 
Haven  and  Northampton  Co.,  14  Conn. 
146,  Williams,  C.  J.,  says,  that  the 
canal  being  made  in  the  place  desig- 
nated '  and  the  damages  assessed  and 
]iaid,  it  became  a  canal  legally  author- 
ized, and  the  company  became  vested 

porate  capacity  may  not  have  property 
from  which  payment  can  be  obtained. 
"  Is  the  distinction  attempted  to  be 
made  between  taking  private  property 
without  first  making  compensation, 
when  provision  is  made  for  payment 
by  a  state,  county,  city  or  town,  and 
when  it  is  made  for  payment  by  a 
private  corporation,  a  sound  one? 
Can  that  be  a  correct  construction  of  the 
provision  which  would  authorize  legis- 
lation by  which  the  owner  of  an  estate 
might  be  deprived  of  it  without  being 
first  paid,  whenever  in  the  judgment 
of  some  court  or  tribunal  it  might  be 
morally  certain  that  he  could  after- 
ward obtain  compensation,  and  which 
would  not  authorize  it  whenever  in 
the  judgment  of  such  court  or  tribunal 
it  was  not  so  certain  that  he  could  ob- 
tain it  ?  That  would  make  the  title 
pass  from  the  owner  to  the  public  use, 
not  upon  payment  of  compensation, 
but  upon  the  opinion  of  certain  offi- 
cial persons  that  a  fund  or  other 
means  had  been  provided  from  which 
he  might  obtain  payment.  If  such  be 
a  correct  construction,  it  would  follow 


with  the  legal  rights  to  the  enjoyment 
of  their  property.'  And  Siikuman,  J., 
says,  '  that  the  only  limitation  at  com- 
mon law  or  by  any  constitution  to  the 
legislative  power  over  individual  prop- 
erty is  that  what  is  taken  must  be  paid 
for.' 

"  In  the  case  of  Bradshaw  v.  Rogers, 
20  Johns.  103,  SPENCEK,  C.  J.,  says, 
'  It  is  true  that  the  fee-simple  of  the 
land  is  not  vested  in  the  people  of  the 
state  until  the  damages  are  appraised 
and  paid,  but  the  authority  to  enter  is 
absolute,  and  does  not  depend  on  the 
appraisal  and  payment.' 

"In  the  case  of  Bloodgood  v.  The 
Mohawk  and  Hudson  Railroad  Co.,  18 
"Wend.  9,  Maison,  Sen.,  insists  that  an 
entry  and  possession  of  the  land  taken 
in  defiance  of  the  rights  of  the  owner, 
is  a  taking  of  it  in  the  legal  sense, 
and  yet  he  admits  that  the  '  legal  fee 
may  not  be  in  them.' 

"  In  the  case  of  Baker  v.  Johnson,  2 
Hill,  342,  the  opinion  states,  '  Although 
the  absolute  fee  did  not  pass  to  the 
state  until  the  appraisement  of  dam- 
ages, yet  the  right  to  enter  and  use  the 

that  the  title  to  private  property  may 
be  made  to  pass  from  the  owner  to  a 
private  corporation  for  public  use, 
when  that  corporation  should  be  found 
to  possess  the  means  or  to  furnish  se- 
curity which  would  render  it  as  cer- 
tain that  compensation  could  be  sub- 
sequently obtained  from  it  as  from 
the  treasury  of  a  state,  county,  city  or 
town. 

"These  and  other  considerations 
present  themselves  as  serious  objec- 
tions to  a  construction  which  would 
permit  an  owner  of  property  to  be  de- 
prived of  it  without  compensation 
actually  paid  or  tendered  to  him, 
whether  it  be  taken  for  public  use  by 
a  state,  county,  city,  town  or  private 
corporation. 

"  If  such  a  construction  be  inadmis- 
sible, as  well  as  one  which  would  pre- 
vent an  exclusive  occupation  of  a 
temporary  character,  without  payment 
of  compensation,  the  inquiry  is  sug- 
gested, whether  by  a  correct  construc- 
tion such  results  may  not  be  avoided. 

"  This  provision  of  the  constitution 
was  evidently  not  intended  to  prevent 


598 


Private  Coepokations. 


precedent  to  tlie  ri<:jlit  of  tlie  company  to  enter  upon  the  land  for 
tlie  pnrposes  of  construction,  and  without  compliance  with  it  they 


property  was  perfect  the  moment  the 
appropriaiiou  was  made."  It  is  sub- 
jiiitted  tliat  a  payment  as  well  as  an 
appraisement  should  have  been  re- 
quired to  pass  the  title. 

"  In  the  case  of  the  People  v.  Hay- 
den,  6  Hill,  359,  the  opinion  states 
'  the  statute  places  the  right  to  have 
compensation  made  where  the  princi- 
ple of  the  constitution  places  it,  viz., 
upon  the  forcible  divestment  of  the 
use  and  enjoyment  of  private  property 
for  the  public  benefit.'  If  the  divest- 
ment intended  was  of  a  permanent 
character  there  would  be  no  objection 
made  to  it. 

"  In  the  case  of  Smith  v.  Helmer,  7 
Barb.  416,  the  opinion  states,  '  It  is 
sufficient  for  this  case  that  the  settled 
construction  of  the  constitution  which 
prohibits  private  property  to  be  taken 
for  public  use  without  just  compensa- 
tion, actual  compensation  need  not 
precede  the  appropriation.' 

"  In  the  case  of  Rubottom  v.  Mc- 
Clure,  4  Black,  505,  it  was  decided 
that  private  property  might  be  taken 
for  public  use,  upon  provision  being 
made  for  a  subsequent  compensation. 

the  exercise  of  legislative  power  to 
prescribe  tlie  course  of  proceeding  to 
be  pursued  to  take  private  property 
and  appropriate  it  to  public  use  ;  nor 
to  prevent  its  exercise  to  determine 
the  manner  in  which  the  value  of 
such  property  should  be  ascertained 
and  payment  made  or  tendered.  The 
legislative  power  is  left  entirely  free 
from  embarrassment  in  the  selection 
and  arrangement  of  the  measures  to 
be  adopted  to  take  private  property 
and  appropriate  it  to  public  use,  and 
to  cause  a  just  compensation  to  be 
made  therefor. 

"  The  provision  was  not  introduced 
or  intended  to  prevent  legislation  au- 
thorizing acts  to  be  done  which  might 
be  more  or  less  injurious  to  private 
property  not  taken  for  public  use.  It 
is  not  unusual  to  find  that  private 
property  has  been  greatly  injured  by 
public  improvements  when  there  has 
been  no  attempt  to  take  it  for  public 
use.  The  records  of  judicial  proceed- 
ings show  that  private  property  in 
railroads,  turnpike  road,  toll  bridges 
and  ferry  ways  has  been  often  greatly 


"  In  the  case  of  Thompson  v.  Grand 
Gulf  R.  R.  Co.,  3  How.  240,  it  was 
decided  that  compensation  must  be 
first  made,  the  constitution  of  that 
state  requiring  that  it  shall  not  be 
taken  'without  a  just  compensatiori 
made  therefor.' 

"  In  the  case  of  Pittsburgh  v.  Scott, 
1  Peun.  St.  309,  it  was  decided  that  it 
was  not  necessary  that  compensation 
should  be  actually  ascertained  and. 
paid  before  private  property  is  appro- 
priated to  public  use,  that  it  was 
sutficient  that  an  adequate  remedy 
was  provided  by  which  compensation 
could  bo  obtained  without  any  un- 
reasonable delay.  To  the  construction 
of  the  prohibitory  clause  proposed  it 
may  be  objected  that  it  will  not  pre- 
vent the  exercise  of  legislative  power 
to  authorize  the  commission  of  serious 
injuries  upon  private  property  without 
making  provision  for  compensation. 

"  A  construction  so  broad  as  to  pre- 
vent this  would  greatly  limit  the  leg- 
islative power,  and  bring  it  within  a 
much  narrower  sphere  of  action  than 
it  was  accustomed  to  claim  and  exer- 
cise without  complaint  before  the  con- 
injured,  and  sometimes  quite  de- 
stroyed, by  acts  authorized  by  legisla- 
tion, which,  according  to  judicial  de- 
cisions, did  not  violate  any  provision 
of  the  constitution. 

"Private  property  is  often  injured 
by  the  construction  and  grading  of 
highways  and  railways  when  no  at- 
tempt has  been  made  to  change  its 
character  from  private  to  public  prop- 
erty. The  cases  of  Day  v.  Stetson,  8 
Greenl.  3G5;  Callender  v.  Marsh,  1 
Pick.  418;  Canal  Appraisers  v.  The 
People,  17  Wend.  571;  and  Susque- 
hanna Canal  Co.  v.  Wright,  9  Watts  & 
Serg.  9,  present  examples  of  it. 

"  The  provision  was  not  designed, 
and  it  cannot  operate  to  prevent  legis- 
lation which  should  authorize  acts 
operating  directly  and  injuriously,  as 
well  as  indirectly,  upon  private  prop- 
erty when  no  attempt  is  made  to  ap- 
propriate to  public  use.  An  instance 
of  this  kind  of  legislative  action  will 
be  found  in  the  case  of  the  Common- 
wealth v.  Tewksbury,  11  Mete.  55, 
where  a  person  was  held  indictable  for 
the  removal  of  gravel   from   his  own 


Eminent  Domain. 


599 


may  be  enjoined  by  a  court  of  equity,  or  prosecuted  iu  trespass  at 
law  for  so  doing.     The  right  of  the  huid-owncr  to  the  damages 


stitutions  containing  this  clause  were 
framed.  Reliance  must  be  placed 
upon  the  justice  of  legislation,  and 
upon  the  administration  of  the  laws 
for  a  lecompense  for  such  injuries, 
and  not  upon  a  provision  of  the  con- 
stitution not  designed  for  such  a  pur- 
pose. 

'•Another  objection  to  this  construc- 
tion may  be  that  the  owner  will  not 
be  able  to  recover  compensation  for 
the  exclusive  occupation  of  his  land, 
and  for  the  iujuri(!S  thereby  occa- 
sioned, when  the  proceedings  are  not 
so  completed  and  compensation  made 
as  to  transfer  any  title  to  land,  or  to 
an  easement  in  it  for  public  use. 

"  This  objection  is  believed  to  be 
founded  upon  an  incorrect  position. 
If  compensation  be  not  made  within  a 
reasonable  time  after  the  land  has 
been  exclusively  occupied,  the  right 
to  continue  thai  occupation  will  be- 
come extinct.  It  being  authorized 
■only  as  a  part  of  the  proceedings  per- 
mitted for  the  acqtiisition  of  title, 
when  it  becomes  manifest  by  an  un- 

land  contrary  to  a  statute  provision, 
which  did  not  assume  to  appropriate 
to  public  use  or  to  make  compensation 
for  it. 

"The  design  ajipears  to  have  been 
simply  to  declare  that  private  property 
shall  not  be  changed  to  public  prop- 
erty, or  transferred  from  the  owner 
to  others  for  pitblic  use  without  com- 
pensation ;  to  prevent  the  personal 
property  of  individuals  from  being 
consumed  or  destroyed  for  public  use 
without  compensation,  not  to  protect 
sucli  property  from  all  injury  by  the 
construction  of  public  improvements; 
not  to  prevent  its  temporary  posses- 
sion or  use  without  a  destruction  of  it 
or  a  change  of  its  character.  It  was 
designed  also  to  prevent  the  owner  of 
real  estate  from  being  deprived  of  it, 
or  of  an  easement  in  it,  and  to  prevent 
any  permanent  change  of  its  character 
and  use  without  compensation.  While 
it  was  not  designed  to  prevent  legisla- 
tion which  might  authorize  acts  upon 
it  which  wotild  by  the  common  law  be 
denominated  trespasses,  including  an 
exclusive  possession  for  a  temporary 


reasonable  delay  that  the  avowed  pur- 
pose is  not  the  real  one,  or  that,  if 
real,  it  has  been  abandoned,  the  meas- 
ures permitted  for  that  purpose  will 
no  longer  be  authorized,  and  if  the 
occu[)ation  be  continued  after  that 
time  tl»e  occupants  will  be  trespassers, 
and  liable  to  be  prosecuted  as  such. 
The  damages  occasioned  before  the 
right  of  exclusive  occupation  became 
extinct  may  be  recovered  by  an  action 
of  trespass,  or  by  an  action  on  the  case, 
containing  in  the  declaration  aver- 
ments tliat  the  exclusive  occupation 
was  autliorized  for  the  purpose  of  ac- 
quiring title  for  public  use,  and  that 
no  such  proceedings  have  taken  place 
as  would  transfer  any  title  within  a 
reasonable  time,  with  other  suitable 
averments.  If  the  occupants  should 
be  regarded  as  trespassers  ab  initio,  it 
would  not  be,  as  has  been  supposed, 
because  they  had  omitted  to  make 
compensation,  but  because  they  had 
continued  to  occupy  or  commit  tres- 
passes after  it  hid  become  manifest 
that  their  avowed  was  not   their  real 

purpose,  where  there  was  no  attempt 
to  appropriate  it  to  public  use.  Sucli 
acts  of  legislation  might  be  very  un- 
just, and  it  may  be  presumed  that  no 
legislative  body  would  make  such  en- 
actments without  making  provision 
for  the  compensation  of  injuries  to 
private  property  occasioned  by  acts 
designed  to  promote  the  pttblic  good. 
******* 

"  This  leads  to  a  further  inquiry  to 
ascertain  the  sense  iu  which  the  word 
taken  was  used  in  the  constitution. 

"  That  word  is  used  in  a  variety  of 
senses,  and  toconimitnicate  ideas  quite 
different.  Its  senses,  as  used  in  a  par- 
ticular case,  is  to  be  ascertained  by 
the  connection  in  which  it  is  used,  and 
from  the  context  the  whole  being  ap- 
plied to  the  state  of  facts  respecting 
which  it  was  used. 

"  It  cannot  well  be  denied,  and  it  is 
generally  admitted  to  have  been  used 
in  constitutions  containing  this  clause 
to  require  compensation  to  be  made 
for  private  property  appropriated  to 
public  use,  by  the  exercise  on  the  part 
of    the   government  of    its    superior 


600 


PlilVATE    COKPOKATIONS. 


awarded  is  a  correlative  right  to  that  of  the  company  to  the  hind. 
If  the  company  has  no  vested  right  to  the  land,  the  land-owner 
has  none  to  the  price  of  the  land."  ' 


purpose,  or  after  their  real  purpose 
had  been  abandoned. 

"It  is  not  necessary  to  decide 
whether  such  an  action  could  be 
maintained,  for  the  distinction  be- 
tween the  actions  of  trespass  and  case 
has  been  abolished  in  this  state. 

"  After  some  difference  of  opinion,  it 
may  now  be  regarded  as  settled,  that 
enactments  which  authorize  private 
property  to  be  taken  for  public  use 
must  provide  the  means  or  course  to 
be  pursued  to  have  compensation 
made  for  it. 

"  The  conclusions  to  which  this  dis- 
cussion leads  are  : 

"  1.  The  clause  in  constitutions 
which  prohibits  the  taking  of  private 
property  for  public  use  was  not  de- 
signed to  operate,  and  it  does  not 
operate,  to  prohibit  the  legislative  de- 
partment from  authorizing  an  exclu- 
sive occupation  of  private  property 
temporarily,  as  an  incipient  proceed- 
ing to  the  acquisition  of  a  title  to  it, 
or  to  an  easement  in  it. 

"2.  It  was  designed  to  operate,  and 
it  does  operate,  to  prevent  the  acquisi- 
tion of  any  title  to  land,  or  to  an  ease- 
ment in  it,  or  to  a  permanent  appro- 
priation of  it  from  an  owner  for  pub- 
lic use,  without  the  actual  payment  or 
tender  of  a  just  compensation  for  it. 


"  3.  That  the  right  to  such  tem- 
porary occupation  as  an  incipient  pro- 
ceeding will  become  extinct  by  an 
unreasonable  delay  to  perfect  proceed- 
ings, including  the  actual  payment  or 
tender  of  compensation  to  acquire  a 
title  to  the  land,  or  of  an  easement  in 
it. 

"4.  That  an  action  of  trespass  <7Ma?'e 
clausum  may  be  maintained  to  recover 
damages  for  the  continuance  of  such 
occu])ation,  unless  compensation,  or  a 
tender  of  it,  be  made  within  a  reason- 
able time  after  the  commencement  of 
such  occupation. 

"  5.  That  under  such  circumstances 
an  action  of  trespass,  or  an  action  on 
the  case-,  may  be  maintained  to  re- 
cover damages  for  all  the  injuries  oc- 
casioned by  the  prior  occupation. 

"  In  this  case,  as  no  compensation  or 
tender  of  it  was  made  to  the  plaintiff 
within  a  reasonable  time  after  his  es- 
tate was  occupied  by  the  corporations, 
no  title  to  it,  or  to  an  easement  in  it, 
has  been  acquired,  and  the  occupation, 
although  legally  commenced,  has 
ceased  to  be  legal. 

"  As  the  corporation  acquired  no  title 
to  the  land,  or  to  any  easement  in  it, 
the  defendant  could  acquird  none  by 
his  conveyance  from  that  corpora- 
tion." 


title  to  all  property  required  by  the 
necessities  of  the  people  to  promote 
their  common  welfare. 

"  This  appears  to  have  been  denom- 
inated the  right  of  eminent  domain, 
of  supereminent  domain,  of  transcen- 
dental propriety.  These  terms  are  of 
importance  only  to  disclose  the  idea 
presented  by  them,  that  the  right  to 
appropriate  private  property  to  public 
use  rests  upon  the  position  that  the 
government  or  sovereignty  claims  it  by 
virtue  of  a  title  superior  to  the  title  of 


the  individual,  and  that  by  its  exer- 
cise the  individual  and  inferior  title 
becomes  wholly  or  in  part  extin- 
guished —  extinguished  to  the  extent 
to  which  the  superior  title  is  exercised. 
To  take  the  real  estate  of  an  individ- 
ual for  public  use  is  to  deprive  him  of 
liis  title  to  it,  or  of  some  part  of  his 
title,  so  that  the  entire  domain  over  it 
no  longer  remains  with  him.  He  can 
no  longer  convey  the  entire  title  and 
dominion." 


'  Stacey  v.  Vermont  Cent.  R.  Co. ,  27 
Vt.  39.  See,  also,  1  Redf.  on  Rail., 
§65. 

In  Stacey  v.  Vermont  Cent.  R.  Co.,  27 
Vt.  39,  it  was  held  that  the  payment 
or  deposit  of  the  money  awarded  for 


damages  was  a  condition  precedent 
to  the  right  to  enter  upon  the  land 
for  the  purpose  of  building  the  rail- 
road and  without  which  the  company 
might  be  enjoined,  or  prosecuted  for 
the  trespass;  and  that  Jf  the  company 


Eminent  Domain. 


601 


Sec.  409.     Damages  —  mode  of  estimating.      We  liavc  heretofore 
stated  tlie  rule  of  dainao-es  in  such  cases  as  follows  :  "  The  stat- 


lias  no  vested  riglit  to  the  land,  the 
owner  has  none  to  the  damages 
awarded  him. 

In  this  case  Isiiam,  J.,  says: 

"  This  action  is  brought  to  recover 
damages  wliicli  were  appraised  by 
commissioners  for  taking  tlie  plaintiffs 
land  for  the  use  and  construction  of 
the  Vermont  Central  railroad.  The 
survey  of  the  road  was  made  on  the 
4th  of  June,  1847,  and  was  recorded 
in  the  town  clerk's  office,  on  the  5th 
of  August  in  the  same  year. 

"  The  appraisal  of  damages  by  the 
commissioners  was  made  on  the  5th  of 
January,  1849,  and  was  recorded  on  the 
6th  of  February,  afterward.  No  ap- 
peal having  been  taken  within  ninety 
days,  as  limited  by  the  eighth  section  of 
the  charter,  that  appraisal  has  become 
conclusive  as  to  the  amount  of  dam- 
ages sustained,  and,  if  the  plaintiff  is 
entitled  to  recover,  will  prevent  any 
further  litigation  of  that  matter. 

"  It  appears  from  the  case  also,  that 
in  February,  1850.  the  defendants 
changed  their  line  of  road  by  locating 
the  same  on  other  laud  than  that  of 
the  plaintiff,  and  upon  which  their 
road  has  been  constructed.  That  al- 
teration of  their  line  of  the  road  has 
superseded  the  necessity  of  taking  the 
plaintiff's  land  on  which  the  road  was 
first  surveyed.  The  right  of  the  cor- 
poration to  change  the  lineof  theirroad 
is  given  them  by  the  fifteenth  section 
of  their  charter,  which  provides  that 
if  the  directors  of  that  company,  for 
any  cause,  shall  deem  it  expedient, 
they  may  change  the  location  of  such 
parts  of  their  road  as  they  shall  deem 
proper.  That  change  in  the  line  of 
their  road,  however,  will  operate  as  an 
abandonment  of  their  former  survey 
on  the  plaintiffs  laud,  so  that  the  com- 
pany can  no  longer  claim  any  right  or 
interest  in  the  land  itself,  or  to  any 
easement  growing  out  of  it,  in  conse'- 
quencH  of  that  survey  having  been 
made.  That  doctrine  has  been  ex- 
pressly held  in  Massachusetts,  in  rela- 
tion to  highways  Commonwealth  v. 
Westborough,  3  Mass.  406,  and  Same 
v.  Cambridge,  7  id.  1(J3,  and  the  same 
effect,  we  tliink,  will  follow  in  cases 
of  this  character.  The  result  is,  that 
the  plaintiff  retains  his  land  free  from 

70 


any  incumbrance  arising  from  that 
location  or  survey  of  the  road.  That 
abandonment  of  the  line  of  the  road 
over  the  plaintiff's  land,  however, 
does  not  necessarily  supersede  his 
claim  for  damages.  The  right  to  re- 
cover those  damages,  whether  liciui- 
dated  by  the  agreement  of  the  parties 
or  by  commissioners,  is  not  necessarily 
defeated  by  that  act  of  the  company. 
If  the  land  has  once  been  taken,  if  the 
company,  for  any  period  of  time,  have 
been  seized  and  possessed  of  the  laud 
so  appraised,  or  if  the  plaintiff  has 
had,  at  any  time,  a  perfected  right  to 
the  damages  awarded  by  the  commis- 
sioners, a  subsequent  abandonment  of 
that  location,  and  the  establishment  of 
a  new  line  for  the  road,  will  have  no 
effect  to  defeat  the  plaintiff's  claim  for 
the  damages  which  have  been  awarded 
to  him.  Westbrook  v.  North,  2  Greenl. 
179  ;  Hampton  v.  Coffin,  4  N.  H.  517; 
Harrington  v  Comm'rs  of  Berkshire,  23 
Pick.  267;  Hawkins  v.  Rochester,  1 
Wend.  53.  Under  such  circumstances 
the  plaintiff  would  be  entitled,  on  the 
abandonment  of  that  location,  to  the 
land  free  from  any  incumbrance  of 
that  character,  and  also  to  the  dam- 
ages which  were  allowed  to  him. 

"  The  important  question  in  the  case 
therefore  arises,  whether  the  Vermont 
Central  Railroad  Company  have  ever 
been  seized  or  possessed  of  this  land 
of  the  plaintiff,  and  for  which  the 
award  of  the  commissioners  was  made; 
or  has  the  plaintiff  ever  had  a  vested 
right  to  the  damages  which  were 
awarded  on  that  survey  of  the  road  ? 
The  determination  of  these  questions 
depends  upon  the  construction  which 
is  to  be  given  to  the  seventh  section  of 
the  charter  of  this  company.  We  obvi- 
ously can  derive  but  little  aid  on  this 
subject  from  adjudged  cases  in  other 
states,  unless  they  have  arisen  upon 
soipe  statutory  provision,  embracing 
substantially  the  specific  provisions 
of  that  section  of  this  charter.  By 
that  section  it  is  provided,  that  when 
land  or  other  real  estate  is  taken  by 
the  corporation  for  the  use  of  their 
road,  and  the  parties  are  unable  to 
agree  upon  the  price  of  the  land,  the 
same  shall  be  ascertained  and  deter- 
mined    by     commissioners,    together 


602 


Pkivate  Corporations. 


utes  of  the    states  generally  make  some  provision  in  reference  to 
damai^es  in  such  cases,  such  as  tliat  in  estimating  tlie  same  no 


with  the  charges  and  costs  accruing 
thereon,  and  upon  the  payment  of  the 
same,  or  by  depositing  tJie  amount  in  a 
hank  as  shall  be  ordered  by  the  commis- 
sioners, the  company  .shall  be  deemed 
to  he  seized  and  jjossessed  of  all  such 
lands  as  shall  have  been  a,ppraised. 
This  provision  is  quite  specific  in 
stating  what  act  on  the  part  of  the 
corporation  vests  in  them  a  riglit  to 
the  laud.  Tliey  derive  no  title  to  the 
land  or  any  easement  growing  out  of 
it,  from  the  fact  of  their  having  sur- 
veyed the  road  across  the  plaintiffs 
land,  or  having  placed  that  survey  on 
record,  nor  by  having  the  damages 
appraised  by  commissioners,  and  caus- 
ing their  award  to  be  recorded.  The 
statute  is  express,  that  the  y)aymeut 
or  deposit  of  the  money  according  to 
the  award  must  be  made  before  any 
such  riglit  accrues.  Until  that  pay- 
ment is  made,  the  company  have  no 
right  to  enter  upon  the  land  to  con- 
struct the  road  or  exercise  any  act  of 
ownership  over  the  same.  A  court  of 
equity  would  enjoin  them  from  exer- 
cising any  such  right,  or  they  might 
be  prosecuted  in  trespass  at  law.  The 
ourvey  and  appraisal  of  damages  are 
merely  preliminary  steps  to  ascer- 
tain the  terms  upon  which  the  land 
can  be  taken  for  such  purposes,  if 
the  company  shall  see  fit  to  use  the 
same  for  the  construction  of  their 
road.  If  it  is  accepted,  and  the  com- 
pany conclude  to  take  the  laud,  that 
acceptance  and  that  taking  is  con- 
summated only  by  a  payment  or  de- 
posit of  the  money,  for  the  use  of 
the  owner  of  the  land,  as  awarded 
and  directed  by  the  commissioners. 
The  case  of  the  Baltimore  &  Sus- 
quehanna R.  Co,  V.  Nesbil  et  al.,  10 
Howard,  895,  is  very  decisive  on  this 
question.  In  that  case  land  was  taken 
by  the  company  under  a  charter 
granted  by  the  state  of  Maryland 
Under  a  provision  in  th(4r  charter,  the 
damages  were  assessed  by  a  jury,  and 
that  assessment  was  confirmed  by  the 
court.  In  that  case,  as  in  this,  the  road 
was  located,  and  the  damages  conclu- 
sively determined  and  settled,  so  that 
no  further  litigation  could  arise  on 
that  matter.  In  that  case,  as  in  this 
also,  the  charter  provided,  that  tlie 
payment,  or  tender  of  payment  of  such 


valuation,  should  entitle  the  company 
to  the  estate  or  laud  as  fully  as  if  it 
had  been  conveyed.  The  charter  of 
that  company  and  of  this,  in  all  par- 
ticulars important  upon  this  question, 
are  substantially  similar.  The  court 
remarked,  '  that  it  is  the  payment  or 
tender  of  the  value  assessed  by  the 
inquisition  which  gives  the  title  to  the 
company,  and,  consequently,  without 
such  payment  or  tender  no  title  could, 
by  the  very  terms  of  the  law,  have 
passed  to  them.'  They  further  ob- 
served :  '  that  it  can  hardly  be  ques- 
tioned, that  without  acceptance  in  the 
mode  presa'ibed  the  company  were  not 
bound;  that  if  they  had  been  dissatis- 
fied with  the  estimate  placed  upon  the 
laud,  or  could  have  procured  a  more 
eligible  site  for  the  location  of  their 
road,  they  would  have  been  at  liljerty, 
before  such  acceptance,  wholly  to  re- 
nounce the  inquisition.  The  proprie- 
tors of  the  land  could  have  no  author- 
ity to  coerce  the  company  into  its 
adoption.'  The  same  doctrine  was 
sustained  in  the  case  of  Bloodgood  v. 
Mohawk  &  Hud.  R.  R.  Co.,  18  Wend. 
10,  19.  In  that  case  the  company  were 
authorized  to  enter  upon  the  land  and 
make  such  examinations  and  surveys 
as  were  necessary  to  determine  the 
most  advantageous  route  for  the  road, 
and  to  take  the  same  for  that  purpose; 
])rovided,  that  all  land  so  taken  shall 
be  purchased  by  the  company  of  the 
owner,  and  in  case  of  a  disagreement 
as  to  the  price  or  value  of  the  land, 
commissioners  were  to  be  appointed 
to  determine  the  same,  and  upon  pay- 
ment of  Hitch  damages  toith  tlie  costs, 
or  depositing  the  same  in  a  hank  in 
tlie  city  of  Albany,  then  the  corpoi'a- 
tion  shall  he  deemed  to  be  seized  and 
possessed  oj  the  land  so  appraised.  It 
will  at  once  be  perceived,  that  the  pro- 
visions of  that  charter  are  not  only 
similar  in  this  respect  to  that  of  the 
Vermont  Central  Railroad  Company, 
but  that  they  are  expressed  in  very 
similar  language.  The  chancellor  re- 
marked '  that  this  provision  should  be 
considered  in  the  nature  of  acondilion 
precedent,  not  only  to  the  acquisition 
of  the  lesral  title  to  the  land,  but  also 
to  the  right  to  enter  and  take  the  per- 
manent posses^^ion  of  the  land  for  the 
use   of  the   corporation.'     It   is   very 


Eaunent  Domain. 


603 


account   shall  be  taken  of  the  benefits   conferred  by  the   con- 
templated iniproveinent  for  which  the  land  is  taken. ^     The  i^en- 


clear,  from  these  cases,  that  as  the 
Verinout  Central  Railniad  Company 
have  never  paid  or  deposited  the 
amount  of  that  award  of  the  commis- 
sioners for  tlie  benefit  of  the  plaintiff, 
as  ordered  by  them,  that  the  company 
have  never  acquired  any  right  or  tithi 
to  the  land  appraised,  or  to  any  ease- 
ment growing  out  of  it  ;  and  that  none 
can  now  be  acquired  under  those  pro- 
ceedings. The  abandonment  of  tliat 
lo(!atiou,  and  the  adoption  of  a  new 
route,  and  the  construction  of  their 
road  thereon,  will  prevent  the  acqui- 
sition of  any  such  title  or  the  perfec- 
tion of  any  such  right. 

"  It  is  insisted,  however,  that 
though  the  corporation  have  no  right 
to  the  land,  and  have  never  been 
seized  or  possessed  of  the  same,  yet 
that  the  plaintiff,  under  the  provisions 
of  that  act,  has  acquired  a  vested  right 
to  the  damages  awarded  by  the  com- 
missioners, and  that  that  right  became 
vested  in  him  when  the  award  was 
made  and  recorded.  The  statute  re- 
quires '  that  the  commissioners  shall 
determine  the  damages  which  the 
owner  of  the  land  may  have  sustained, 
or  shall  he  likely  to  sustain,  by  the  oc- 
cupation of  the  same  for  the  purposex 
aforesaid.'  The  actual  taking  and  oc- 
cupation of  the  same  for  such  pur- 
poses is  the  foundation  upon  which 
the  binding  character  of  that  award  is 
made  to  rest.  It  is  those  circum- 
stances which  the  commissioners  are 
to  take  into  consideration  in  ascertain- 
ing the  amount  of  damages.  If,  there- 
fore, the  land  has  never  been  taken 
by  the  company  in  a  manner  in  which 
they  can  legally  occupy  the  same,  no 
damages  have  arisen,  or  can  arise,  from 
that  cause.  When  the  corporation 
obtains  a  vested  right  to  the  land,  or 
to  the  easement,  the  landholder  has  a 
vested  right  to  the  damages ;  that 
specific  art,  which  vests  the  right  in 
them,  gives  also  a  vested  right  to  the 
owner  of  the  land.  These  respective 
rights  are  correlative, and  have  a  recip- 
rocal relation;  the  existence  of  one 
depends  upon  the  existence  of  the 
other.  If  the  corporation  have  no 
vested  right  to  the  land,  the  owner  of 


the  land  has  no  vested  right  to  the 
price  which  was  to  be  paid  for  it.  Tliis 
is  the  very  ground  upon  which  the 
cases  were  sustained  to  which  we  were 
referred  in  the  2  Me.  179  ;  4  X.  H. 
517;  and  I  Wend.  58.  Two  of  these 
cases  were  in  assumpsit,  and  the  other 
in  debt  for  the  recovery  of  a  sum 
awarded  for  land  taken  for  similar 
purposes.  The  land-owner  was  al- 
lowed to  recover  his  damages,  and 
was  treated  as  having  a  vested  right 
to  them,  as  a  vested  right  to  the  ease- 
ment in  the  laud  had  been  acquired, for 
which  those  damages  had  been  given 
as  a  compensation  That  is  also  the 
doctrine  of  the  case  in  10  How.  395,  for 
on  that  ground  alone  was  sustained 
the  constitutionality  of  the  act  of 
Maryland,  in  causing  to  be  vacated  the 
firht  appraised,  and  ordering  a  new  in- 
quisition to  be  taken.  As  there  had 
been  no  payment  or  tender  of  the 
damages  assessed,  there  was  no  vested 
riglit  to  the  land,  and  for  that  reason 
the  act  was  held  constitutional  in  va- 
cating the  first  inquisition.  On  the 
same  ground,  and  for  that  reason  spe- 
cifically assigned,  the  court,  in  the  case 
of  Harrington  v.  Berkshire,  23  Pick. 
267,  granted  a  mandamus  to  enforce 
the  payment  of  damages  awarded  to 
the  landholder.  The  road  had  been 
laid,  the  title  to  the  easement  under 
their  statute  had  vested,  and,  for  that 
reason,  tlie  party  had  a  vested  right  to 
the  damages  awarded.  We  know  of 
no  case,  neither  haive  we  been  referred 
to  any,  in  which  such  damages  have 
been  recovered,  or  in  which  the  owner 
of  the  laud  has  been  c<nisiiiered  as 
having  a  vested  right  to  the  same, 
wlieu  the  corporation  hud  acquired  no 
right  to  the  land,  or  to  an  easement 
growing  out  of  it.  There  is  no  pro- 
priety or  consistency  in  saying,  that 
the  plaintiff  shall  recover  this  com- 
pensation for  land  which  has  never 
been  taken  or  purchased  from  him  ; 
that  this  company  shall  pay  for  a  right 
or  an  easement,  whicli  they  never  had, 
and  which  they  never  could  legally 
enjoy.  If  the  line  of  this  road  had 
been  so  varied  as  to  run  over  another 
portion  of  the  plaintiffs  land,  it  would 


Const.  Iowa,  art.  1,  §  18. 


604 


PjKivATE  Corporations. 


eral  rale  is,  that  tlie  party  whose  land  is  taken  maj  recover  the 
market  value  of  the  land  thus  taken,  and,  in  the  absence  of  statu- 
tory provisions,  no  allowance  should  be  made  on  account  of  the 
general  advantage  which  the  owner  enjoys  in  connnon  with  the 


hardly  be  contended  that  he  would  be 
entitled  to  a  double  compensation  ; 
yet  such  would  be  the  result  if  this 
action  can  be  sustained. 

"  The  cases  in  England  have  no 
definite  bearing  upon  this  subject,  nor 
are  they  in  conflict  with  the  construc- 
tion we  have  given  to  the  provisions 
of  this  charter.  In  that  country,  gen- 
erally, the  railroad  is  located,  and  its 
courses  definitely  defined,  when  the 
application  is  made  to  parliament  for 
a  charter.  When  a  charter  is  granted, 
it  is  based  upon  that  location,  and 
authority  is  granted  to  take  that  spe- 
cific land  for  that  purpose.  The 
owner  of  the  land  is  required  to  spe- 
cify the  sum  he  demands  for  it,  and  if 
not  assented  to,  inquisition  is  to  be 
made  to  determine  the  value  of  the 
laud.  Burkiushaw  v.  Birmingham  & 
Oxford  Railway  Co.,  4  Eng.  Law  &  Eq. 
492.  Under  those  charters  it  has  been 
held  that,  if  no  inquisition  is  made, 
the  company  are  bound  to  pay  the 
sum  specified,  and  not  only  has  pay- 
ment been  enforced  by  mandamus, 
but  the  company  have,  by  the  same 
process,  been  compelled  to  carry  into 
effect  all  the  powers  delegated  to  them 
by  their  charter.  Blakeniore  v.  Gla- 
morganshire Canal  Navigation,  1 
Mylne  &  Keene,  1G2,  163;  Regina  v. 
The  Eastern  Counties  R.  Co.,  10  Ad. 
&  Ell.  531  ;  Regina  v.  The  York  North 
Midland  R.  Co.,  16  Eng.  Law  &  Eq, 
299.  That  doctrine,  however,  has 
since  been  overruled  in  the  exchequer 
chamber,  to  which  the  last  cited  case 
was  carried  on  a  writ  of  error.  York 
&  N.  Midland  Railway  Co.  v.  Regina, 
18  Eng.  Law  &  Eq.  206,207,208.  Those 
charters  are  now  treated  as  conferring 
conditional  powers  to  take  the  land  on 
making  compensation  for  it.  The  ob- 
servations of  Jeuvis,  C.  J.,  in  the 
last  case,  are  very  appropriate  and  ap- 
plicable to  the  rights  of  the  parties 
under  this  charter.  '  The  company 
may  take  land  ;  if  they  do,  they  must 
make  full  compensation.  The  words 
of  the  statute  are  permissive,  and  only 
impose  the  duty  of  making  full  com- 


pensation to  each  land-holder,  as  the 
option  of  taking  the  land  of  each  is 
exercised.'  This  case  as  well  as  the 
case  of  Burkinshaw  v.  The  Birming- 
ham &  Oxford  R.  Co.,  4  Eng.  Law  & 
Eq.  489,  establishes  the  correlative 
and  reciprocal  relation  existing  be- 
tween the  right  of  the  company  to  the 
laud,  and  the  right  of  the  owner  of 
the  laud  to  the  damages  awarded.  If 
the  land  has  been  taken  in  such  a 
manner  as  to  vest  in  the  company  a 
right  to  the  use  and  occupancy  of  it, 
compensation  is  to  be  made  ;  but  no 
rigiit  to  such  compensation  can  exist 
where  the  laud  has  not  been  taken. 

' '  The  authorities  upon  the  questions 
involved  in  this  case,  we  think,  are 
more  than  ordinarily  clear  and  decis- 
ive, and  fully  establish  the  principle 
that  the  plaintiff  has  no  claim  to  these 
damages,  as  the  land  has  never  been 
taken  or  occupied  by  the  corporation 
for  the  purposes  mentioned  in  their 
charter  ;  and  that  the  payment  of  the 
money,  as  awarded  by  the  commission- 
ers, is  necessary,  and  is  to  be  treated 
as  a  condition  precedent  to  the  right 
of  the  company  to  the  land,  or  to  any 
easement  growing  out  of  it." 

In  Neal  v.  Pittsburgh  &  Connells- 
ville  Railway  Company,  31  Penn.  St. 
19,  it  is  held  that,  where  a  railway 
company  had  located  their  road 
through  a  man's  land,  and  had  the 
damages  assessed  by  viewers  and  con- 
firmed by  the  court,  the  owner  of  the 
land  was  entitled  to  execution  for  the 
amount  as  upon  a  judgment  in  hia 
favor,  although  the  company  had  not 
taken  possession,  and  had  instituted 
proceedings  to  ascertain  the  advant- 
ages of  another  route  with  a  view  to 
change  the  location. 

The  court  say,  "Though  railroad 
companies  may  make  experimental 
surveys  at  pleasure  before  finally  lo- 
cating their  road,  yet  certainly  it  has 
never  been  granted  to  them  to  have 
experimental  suits  at  law  as  a  means 
of  chaffering  with  the  land-owner  for 
the  cheapest  route." 


Eminent  Domain. 


605 


public  generally  by  reason  of  the  public  improvement.  And 
wliero  damages  are  assessed  for  a  railroad,  it  should  include  coiri- 
pensation  for  all  actual  loss  to  whieli  the  owner  will  be  sul>ject  by 
reason  of  the  proper  construction  and  operation  of  the  road.  The 
proper  mode  of  ascertaining  damages  for  a  right  of  way  of  a  road 
across  lands  is  to  determine  the  market  value  of  the  premises  be- 
fore the  right  is  set  apart,  and  then  again  immediately  after,  and 
the  difference  will  be  the  true  measure  of  damages.  Present 
values  and  the  immediate  and  necessary  consequence  of  parting 
with  the  right  conferred  being  alone  proper  to  be  considered,  and 
future  benefits,  abuse  of  privilege  and  unwillingness  of  the  owner 
to  part  with  the  I'ight  should  be  disregarded.  The  condition  in 
which  the  premises  will  be  left  after  the  right  of  wax  is  taken, 
together  with  the  damages  assessed,  should  be  equal  to  the  value 
of  the  premises  immediately  before  the  right  of  way  is  taken,* 
Present  depreciation,  and  not  anticipated  injuries,  .is  the  measure 
of  damages,^  although  future  exposure  to  fire  may  be  proper  to 
be  considered  by  a  jury  in  estimating  them,  as  it  M'ould  tend  to 
reduce  the  present  value."  * 


1  Jacob  V.  City  of  Louisville,  9  Daua 
(Ky.),  114 ;  2  Keut'a  Com.  3o9  and 
notes  ;  Isreal  v.  Jewett,  29  Iowa,  4T5  ; 
Fleming  v.  The  Chicago,  etc.,  R.  Co., 
34  id.  353. 

2  Watson  V.  The  Pittsburgh,  etc.,  R. 
Co.,  37  Penn.  St.  469;  Schuylkill  Nav. 
Co.  V.  Thoburn,  7  S.  &  R.  411;  Deaton 
V.  Polk  Co.,  9  Iowa,  594,  Preston  v.  Du- 
buque, etc.,  R.  Co.,  11  id.  15;  Henry  v. 
Dubuque,  etc.,  R.  Co.,  2  id.  288;  Sater 
V.  Burlington,  etc.,  R.  Co.,  1  id.  386. 

3  Wilmington,  etc.,  R.  Co.  v.  Stauf- 
fer,  60  Penn.  St.  374. 

4  Field  on  Dam.,  i^  846;  citing  Col- 
ville  V.  Railway,  19  Minn.  282.  See, 
also,  Pottstowu  Gas  Co.  v.  Murphy,  39 
Penn.  St.  257  ;  Hornstein  v.  Atlantic, 
etc.,  R.  Co.,  51  id.  87;  Buckwalter  v. 
Black  rock  Bridge  Co.,  38  id.  281;  Dear- 
born v.  The  Boston,  etc.,  R.  Co.,4  Fos- 
ter (N.H.),  179;  Mt.  Washington  R.  Co.'s 
Petition,'  35  N.  H.  134;  Minnesota 
Cent.  R.  V.  McNamara,  13  Minn.  508; 
Winona,  etc.,  R.  Co.  v.  Waldron,  11 
id.  515;  Fleming  v.  Chicago,  etc.,  R. 
Co.,  34  Iowa,  558;  Deaton  v.  County  of 
Polk,  9  id.  594;  East  Penn.  R.  Co.  v. 
Hottenstine,  47  Penn.  St.  28 ;  Searl  v. 
The  Lackawanna,  etc.,  R.  Co.,  33  id. 


57;  Patten  v.  North  Cent.  R.  Co.,  id. 
426;  Dorian  v.  East  Brandvwine,  etc., 
R.  Co.,  46  id.  520 ;  Town  o"f  Lambert- 
ville  v.Clevinger,30  N.J. L.  53;  Amsden 
V.  Dubuque,  etc.,  R.  Co.,  28  Iowa,  542; 
San  Francisco,  etc.,  R.  Co.  v.  Caldwell, 
31  Cal.  367;  Tingley  v.  City  of  Provi- 
dence, 8  R.  I.  493 ;  Bangor  R.  Co.  v. 
McConib,  60  Me.  290 ;  Thompson  v. 
Grand  Gulf  R.  Co.,  3  How.  (Miss.)  240; 
Bonaparte  v.  Camden,  etc.,  K.  Co.,  1 
Bald.  (U.  S.  C.  C.)~05;  Rexford  v. 
Knight.  11  N.  Y.  308;  Bloodgood  v. 
Mohawk,  etc.,  R.  Co.,  18  Wend.  9 ; 
Baker  v.  Johnson,  2  Hill,  342;  People 
V.  Hayden,  6  id.  359. 

Mr.  Redtield  observes  in  reference  to 
the  uiode  of  estimating  damage  as  fol- 
lows .  "  But  this  is  most  readily  and 
fairly  ascertained  by  determining  the 
value  of  the  whole  land,  without  the 
railway  and  the  portion  remaining 
after  the  railway  is  built.  The  dif- 
ference is  the  true  compensation  to 
which  the  partv  is  entitled."  1 
Redf.  on  Rail  ,  §"71.  This  gives  the 
owner  the  benefit  anticipated  from 
the  building  of  the  road,  from  which 
others  in  close  proximity  to  the  road 
may  be   equally   benefited.     And   the 


606  Pkivate  Corporations. 

Skc.  410.  Elements  of  damages  which  may  be  considered.  —  In  esti- 
mating the  damages  sustained,  the  appraisers,  however  selected,  or 
the  jury,  where  it  is  submitted  to  a  jury,  may  consider  not  only 
the  present,  but  the  prospective  injury  which  the  party  will  sus- 
tain by  a  prudent  construction  and  operation  of  the  road.  Thus, 
they  may  take  into  account  the  effect  which  a  proper  construction 
of  tl)e  road  will  have  in  diminishing  deposits  of  sediment  on  the 
balance  of  the  land  ; '  the  deterioration  of  the  balance  of  the  land  ; 
the  additional  risk  by  fire  and  care  of  family  and  stock,  in  con- 
sequence thereof  ;  the  inconvenience  of  embankments,  excavations 
and  otiier  obstructions  to  the  free  use  of  the  land  or  buildings ;  '^ 
the  increase  or  decrease  in  value  of  the  remaining  lands,  and  the 
additional  expense  of  fencing."  But  these  elements  and  consid- 
erations should  be  considered  as  afEecting  the  present  damages  for 
the  taking  of  the  land  ;  the  true  rule  bemg,  as  we  have  stated  it, 
viz.,  the  difference  between  the  value  of  the  land  before  and  im- 
mediately after  the  appropriation,  as  affected  by  the  various  cir- 
cumstances which  we  have  indicated.  But  where  the  whole  land 
of  a  party  is  taken,  the  measure  of  damages  would  be  the  whole 
value  of  the  land  at  the  time  of  the  taking,  without  regard  to  the 
anticipated  benefits  which  may  result  from  the  construction  and 
operation  of  the  road." 

Sec.  -ill.  Land  injuriously  aflfected  but  not  taken.  —  It  is  a  gen- 
erally recognized  doctrine  of  the  common  law,  that  railroad  cor- 
porations are  not  liable  for  the  incidental  damages  occurring  to 
premises  not  taken,  under  the  exercise  of  the  right  of  eminent 
domain,  provided  they  exercise  proper  care  in  the  construc- 
tion and  operation  of  their  roads.  Such  damage  is  dainnuin 
absque  injuria,  and  no  action  can  be  maintained  therefor.^     But 

right  to  consider  benefits  to  be  derived  reduce  the  amount  of  compensation 
in  common  with  others  has  been  ques-  for  the  appropriation  of  lands,  by  rail- 
tioned  iu  many  cases,  as  an  element  to     road  corporations. 

'  Concord  R.  Co.  v.  Greely,  21  N.  H.  cific  R.   Co.  v.   Chrystal,   25   Mo.  544. 

237.  See,  also,  in  case  of  woodlands,  Ryder 

■^  Somerville,  etc.,  R.  Co.  V.  Doughty,  v.  Striker,  63  N.  Y.   136.     The  value 

22  N.  J .  L.  495.  should  be  fixed  at  the  time  proceed- 

•*  Greenville,  etc.,  R.  Co.  v.  Partlow,  ings  are  commenced.     Graham  v.  Con- 

5  Rich.  (S.  ('.)  428.  nersville  R.  Co.,  36  Ind.  463  ;  10  Am, 

*  See  notes,  supra  ;  Little  Miami  R.  Rep.  56. 
Cx).  V.  Collett,  6  Ohio  (N.  S.),  182  ;  Pa-        '  Field  on  Dam.,  §  43. 


Eminent  Domain. 


607 


tlicy  would  be  liable  for  diverting  a  stream  of  water  from  its 
natural  course,  whereby  a  person  sustains  damage,'  or  doing  any 
other  damage  to  the  adjoining  lands  which,  by  the  exercise  of 


'  Hatch  V.  Vermont  Cent.  R.  Co.,  and 
Wliitcomb  V.  Same,  25  Vt.  49. 

In  reference  lo  such  cases.  Red- 
field,  C.  J.,  observed : 

"  The  important  question  in  the  case 
is,  how  far  this  railway  company  is 
liable  for  consequential  damage  to 
lands  near  their  track,  but  no  part  of 
which  is  taken,  by  tliem,  for  any  pur- 
pose. It  seems  to  be  conceded  in  the 
argument  for  the  plaintiff,  and  as- 
sumed on  all  hands,  that  nothing  in 
the  company's  charter,  or  in  any  gen- 
eral statute  of  the  state,  in  force  at 
the  time,  in  terms  made  them  liable 
for  such  damage.  Indeed,  this  as- 
sumption seems  indispensable  to  en- 
able the  plaintiff  to  get  along  with  his 
case.  For,  if  such  remedy  is  given  by 
statute,  it  is  probably  exclusive,  or 
at  all  events  it  would  doubtless  often 
have  been  resorted  to  long  before 
this.  But  no  such  claim  has  ever  been 
made,  by  any  one;  and  this  may  be 
regarded  as  pretty  satisfactory  proof 
that  no  such  express  provision  exists. 
The  English  courts  seem  to  consider 
a  provision  in  the  charter  for  assess- 
ing damages,  in  a  summary  way,  ex- 
clusive and  not  a  cumulative  remedy. 
East  and  West  India  Docks,  etc.,  v. 
Qattke,  ;".  Eng.  Law  &  Eq.59;  Wat- 
kins  V.  Great  Northern  Railway,  6  id. 
179. 

"  It  must  be  conceded,  then,  that  so 
far  as  a  general,  unqualified  grant  of 
the  legislature  will  enable  the  defend- 
ants to  build  the  road,  and  continue 
its  operation,  without  liability  for  con- 
sequential damage  to  the  proprietors 
of  the  land,  not  taken,  they  are  acquit 
of  all  such  liability  There  is  no 
doubt  the  legislature  might  have 
granted  the  charter  with  this  liability 
attached  to  the  company,  or  any  other 
which  they  saw  fit  to  attach.  The 
accepting  of  the  charter  was  not  im- 
perative upon  the  company.  But  hav- 
ing accepted  it,  they  are  bound  by  its 
conditions,  and  entitled  to  all  its  priv- 
ileges. And  it  seems  to  us  fair  to  as- 
sume that  no  such  obligation  being 
imposed  upon  the  company,  in  the 
charter,  or  by  the  general  statutes  of 
the  state  then  in  force,  it  was  the  pur- 
pose of  the  legislature  to  exempt  them 


from  such  obligation,  so  far  as  they 
had  th(i  power  to  do  so.  The  reason 
for  doing  this  it  is  scarcely  needful  to 
discuss,  it  was,  doubtless,  esteemed 
some  object  to  encourage  such  com- 
panies to  build  their  roads.  The  ex- 
tent of  such  injuries  had  not  been 
much  considered,  perhaps,  at  that 
time,  and  almost  all  our  citizens 
then  esteemed  a  desideratum  to  bring 
a  railway  as  near  them  as  possi- 
ble, the  nearer  the  better.  I  siiould 
not  probably  be  able  to  give  much 
force  to  an  argument,  which  is  said  to 
intlueuce  some  minds,  that  it  would 
be  impossiblo  for  any  company  to 
stand  up  unfler  such  a  burden.  I 
should  probably  think,  if  such  was 
tlie  statute  or  the  law,  that  they  must 
stand  up  under  it,  or  fall  before  it. 
And  it  seems  to  me,  that  such  a  statute 
regulation,  which  exists  in  England, 
and  in  Massachusetts,  and  perhaps  in 
some  of  the  other  states,  is  highly 
equitable  and  just.  And  if  these  pub- 
lic works  cannot  be  maintained  upon 
fair  and  just  grounds,  by  individual 
enterprise,  they  must  be  fostered  by 
public  grants,  or  delayed  till  they  can 
be  thus  maintained.  But  if,  instead 
of  this,  the  legislature  sees  tit  to  an- 
nex no  such  condition  to  the  charter, 
and  thus  virtually,  so  far  as  they  have 
the  power,  exempt  them  from  any 
such  obligation,  the  company  are  en- 
titled to  have  their  rights  fairly  and 
fully  vindicated,  in  the  tribunals  of 
the  state,  the  same  as  other  citizens. 
Nor  should  this  be  done  grudgingly, 
or  by  compulsion,  but  justly  and  equit- 
ably, the  same  as  in  other  cases  of 
like  character.  If  the  character  of 
parties  should  come  to  be  the  measure 
of  their  rights,  and  this  to  be  deter- 
mined by  the  fallible  judgments  of 
imperfect  humanity,  swayed  or  se- 
duced by  the  conceits,  the  passions, 
and  the  prejudices  of  the  moment, 
men  might  almost  as  well  resort  at 
once  to  their  ultimate  rights,  before 
civil  government  existed. 

"  If,  then,  the  legislature  have  pur- 
posely exempted  this  company  from 
such  an  obligation,  we  do  not  well 
perceive  how  the  plaintiff  will  be 
fairly  able   to    deprive   them   of   the 


608 


Private  Corporations. 


due  care,  and  tlie  adoption  of  proper  methods  might  luive  been 
avoided.  The  presumption  in  all  cases  is,  that  the  grant  only 
contemplates  such  injury  from  its  exercise  as  inevitably  results 


benefit  of  the  exemption,  unless  he 
can  show  that  such  an  exemption  is  a 
violation  of  the  constitutional  restric- 
tions upon  tlie  power  of  the  legisla- 
ture, or  else  that  it  is  exempting  a 
particular  person  from  the  general 
liability,  by  law  attaching  to  all  other 
persons,  similarly  situated,  and  in 
such  case,  the  exemption  would  be 
void,  probably,  as  an  act  of  special 
legislation,  upon  general  principles  of 
reason  and  justice,  like  a  particular 
act,  allowing  one  citizen  perpetual 
exemption  from  punishment  for  all 
ofifenses,  or  from  all  liability  for  torts. 

"  Perhaps  it  may  be  useful  to  con- 
sider this  latter  ground  first.  It 
should  be  premised,  in  the  very  out- 
set, that  it  is  no  fair  test  of  the  gen- 
eral liability  of  a  railway  company  for 
their  acts,  to  argue  from  what  natural 
persons  may  lawfully  do,  and  what, 
if  done  by  them,  becomes  a  nuisance. 
There  is  no  doubt,  that  if  an  individ- 
ual, or  a  mere  partnership,  should  do 
all  that  the  defendants'  company  do 
daily,  in  the  village  of  Burlington, 
they  would  become  indictable  for  the 
continuance  of  a  common  nuisance, 
and  a  mere  statute  of  exemption  from 
liability  to  prosecution  for  crime  would 
not  affect  their  liability.  And  any 
citizen  suffering  special  damage,  by 
means  of  such  nuisance,  might  have 
his  action,  or  enjoin  the  offenders  or- 
dinarily, in  equity. 

"  But  here  the  sovereignty  of  the 
state  have  seen  fit  to  confer  upon  this 
company  an  important  franchise,  a 
considerable  portion  of  that  sover- 
eignty which  themselves  possess,  the 
right  to  construci  and  continue  a  rail- 
way, almost  from  one  extreme  of  the 
state  to  the  other,  with  slight  limita- 
tions as  to  its  course,  and  providing  no 
tribunal  but  their  own  engineers  to 
determine  its  location.  The  location 
which  they  adopt,  then,  is  conclusive 
of  their  rights  to  build  the  road  in 
that  place  as  to  every  one,  unless  re- 
sisted by  some  proceeding,  taken  at 
the  time  of  the  location,  and  brought 
to  bear  directly  upon  the  question  of 
the  location  of  the  road.  If  the  plaint- 
iff",  or  others  interested  in  the  location 


of  this  road,  would  insist  that  it  is  im- 
properly located,  inasmuch  as  it  is  in 
a  too  populous  portion  of  the  village, 
to  allow  of  such  a  work,  this  should 
have  been  done,  by  mandamus,  or  in- 
junction, or  some  proper  process,  to 
arrest  and  correct  the  evil,  at  the  time 
of  its  being  built.  But  it  is  now  too 
late  to  bring  this  matter  in  discussion, 
perhaps,  in  any  form,  or  at  any  time, 
since  the  decisions  in  Lexington  and 
Ohio  R.  R.  V.  Applegate,  8  liana,  289, 
reversing  the  decision  of  Chancellor 
Bibb,  Philadelphia  and  Trenton  R.  R. 
Co.,  6  Wharton,  25,  and  many  other 
cases,  and  especially  tlie  discussions 
in  regard  to  the  railways  in  the  city 
of  New- York,  and  the  fact  that  in  the 
largest  cities  upon  the  continent  the 
efforts  of  the  constituted  authorities 
have  hitherto  been  found  almost  pow- 
erless for  the  regulation  merely  of  the 
operation  of  railways,  and  locomotive 
engines,  in  her  principal  thorougli- 
fares,  and  have  made  no  approach  to- 
ward an  exclusion  of  them  even  there. 
"  It  will,  therefore,  scarcely  be 
claimed  that  the  operations  of  the  de- 
fendants, in  the  village  of  Burlington, 
are  a  mere  nuisance.  There  was  noth- 
ing in  the  proof  tending  to  show  that 
they  were  so  conducted  as  to  be  made 
such  by  reason  of  mismanagement  as 
to  the  time  and  manner  of  carrying  on 
their  operations,  as  seems  to  have  been 
held  in  some  of  the  New  York  cases, 
where  the  operation  of  engines,  near 
a  church,  on  Sunday,  during  the  time 
of  public  worship,  was  regarded  as 
actionable,  as  a  common  nuisance, 
causing  special  damage  to  this  church 
as  a  corporation.  The  First  Baptist 
Church,  etc.,  v.  Sch.  &  Troy  R.  R. 
Co.,  5  Barb.  79.  But  the  precise  con, 
trary  doctrine  was  held,  it  seems,  in 
The  First  Baptist  Church,  etc.,  v. 
Qtica  R.  R.,  etc.,  6  Barb.  313.  And  in 
Drake  v.  Hudson  R.  R.,  etc.,  7  Barb. 
508,  it  was  held  generally,  that  a  road 
running  through  streets  in  a  city  does 
not  amount  to  the  infringement  of  pri- 
vate rights,  x'rovided  the  passage  is 
left  free  to  travel.  The  owners  of 
property  bounded  on  streets  have  no 
exclusive  right  of  property  in  them. 


Eminent  Domain. 


609 


from  the  doing  of  the  act  at  all,  and  that  of  these  two  methods  by 
which  the  act  may  be  done,  one  of  whicli,  if  pursued,  will  result 
in  damage  to  others,  and  the  other  not,  that  the  legislature  con- 
templated only  the  doing  of  the  act  by  the  method  which  would 
produce  no  damage. 


It  belongs  to  the  corporation,  the  legal 
owners  of  the  soil,  to  manage  and  reg- 
ulate the  use  of  the  streets.  See  note 
to  7th  ed.  Kent's  Com.,  vol.  2,  p.  398, 
by  Kent  and  Eaton.  It  is  said,  in  the 
last  case,  that  for  any  injury  done  to 
the  adjoining  proprietors  they  may 
have  an  action  on  the  case. 

"  The  question  still  recurs,  what  is 
to  be  regarded  as  a  legal  injury  ?  If 
the  operations  of  the  railway  in  that 
place  are  to  be  regarded  as  altogether 
legal,  and  the  adjoining  proprietors 
have  no  interest  in  the  soil  under  the 
street,  as  in  the  case  of  an  ordinary 
highway  in  the  country,  which  seems 
to  be  the  view  taken  by  the  court 
here,  then  the  ordinary  carrying  for- 
ward of  the  business  of  the  railway, 
although  it  may  cause  annoyance  and 
damage  to  the  dwellers  along  the 
street,  could  scarcely  be  regarded  as  a 
legal  injury,  for  which  an  action  will 
lie.  In  the  language  of  the  law,  it  is 
damnum  absque  injuria.  If  the  com- 
pany constructed  their  road  in  an  im- 
proper manner,  thus  causing  needless 
damage  to  the  adjoining  proprietors, 
or  if  they  wantonly  or  negligently  run 
their  cars,  or  carry  on  their  operations, 
so  as  in  any  manner  to  cause  needless 
damage  to  such  proprietors,  they 
would  be  entitled  to  a  remedy,  by  ac- 
tion. 

"But,  upon  general  principles,  the 
defendants  may  conduct  their  lawful 
business,  in  a  reasonable  and  prudent 
manner,  'with  as  little  injury  to 
plaintiffs  premises  as  was  consistent,' 
etc.,  in  the  language  of  the  bill  of  ex- 
ceptions in  this  case.  It  seems  to  be 
well-settled  law,  that  fehe  first  occu- 
pier of  land  acquires  no  right  (within 

77 


the  period  of  prescription  for  presum- 
ing a  grant)  to  exclude  an  adjoining 
proprietor  from  the  free  use  of  his 
land,  in  any  proper  mode,  by  erections 
or  excavations.  A  building,  which 
has  stood  more  than  twenty  years,  is 
presumed  to  have  a  grant  to  have  its 
walls  supported  by  the  adjoining  land, 
and  that  its  ancient  lights  shall  not 
be  darkened.  1  Bac.  Abr.  77,  citing  23 
H.  6,  15;  9  Co.  59  ;  Bland's  case,  cited 
Bulstrode,115;  2  Rolle's  Abr.  107, 143; 
3  Leon.  93.  The  same  rule  is  laid 
down  in  all  the  elementary  writers, 
and  generally  recognized  in  the  Eng- 
lish reports.  But,  in  some  of  the 
American  states,  this  doctrine  of  an- 
cient lights  is  questioned,  or  denied. 
Parker  &  Edgarton  v.  Foote,  19  Wend. 
309.  But  when  no  such  question 
arises,  the  adjoining  proprietors  may 
excavate  or  put  up  erections  to  any 
extent,  with  impunity,  using  proper 
precautions  to  cause  no  unnecessary 
damage.  Prior  occupancy  gives  no 
exclusive  rights.  Panton  v.  Holland, 
17  Johns.  92;  Thurston  v.  Hancock, 
12  Mass.  220,  where  the  subject  is 
very  elaborately  discussed  and  satis- 
factorily determined.  It  is  here  held, 
that  if  one,  by  digging  into  his  own 
soil,  cause  the  surface  of  his  neigh- 
bor's land  to  slide  into  the  pit,  or  cause 
damage  to  his  neighbor's  erections,  by 
not  using  proper  and  reasonable  pre- 
cautions in  making  his  excavations, 
for  such  damage  an  action  will  lie, 
but  not  for  removing  his  earth  in  a 
prudent  manner,  whereby  his  neigh- 
bor's soil  or  erections  caved  and  fell, 
by  reason  of  extraordinary  weight  put 
upon  the  land." 


610  Private  Corporations. 


CHAPTER  XYIIl. 

QUO    WARRANTO. 

Sec.  412.  The  writ  of  quo  warranto  at  common  law. 

Sec.  413.  Proceedings  in  the  nature  of  quo  warranto. 

Sec.  414.  The  remedy  regulated  by  constitutional  and  statutory  provisions. 

Sec.  415.  As  a  remedy  against  private  corporations. 

Sec.  416.  The  fact  of  non-user  or  mis-user  must  be  clear. 

Sec.  417.  Aa  a  remedy  for  an  unlawful  usurpation  of  an  oifice  in  a  private 
corporation . 

Sec.  418.  Possession  and  user  of  the  assumed  office,  essential. 

Sec.  419.  Xon-user  as  a  ground  for  forfeiture. 

Sec.  420.  Destruction  of  the  objects  of  a  corporation,  as  a  ground  of  for- 
feiture. 

Sec.  421.  Pleadings.     Evidence. 

Sec.  422.  Judgment. 

Sec.  423.  Nothing  forfeited  to  the  state  but  the  franchise. 

Sec.  412.  The  writ  of  quo  warranto  at  common  law. —  The  extraor- 
dinary remedies  by  injunction,  mandamus^  prohibition,  quo 
warranto,  etc.,  may  be  used  by  and  against  corporations,  as  well 
as  natural  persons.  But  as  special  treatises  are  devoted  to  these 
subjects  we  do  not  deem  it  necessary  fully  to  consider  any  of 
them,  except  quo  warranto,  which  relates  more  intimately  and 
excliTsively  to  corporate  rights  and  franchises.  A  writ  of  quo 
warranto  is  in  the  nature  of  a  writ  of  right,  against  one  claiming 
or  usurping  an  office  or  franchise,  to  inquire  by  what  authority  he 
supports  his  claim,  in  order  to  determine  the  right.  It  lies  also 
in  case  of  non-user  or  long  neglect  of  a  franchise,  or  mis-user  or 
abuse  of  it,  and  it  commands  the  defendant  to  show  by  what 
warrant  he  exercises  such  a  franchise,  having  never  had  any  grant 
of  it,  or  having  forfeited  it  by  neglect  or  abuse. ^  The  operation 
of  the  writ  was  extended  by  a  statute  of  Edward  I,  but  the 
antiquity  of  its  origin  is  such  as  to  afford  only  matter  for  profit- 
less speculation.  It  is  not  even  clearly  known  when  it  fell  into 
disuse,  being  superseded  by  tlie  information  filed  in  the  court  of 

13B].  Com.  262. 


Quo  Warranto.  611 

king's  bench  by  the  attorney-geueral,  iu  the  nature  of  a  writ  of 
quo  warranto.  The  judgment  upon  the  writ  was  final  and  con- 
chisive,  when  against  the  crown.'  It  was  purely  of  a  civil  charac- 
ter, and  its  process  was  tedious. 

The  proceeding  by  information,  though  criminal  in  form,  and 
designed  to  punish  the  usurper  by  a  fine,  as  well  as  to  oust  him, 
or  to  seize  the  franchise,  has  long  been  applied  to  the  mere  pur- 
pose of  trying  the  civil  right,  the  fine  being  nominal  only.' 

The  terms  "  quo  warranto,''^  and  "  information  in  the  nature 
of  quo  warranto  "  are  generally  used  synonymously. '  As,  for 
instance,  where  the  constitutions  of  certain  of  the  states  authorize 
the  issue  of  the  "  writ  of  quo  warranto^''  it  has  been  held  in 
Wisconsin,*  in  Florida,*  and  in  the  earlier  Missouri  cases,'  that 
jurisdiction  was  also  given  of  the  information  in  the  nature  of 
the  writ ;  although  later  Missouri  decisions,'  as  well  as  those  of 
Arkansas,^  assert  a  contrary  doctrine,  the  rule  is  believed  to  be 
nearly  invariable.  Some  of  the  states  have  substituted  a  statu- 
tory process  in  the  place  of  the  common-law  proceeding,  designa- 
ted to  be  shorter  and  simpler  than  the  latter,  but  partaking  of  its 
general  nature,  both  in  form  and  in  the  objects  to  be  attained,  and 
governed  by  the  same  general  rules.  Although  the  object  of  the 
proceeding  is  to  inquire  into  the  legality  of  the  acts  of  a  coi-pora- 
tion,  and,  if  necessary,  to  declare  its  franchises  forfeited  to  the 
sovereignty  conferring  them,  it  is  not  every  act  of  non-user  or 
mis-user  for  which  a  forfeiture  will  be  decreed.  It  will  not  be 
decreed  for  mistakes  or  unintentional  errors.  The  M-rong  com- 
plained of  must  relate  to  the  essence  of  the  corporate  grant,  and 
the  violation  of  duty  must  be  manifest.  An  act  done  which 
wholly  destroys  the  objects  and  purposes  for  which  the  charter 
was   given,  affords  ground   for  forfeiture.^     If  non-user  is   com- 

1  1  Sid.  86.  ^  State  v.  IVIerry.  3  Mo.  278  ;  State  v. 

2  3  Bl.    Com.  263  ;  State  v.  Gleasoa,     McBride,  4  Mo.  303. 

12   Fla.  190  ;  Res  v.   Francis,  2   D.  &  '  State  v.   St.  Louis  Ins.  Co. ,  8  Mo. 

E.  484 ;  State  Bank  v.  State,  1  Blackf.  330  ;  State  v.  Stone,  25  id.  555. 

267  ;  2    Kyd   on  Corp.  439.  «  State  v.   Ashley,  1  Ark.  279,  513  ; 

2  Attorney -General  v.  Utica  Ins.  Co.,  State  v.  Real  Estate  Bank,  5  id.   595  ; 

2  Johns.  Ch.  371.  376  ;  State  v.  West  State  v.  Johnson,  26  id.  281. 

Wisconsin  Ry.  Co.,  34  Wis.  213,  ^  State  v.  Real  Estate  Bank,  5  Ark. 

*  State  V.  West,  Wisconsin  Ry.  Co.,  595  ;  People  v.  Hudson  Bank,  6  Cow. 

34  Wis.  197.  217. 

5  State  V.  Gleason,  12  Fla.  190. 


612  Private  Cokporations. 

plained  of,  it  must  be  a  total  non-usei* ,  not  a  mere  refusal  to  act, 
or  a  mere  refusal  to  pay,  resulting  from  insolvency.^ 

A  breach  of  the  implied  duties  to  which  a  corporation  is  clearly 
subject  may  be  visited  with  the  same  penalty  as  a  breach  of 
those  expressed.''  The  charter  of  an  insurance  company  has  been 
declared  forfeited  upon  proceedings  in  quo  warranto  where  the 
company,  without  authority,  engaged  in  a  general  banking  busi- 
ness.^ Also  where  a  bank,  prohibited  by  its  charter  from  making 
loans  at  more  than  a  stipulated  rate  of  intei'est,  and  from  dealing 
in  promissory  notes,  willfully  violated  these  restrictions.*  Quo 
warranto  will  not  lie  against  a  railroad  company  in  behalf  of  a 
stockholder,  merely  because  the  corporation  issued  stock  below 
its  par  value,  and  began  to  construct  its  road  before  the  requisite 
amount  of  stock  was  subscribed  ;  it  not  appearing  that  the  peti- 
tioner's private  right  or  interest  was  thereby  put  in  hazard.^  It 
was  maintained  against  a  turnpike  company  for  violating  its 
charter  in  not  annually  exhibiting  its  accounts  to  the  governor  and 
council.* 

It  has  been  held  to  be  the  proper  method  of  testing  the  con- 
stitutionality of  the  charter  of  a  private  corporation.''  Quo  war- 
ranto has  been  held  to  be  necessary,  where  there  is  a  body  corpo- 
rate de  facto^  which  assumes  to  act,  but  which,  from  a  defect  in 
its  constitution,  cannot  legally  exercise  the  power  assumed."  In 
Pennsylvania,  it  has  been  held,  that  quo  warranto  may  be  main- 
tained against  the  trustees  of  an  incorporated  church ;  but  that 
the  court  will  refuse  or  grant  leave  to  file  the  information,  accord- 
ing to  circumstances.^  In  the  same  state  it  has  been  held  that  an 
information  will  not  be  granted  against  the  minister  of  a  religious 
society,  where  the  relator  and  the  defendant  do  not  claim  under 

1  People  V.  Niagara  Bank,  6  Cow.  town  R.  R.  Co.,  9  Cusli.  596.  See, 
196  ;  People  v.  Hudson  Bank,  id.  217  ;  also.  Commonwealth  v.  Allegheny 
Rex  V.  Stacey,  1  T.  R.  1  ;  DeCamp  v.     Bridge  Co.,  20  Penn.  St.  185. 

Al  ward,  52  liid.  468  ;  Importing,  etc.,  ''Commonwealth     v.    Tenth    Mass. 

Co.   of  Georgia  v.  Lock,  50  Ala.  332  ;  Turnpike,  11  Cush.  171. 

i2e  Franklin  Tel.  Co.,  119  Mass.  447.  'People  v.   Marshall,  1  Gilm.  (111.) 

2  Attorney-General  v.  Petersburgh  672 ;  Williams  v.  Illinois  Bank,  id. 
&  Roanoke  R.  R.  Co.,  6  Ired.  461.  667. 

3  People  V.  Uticalns.  Co.,  15  Johns,  »  Baker  v.  Backus,  32  111.  79  ;  Crys- 
358.  tal  Lake  Ice  Co.  v.  Backus,  32  111.  116. 

■*  Commonwealth  v.  Commercial  ^  Commonwealth  v.  Arrison,  15  S.  & 
Bank  of  Penn.,  28  Penn.  St.  383.  R.    127  ;   Commonwealth  v.   Graham, 

*  Hastings  v.    Amherst  «&  Belcher-     64  Penn.  St.  339. 


Quo  Warranto.  613 

the  same  charter.^  In  New  York,  quo  warranto  has  been  main- 
tained against  the  trustees  of  a  college,  who  usurped  the  franclii»e 
of  estabHshing  a  branch,  and  appointing  professors,  at  a  place 
other  than  that  of  the  location  of  the  college.'^  An  information 
against  a  turnpike  company  lias  been  i-efused,  when  the  wrong 
complained  of  consisted  in  opening  a  road  through  private  land, 
without  making  compensation  ;  another  remedy  existing.^  So  it 
has  been  held  to  be  not  the  proper  remedy  for  the  recovery  of 
land,  except  when  the  hind  has  esciieated  or  been  forfeited  to  the 
state,  for  its  use.* 

It  was  formerly  a  disputed  question  whether  the  proceeding 
was  available  against  one  intruding  himself  into  an  office  of  a 
private  corporation.  The  question,  however,  has  for  some  time 
been  settled  in  favor  of  the  jurisdiction.  In  a  Pennsylvania  case, 
decided  in  1827,^  the  point  was  fully  argued,  and  the  cases  learn- 
edly reviewed.  TiLGHMAN,  C.  J.,  said:  "I  find  no  instance  of 
an  information  in  the  nature  of  a  quo  warranto  in  England,  ex- 
cept in  a  case  of  a  usurpation  of  the  king's  prerogative,  or  of  one 
of  his  franchises,  or  when  the  public,  or  at  least,  a  consideraljlo 
number  of  people,  were  intended.''  *  *  *  "I  incline  to  the 
oijinion,  that  in  all  cases  where  a  charter  exists,  and  a  question 
arises  concerning  the  exercise  of  an  office  claimed  under  that 
charter,  the  court  may,  in  its  discretion,  grant  leave  to  file  an  in- 
formation. Because  in  all  such  cases,  although  it  cannot  strictly 
be  said  that  any  prerogative  or  franchise  of  the  commonwealth 
has  been  usurped,  yet,  what  is  much  the  same  thing,  the  privilege 
granted  by  the  commonwealth  has  been  abused.  The  party 
against  whom  the  information  is  prayed  has  no  claim  but  from 
the  grant  of  the  commonwealth,  and  an  unfounded  claim  is  an 
usurpation,  under  pretense  of  a  charter,  of  a  right  never  granted." 
There  is  nothing  in  the  English  authorities  inconsistent  with  the 
foregoing,  and  in  the  courts  of  the  various  states  the  question  is 
no  longer  an  open  one.* 

'  Commonwealth  v.  Murray,  11  S.  &  ^  Commonwealth  v.   Arrison,  15   S. 

R.  73.  &  R.  127. 

^  People  V.  Geneva  College,  5  Wend.  *  Commonwealth  v.  Union  Ins.  Co., 

211 .  5    Mass.    231  ;     State    v.    Buchanan, 

3  People  V.  Hillsdale  &  Chatham  Wright  (Ohio),  233 ;  Murphy  v.  Farm- 
Turnpike  Co.,  2  Johns.  190.  ers'  Banii,  20  Penn.  St.  415  ;  Commou- 

4  State  V.  Shields,  56  Ind.  521.  wealth  v.  Graham,  64  Penn.  St.  339. 


614  Private  Coeporations. 

The  usurper,  however,  must  be  an  ofReer,  strictly  speaking,  and 
not  a  mere  servant.  As,  for  instance,  quo  warranto  lias  been  re- 
fused against  the  secretary  and  treasurer  of  a  railroad  company, 
on  the  ground  that  he  was  a  servant  only,  holding  at  the  will  of 
the  directors.^  It  has  been  refused  also,  when  resorted  to  against 
the  trustees  of  an  insurance  company,  to  forfeit  their  offices,  on 
the  ground  that  they  held  subordinate  employments  under  the 
corporation,  such  as  solicitor  and  traveling  agent ;  the  latter  not 
being  officers  of  the  company.'' 

As  the  information  is  in  form  criminal,  process  must  run  in 
the  name  of  the  people.''  At  common  law,  private  individuals, 
without  the  intervention  of  the  crown  officer  or  attorney-general, 
cannot  file  an  information.*  An  information  by  the  attorney- 
general  ex  officio  is  filed  on  his  own  authority.  Under  the  English 
practice,  an  individual  specially  affected  or  injured  by  a  usurpa- 
tion of  office,  or  other  wrong  or  injury  to  the  public,  may  file  in 
the  court  of  king's  bench  an  application  for  a  direction  to  the 
master  of  the  crown  office  to  file  an  information  to  redress  the 
public  wrong  of  which  the  relator  complains,  whereupon,  security 
for  costs  being  given,  notice  usually  issues  to  the  party  com- 
plained of,  and  probable  cause  being  shown,  the  master  of  the 
crown  office  is  directed  to  file  an  information  at  the  suit  of  the 
king,  but  naming  the  relator,  after  which  the  suit  is  conducted 
by  the  relator  at  his  own  expense,  much  in  the  nature  of  a  civil 
suit.  In  Massachusetts,  it  has  been  held  that,  except  in  the 
limited  number  of  cases  in  which  it  is  provided  by  statute  that  an 
individual  may,  upon  leave  of  court,  file  an  information,  the  dis- 
cretion of  the  attorney-general  will  not  be  controlled,  nor  will 
the  court  direct  or  advise  him  as  to  his  duties  in  the  premises.' 
In  Ohio,  on  the  contrary,  the  court  held  that  if,  in  a  proper  case, 
the  prosecuting  attorney  declines  to  apply  for  a  rule  to  show  cause 
why  the  writ  should  not  issue,  the  court  will  order  him  to  make 
it  peremptorily,  or  will  direct  it  to  be  made  by  another  person 
according  to  circumstances.*     In  this  case,  the  application  was 

'  People  V.  Hills,  1  Lans.  202.  »  Qoddard  v.  Smitbett,  3  Gray.  116  : 

"^  Commonwealth  v.  McBride,  4  Leg.  Rice  v.  Commonwealth  Bank,  126  Mass. 

Qaz.  (Penn.)  338.  300. 

3  Donnelly    v.  People,  11    111.   552;  «  i2e  Mount  Pleasant  Bank,  5  Ohio, 

Hay  V.  People,  59  id.  94.  249. 

^"Qoddard  v.  Smithett,  3  Gray,  116. 


Quo  Wabranto.  615 

made  by  an  attorney  of  the  court,  in  the  name  of  a  private  indi- 
vidual. 

Where  leave  is  required,  it  will  usually  be  granted^  if  the  right, 
or  the  fact  on  which  the  right  depends,  is  disputed  and  doubtful.^ 
But  not  when  another  remedy  exists,  either  at  common  law '  or 
under  a  statute  ;  ^  or  if  tlic  right  has  already  been  determined  by 
mandamus  ;  *  or  if  it  depends  on  the  right  of  those  who  voted 
for  defendant,  and  this  right  has  not  been  settled ;  or  if  the 
right  has  been  acquiesced  in  for  a  length  of  time ;  ^  or  if  it  ap- 
pear that  the  official  term  of  the  incumbent  of  the  office  will  expire 
before  a  determination  upon  the  proceedings  can  be  had ;  °  or 
where  the  party  moving  has  waived  his  right  or  forfeited  his 
claim  to  assert  it ;  as  where,  knowing  the  illegality  of  an  election, 
he  participates  in  corporate  meetings,  and  recognizes  and  acqui- 
esces in  the  result.' 

The  conduct  or  motive  of  the  relator  may  properly  be  consid- 
ered upon  the  application  to  grant  leave  to  file  the  information ; 
leave  has  been  refused,  where  the  relator  was  a  stranger,  showing 
no  interest  in  himself  and  failing  to  show  that  the  public  interest  re- 
quired that  the  proceeding  be  instituted  ;  *  where  he  was  shown 
to  be  the  tool  of  one  to  whom  the  application  would  have  been 
refused  ; '  when  the  application  is  made  to  obtain,  indirectly,  a 
decision  upon  liis  own  case,  which  he  might  bring  directly  before 
the  court.^" 

In  those  of  the  United  States  where  the  jurisdiction  is  not  con- 
ferred by  constitutional  or  statutory  provisions  in  analogy  to  the 

1  Rex  V.  Latham,  3  Burr.  1485.  *  People  v.  Sweeting.  3  Johns.  184 ; 

"^  State  V.  Marlow,  15  Ohio   St.  114  ;  Commonwealth    v.    Athearn,  3  Mass. 

State    V.    Taylor,    id.  137 ;  People    v.  285;    Commonwealth     v.    Sparks,     6 

Hillsdale,  etc.,  Co.,  3  Johns.  190;  State  Wharton  (Peun.),  416;  Commonwealth 

V.  Wadkins,  1  Rich.  43.  v.  Smith,  4.5    Penn.    St.  59;  this  rule 

3  Updegraff  v.  Evans,   47  Penn.   St.  does  not  prevail  in  Enjjland  ;  though 

103;  Hullman  V.  Honcomp,  5  Ohio  St.  there    can    be   no   judgment   for    the 

237.  ouster,  judgment  may  be  rendered  for 

*  2  Hawk.  P.  C.  chap.  26,  §  9.  the  fine.     Rex  v.  Payne,  3  Chitty,  367. 

'Bac.Abr., Informations.  The  length  ■"  State  v.  Lehre,  7  Rich  234;  Rex  v. 

of  time  of  the  acquiescence  was  form-  Stacy,  1  T.  R.  1. 

erly  indefinite,  varying  with  each  case.  =*  Rex  v.  Grant,  11  Mod.  229  ;  Rex  v. 

In    England,    it    was  finally  fixed  by  Stacey,  1  T.  R.  3;    Miliary.  English, 

the  courtat  twenty  years,  then  reduced  1  N.  J.  217. 

to   six,   which   last   period    was  con-  '  Rex  v.  Stacey,  1   T.  R.  3  ;  Rex  v. 

firmed  by  act  of  33  Geo.  Ill,  stat.  58  ;  Cudlipp,  6  id.  503;   Rex  v.   Trevenen, 

in  Ohio  the  statute  period  of  limitation  3  B.  &  Aid.    344,  482. 

is  three  years.  '"  Rex  v.  Anderson,  3  Q.  B.  740. 


QIQ  Private  Corporations. 

Eno:lisli  practice,  the  process  usually  issues  from  the  highest  court 
of  orii^inal  jurisdiction.  It  has  been  held  that  it  cannot  issue  from 
an  appellate  court,  or  from  a  court  whose  subjects  of  jurisdiction 
are  defined  by  law,  and  which  do  not  include  quo  warranto} 

In  quo  warranto  and  proceedings  in  the  nature  thereof,  the 
ordinary  rules  of  pleading  prevail.^  If  for  mis-user,  the  facts 
necessary  to  show  the  mis-user  must  be  set  forth  with  the  exact- 
ness of  pleading  required  in  a  penal  action.^ 

The  usual  process  is  a  venire  facias  in  the  first  instance,  fol- 
lowed by  a  distringas*  Siderfin,'  after  comparing  the  precedents 
in  Coke' s  Entries,  declares  the  process  upon  the  information  to 
be  as  above  stated,  while  that  upon  the  writ  he  declares  to  be  a 
summons  in  the  first  instance,  and  that  for  default  of  appearance, 
the  liberties  shall  be  seized.* 

The  judgment  seems  to  be  the  same  upon  the  information  as 
upon  the  writ.'  In  a  New  York  case,*  Savage,  C.  J.,  thus  states 
the  distinction  between  the  judgfiient  against  the  individuals  and 
that  against  the  corporation.  "  Whenever  individuals  or  a  corpo- 
ration shall  be  found  guilty,  either  of  usurping  or  intruding  into 
any  office  or  franchise,  or  of  unlawfully  holding,  judgment  of 
ouster  shall  be  rendered,  and  a  fine  may  be  imposed  ;  but  when 
the  proceeding  is  against  a  corporation,  and  a  conviction  ensues 
for  mis-user,  non-user  or  surrender,  judgment  of  ouster  and  of  dis- 
solution shall  be  rendered;  which  is  equivalent  to  judgment  of 
seizure  at  common  law."  An  English  case  *  thus  states  the  dis- 
tinction :  "  When  it  clearly  appears  to  the  court  that  a  liberty  is 
usurped  by  wrong,  and  upon  no  title,  judgment  only  of  ouster 
shall  be  entered.  But  when  it  appears  that  a  liberty  has  been 
granted,  but  has  been  mis-used,  judgment  of  seizure  into  the 
king's  hands  shall  be  given." 

1  State  V.  Asliley,!  Ark.  279;  Ex2)arte  Hertford,  1  Salk.  374  ;  S.  C,  Carthew, 
Attorney-General,!  Cal.  85.  503;  Com.  Dig.,  Quo  Warranto;  State 

2  People  V.  Clark,  4  Cow.  95.     For     Bank  v.  State,  1  Blackf.  273. 

tlie    form    of    the    information,    see  ^  Note  to  Le  Roy  v.  Trinity  House, 

People   V.  Utica   Ins.   Co.,  15   Johns.  1  Sid.  86. 

362;    Commonwealth   v.    Fowler,   10  ^  Kyd  and  some  other  writers  speak, 

^lass.  290  ;  for  the  substance,  see  State  probably   erroneously,  as  though  the 

V.  Tudor,  5  Day,  329  ;  see  also  English  venire  facias  and  distringas  were  used 

precedents   in  6   Wentworth's   Plead-  indifferently   with   the   subpoena   and 

ings,    28-234,    and   an   outline  of  the  attachment. 

English  form  in  2  Kydon  Corp.  403.  "^  2  Kyd  on  Corp.  406. 

^  People  V.  Kingston,  etc.,  Turnpike  ^  People   v.   Saratoga   &  Rensselaer 

Co. ,  23  Wend.  193.  R.  R.  Co.,  15  Wend.  128. 

4  2    Kyd    on    Corp.    438;   King  v.  »  Rex  v.  London, 2  T.  R.  523. 


Quo  Warranto.  617 

The  form  of  the  judgment  at  common  law  was  formerly  the 
subject  of  some  discussion  and  dispute,  as  to  whether  it  should 
be  of  seizure,  ouster,  or  mixed  of  both.'  The  question  is  no 
longer  of  much  })r;ictical  importance,  having  been  set  at  rest  l>y 
statutes  or  decisions  in  most  of  the  states. 

At  common  law  neither  party  could  recover  costs.  In  England 
this  rule  was  changed  by  the  statute  9  Anne,  chap.  20.  In  Penn- 
sylvania, when  the  statute  of  Aime  had  not  been  re-enacted,  it  was 
held  that  costs  were  not  recoverable.  In  most  of  the  states,  how- 
ever, costs  follow  the  judgment,  as  in  suits  generally. 

The  common-law  process  after  judgment  of  forfeiture  was  a 
writ  of  seizure  to  the  sheriff,  which,  after  reciting  the  proceedings, 
commanded  him  to  seize  the  liberties,  etc.''  The  judgment  of 
forfeiture  may  be  the  same  for  non-user,  where  no  property  has 
been  held  or  rights  exercised,  as  for  mis-user,  after  the  acquisition 
of  property  and  the  exercise  of  power,^  and  the  forfeiture  is  of 
the  franchises,  not  of  the  property  of  the  corporation.  This  dis- 
tinction was  learnedly  and  fully  discussed  in  an  Indiana  case,*  in 
which  the  English  authorities  were  reviewed. 

Sec.  413.  Proceedings  in  the  nature  of  quo  warranto. —  In  mOSt  of 
the  states  proceedings  are  autliorized  by  statute  in  the  nature  of 
quo  warranto.  The  proceeding  is  authorized  for  substantially  the 
same  purpose,  namely :  to  correct  usurpations  in  office  or  abuse 
of  corporate  franchises.  iVnd  the  term  quo  warranto  is  frequently 
used  in  constitutions  and  statutes  when  proceedings  in  the  nature 
of  quo  warranto  are  meant.^ 

1  The  English   cases   on  this   head  Commonwealth  v.    Fowler,    11  Mass. 

are  collected   in  2  Kyd  on  Corp.  407-  339. 

409.     Kyd,  citing  Co.  Ent.  535  5,  537,  -  Kyd  on  Corp.  410,  citing  Co.  Eut. 

a  ;  Rast.  540  h,  gives  the  following  as  539,  h. 

the    form  of  entry  when  judgment  is  ^  State  Bank  v.  State,  1  Blackf.  281  ; 

for  the  defendant  :  "  It  is  considered  King  v.  Amery,  2  T.  R.  515. 

that  the  liberties,  etc.,  be  allowed  to  ^  State  Bank  v.  State,  ante. 

the  said ; "  or  thus  :  "  the   said  ^  See  Bouv.  Law  Die.    (^uo  warranto 

may  use,  have  and  enjoy  all  the  is  not  issuable  by  a  court  whose  juris- 

said,  etc.  ;  and  the  said ,  as  to  diction,  as  defined  by  the  constitution 

the    said  premises,  may  be  dismissed  of     the    state,    is    strictly    appellate. 

from   this  court,    saving   always   the  State  v.  Ashley,  1  Ark.  279  ;  Ex,  parte 

right   of  the  said  lord,    the   king,   if  Attorney-General,    j   Cal.  85.     Nor  is 

hereafter,"  etc.      Forms  of  judgment  its  issue  a  matter  of  right,  but  rests 

are  given  in  6  Wentw.  Plead .  13,  89,  in  the  sound  discretion  of  the  court, 

161  and  242.     A  form  will  be  found  in  Comm.  v.  Arrison,  15  S.  &  R.  127,  and 

78 


618 


Private  Corporations. 


Mr.  Justice  Spencer,  in  relation  to  this  question  and  the  use  of 
the  term  in  the  constitution  of  New  York,  observes :  "  An  infor- 
mation in  the  nature  of  quo  warranto  is  a  substitute  for  that  an- 
cient writ  wliich  has  fallen  into  disuse,  and  the  information  which 
has  superseded  the  old  writ  is  defined  to  be  a  criminal  method  of 
prosecution,  as  well  to  punish  the  usurper  by  fine  for  the  usurpa- 
tion of  the  franchise,  as  to  oust  him,  and  seize  it  for  the  crown. 
It  has  for  a  long  time  been  applied  to  the  mere  purpose  of  trying 
the  civil  right,  seizing  the  franchise  or  ousting  the  wrongful  pos- 
sessor, the  fine  being  nominal  only."  ^ 

And  Dixon,  C.  J.,  observes  :  "  Xow  it  was  with  the  view  of 
this  well-known  jurisdiction,  then  and  long  before  exercised  only 
in  the  proceeding  bj"^  information,  that  the  framers  of  the  consti- 
tution gave  or  reserved  the  power  to  this  court,  using  for  con- 
venience and  brevity  merely  the  words  ^  writ  of  quo  warranto,^ 
just  as  those  words  were  used  by  Chancellor  Kent  in  Attorney-^ 
General  v.  Utica  Insurance  Company,  2  Johns.  Ch.  371,  376, 
and  as  they  had  been  used  in  our  own  statute,     *     *     •*     as 


it  will  only  issue  in  favor  of  a  relator 
having  an  interest  to  be  affected, 
Comm.  V.  Cluley,  56  Penn.  St.  370  ; 
consequently  it  will  not  be  issued  at 
the  suit  of  a  private  relator  who  has 
no  interest,  to  perfect  the  charter  of  a 
private  corporation.  Comm.  v.  Alle- 
ghany Bridge  Co.,  20  Penn.  St.  185  ; 
Comm.  V.  Farmers'  Bank,  2  Grant's 
Cas.  (Penn.)  393.  Nor  even  in  Penn- 
sylvania will  the  writ  be  maintained 
to  dissolve  a  corporation  unless  upon 
the  relation  of  the  attorney-general  or 
Bome  authorized  agent  of  the  state. 
Murphy  v.  Farmers'  Bank,  etc.,  20 
Penn.  St.  415.  In  Massachusetts,  un- 
der the  practice  act  of  1852,  §  42, 
which  is  still  in  force,  which  enacts 
that  any  person  whose  private  right 
or  interest  has  been  injured,  or  is  put 
in  hazard,  by  the  exercise,  by  any  pri- 
vate corporation  or  any  persons  claim- 
ing to  be  a  private  corporation,  of  a 
franchise  or  privilege  not  conferred 
by  law,  whether  such  person  be  a 
member  of  such  corporation  or  not, 
may  apply  to  the  supreme  judicial 
court  for  leave  to  file  an  information 
in  the  nature  of  a  quo  warranto  —  the 


rule  stated  in  the  text  no  longer  pre- 
vails in  that  state  ;  Boston  &  Provi- 
dence R.  R.  Co.  V.  Midland  R.  R.  Co., 
1  Gray,  340  ;  but  a  religious  society  is 
not  within  the  meaning  of  this  act. 
Goddard  v.  Smithett,  3  Gray,  116.  But 
in  Massachusetts  it  is  held  that  an  in- 
formation in  the  nature  of  a  quo  war- 
ranto will  not  lie  without  the  inter- 
vention of  the  attorney-general, against 
a  corporation  regularly  organized  un- 
der the  statute  of  1870,  chap.  224,  if 
the  forms  of  law  in  the  organization 
of  the  corporation  have  been  com- 
plied with  and  the  certificate  has  been 
issued  by  the  secretary  of  the  com- 
monwealth, although  the  certificate 
was  obtained  by  fraud.  Rice  v.  Com- 
monwealth Bank,  126  Mass.  300.  In 
New  Jersey  substantially  the  same 
provisions  as  the  statute,  9  Anne, 
chap.  20,  is  in  force  and  is  construed 
in  the  same  manner.  Individuals  may 
be  permitted,  as  in  Pennsylvania,  for 
an  usurpation  of  an  office  in  a  corpo- 
ration, but,  even  by  leave  of  court, 
cannot  file  a  writ  to  dissolve  it.  State 
v.  Paterson,  etc.,  Turnpike  Co.,  21  N. 
J.  L.  9. 


1  People  V.  Utica  Ing.  Co. ,  15  Johns.  358. 


Quo  Wakkanto.  619 

meaning  the  same  thing  and  intended  to  convey  the  same  general 
idea  of  the  words  '  information  in  the  nature  of  quo  %oarranto.'  "  ^ 

Skc.  414.  The  remedy  regulated  by  constitutional  and  statutory  pro- 
visions.—  The  constitutions  and  statutory  provisions  of  the  various 
states,  usually  fix  the  courts  that  are  authorized  to  administer  this 
remedy  and  the  mode  and  effect  of  the  remedy  in  different  cases. 
And  usually,  the  proceeding  by  quo  warranto^  as  well  as  by  the 
other  extraordinary  remedies  by  injunction  and  mandamus^  is  not 
authorized  when  tlie  party  claiming  it  has  an  adequate  remedy 
by  ordinary  proceedings.'  It  can  only  be  used  to  test  the  actual 
right  to  an  office  or  franchise,  and  not  the  legality  of  the  official 
action  of  corporate  officers.'  And  the  statute  provides  for  this 
remedy,  to  test  the  right  to  exercise  a  franchise,  it  is  held  to  be 
exclusive  of  all  other  remedies  for  that  purpose." 

Sec.  415.  As  a  remedy  against  private  corporations.  —  Uaving  con- 
sidered, briefly,  the  origin  and  liistory  of  tlie  writ  of  quo  war- 
ranto^ and  the  modern  substitute  for  the  remedy,  by  information 
in  the  nature  of  quo  warranto^  and  some  of  the  general  principles 
applicable  to  the  remedy,  we  will  now  proceed  to  discuss  the  remedy 
more    particularly    in   its   application   to   private    corporations.* 

'  State  V.  West  Wis.  R.  Co.,  34  Wis.  with   'information   in   the   nature   of 

197.  quo  xcarrmito,'  which  had  so  long  been 

Dixon,   C.   J.,    in    this    case,    con-  the  complete  and  unqualified  substi- 

struing  a  clause  in  the  constitution  of  tute    for   the  writ."      State    v.    West 

Wisconsin,    giving   power  to  the  su-  Wisconsin  R.  Co.,  34  Wis.  197.       See, 

preme  court  of  that   state    "to  issue  also,  State   v.    Gleason,  12  Fla.   190; 

writs    of    habeas  corpus,  mandamus.  State   v.   Merrv,   3    Mo.     278;     State 

injunction,  quo  warntnio,  certiorari,"  v.  St.  Louis  Ins.  Co.,  8  id.  330  ;  State 

etc.,  further  observes  :  v.  Stone,   25  id.  555;  Commonwealth 

"  It  is  as  impossible  to  believe  that  v.  Burrell,  7  Penn.  St.  34  ,  Murphy  v. 

the  framers  of    the  constitution  were  Farmers'  Bank,   20  id.    415:    State  v. 

looking  back  over  a  period  of  three  or  Ashley,    1     Ark.    279,    513;    State    v. 

four  hundred  years,  into   the  middle  Johnson,  26  id.  281. 
ages,  designing  to  give  this  court  such         ^People  v.   Hillsdale   &  C.    Turnp. 

jurisdiction  and  only  such  as  was  then  Co. ,  2  Johns.  190  ;  State  v.  Wadkins, 

exercised  in  virtue  of  the  writ  of  quo  1  Rich.  42  ;  State  v.  Marlow,  15  Ohio 

«car?'a?i<o, as  it  is  that  they  intended  to  St.  114;    State    v.    Taylor,   id.     137. 
confine  the    court   to  that   antiquated         ^  People  v.  Whitcomb,  55  111.   172  ; 

and  useless  process.     The  framers  of  Dart  v.  Houston,  22  Ga.  506. 
the    constitution  were    practical   men         *  UpdegratF  v.   Evans,  47  Penn.  St. 

and  were  aiming  at  practical  and  use-  108  ;  Hullman  v.  Honcomp,  5  Ohio  St. 

ful     results.     They    used    the    words  237. 

'writ    of   quo  warranto,'  just  as  they         ^  It    is   held   in   Arkansas    that    the 

had  been  used   in  common  parlance,  ancient  writ  is  the  proper  remedy  to 

and  by  courts,  lawyers  and  writers  for  resume  a  corporate   franchise.     State 

hundreds   of    years,  as    synonymous  v.  Real  Estate  B'k,  5  Ark.  595. 


620 


Private  Corporations. 


From  what  has  ah'eady  been  said,  it  is  ev-ident  that  a  corporate 
franchise  is  a  special  privilege  or  imrauiiity  proceeding  from  the 
sovereign  power,  and  conferred  by  a  grant  from  such  power. 
And  it  is  a  doctrine  universally  recognized,  that  the  sovereignty 
conferring  the  franchise  may,  at  any  time,  through  the  courts 
it  has  constituted,  inquire  into  the  manner  in  which  the  franchise 
is  used.  And  if  the  person  or  association  on  which  the  privilege 
is  conferred  has  been  guilty  of  mis-user  or  non-user;  or  if  such 
party  has  assumed  tiie  right  of  franchise  where  none  exists,  the 
courts  may,  by  the  proceedings  in  the  nature  of  quo  warranto^ 
declare  a  forfeiture,  or  render  a  judgment  of  ouster  as  the  circum- 
stances of  the  cases  require.^  But  it  is  not  every  act  of  non-user 
or  mis-user  that  will  justify  a  judgment  of  forfeiture.  In  such 
cases  it  is  held  that  these  wrongs  nmst,  in  order  to  constitute 
grounds  for  forfeiture,  relate  to  the  essence  of  the  corporate  grant, 
and  the  contract  thereby  created  between  the  sovereign  and  the 
corporators.  But  willful  and  repeated  violations  of  duty  in  this 
respect  would  usually  warrant  a  judgment  of  forfeiture.'' 


'  An  information  in  the  nature  of 
quo  warranto  lies  against  a  corporation 
for  carrying  on  banking  business 
without  authority,  People  v.  Utica 
Ins.  Co.,  15  Johns.  358,  or  against  a 
person  who  has  usurped  the  office  of  a 
director  therein.  People  v.  Tibbitts, 
4  Cow. 358,  or  of  trustee.  Coram,  v. 
Graham,  64  Penn.  St.  339.  Indeed  an 
information  lies  against  a  corporation 
for  any  cause  of  seizure  or  dissolution. 
People  V.  Bristol,  etc.,  Turnpike  Co, 
23  Wend.  222.  The  use  of  an  abbre- 
viation of  its  corporate  name  is  not  an 
usurpation  for  which  quo  warranto 
will  lie.    People  v.  Bogart,  45  Cal.  73. 

'■'Commonwealth  v.  Commercial  B'k, 
28  Penn.  St.  383  ;  People  v.  Kingston 
«&  Middletown  Turnpike  Co.,  23  Wend. 
193. 

In  the  former  case  the  proceeding 
was  in  the  nature  of  quo  warranto  to 
procure  a  forfeiture  of  the  charter  of 
the  bank  for  mis-user  on  the  ground 
of  its  having  dealt  in  promissory 
notes  contrary  to  the  express  provis- 
ions of  its  charter,  and  loaned  money 
at  rates  of  interest  not  authorized  by 
it.  The  court,  by  Lewis,  C.  J.,  say  : 
"  These  acts  are  expressly  prohibited 
by   the   charter.     The   question   then 


arises,  do  these  constant  and  willful 
violations  of  the  fundamental  condi- 
tions upon  which  the  charter  was 
granted  entitle  the  commonwealth  to 
demand  its  forfeiture  '?  The  question 
is  not  whether  a  single  act  or  even 
a  series  of  acts  of  mis-user,  through 
inadvertence  or  mistake,  may  work  a 
forfeiture,  but  whether  the  constant 
and  willful  violation  of  these  impor- 
tant conditions  of  the  grant  produces 
that  effect  ? 

"Mr.  Justice  Story,  in  delivering 
the  judgment  of  the  supreme  court  of 
the  United  States  in  Mumma  v.  Poto- 
mac Company, held  that '  a  corporation, 
by  the  very  terms  and  nature  of  its 
political  existence,  is  subject  to  disso- 
lution by  forfeiture  of  its  franchises 
for  willful  mis-user  or  non-user.'  8 
Pet.  287. 

*'  Many  years  before  that  decision 
was  pronounced  the  same  principle 
was  fully  recognized  by  the  same 
high  authority  in  Terrett  et  al.  v.  Tay- 
lor et  al.,  9  Cranch,  43,  where  the  right 
of  forfeiture  for  mis-user  or  non-user 
was  held  to  be  '  the  common  law  of 
the  land,  and  a  tacit  condition  annexed 
to  the  creation  of  every  corporation.' 

"  It  is  now  well  settled  by  numerous 


Quo  Wakranto. 


621 


Sec.  416.  The  fact  of  non-user  or  mis-user  must  be  clear.  —  It  will 
occur  to  every  one,  on  tho  least  retlectioii,  that  in  the  pursuit  of 
the   main   objects  and  purposes  of  coi'porations  organized  for 


autliorities  that  it  is  a  tncit  condition 
of  a  grant  to  a  corporation  tiiat  the 
grantees  shall  act  up  to  the  end  or  de- 
sign for  which  they  were  incorporated, 
and  hence,  through  neglect  or  abuse 
of  its  franchises,  a  corporation  may 
forfeit  its  charter,  or  for  a  condition 
broken  or  for  a  breach  of  trust.  See 
Ang.  &  Ames  on  Corp.,  i^  776,  and 
the  cases  there  cited. 

"  In  the  Attorney-General  v.  Peters- 
burgh  &  Roanoke  R.  Co.,G  Iredell, 
461,  it  was  held  that  the  omission  of 
an  express  duty  prescribed  by  charter 
is  a  cause  of  forfeiture,  and  that,  as 
implied  powers  are  as  much  protected 
by  the  law  as  those  which  are  ex- 
pressed, implied  duties  are  equally 
obligatory  with  duties  expressed,  and 
their  breach  is  visited  by  the  same 
consequences.  It  may  be  affirmed 
as  a  general  principle,  that  where  there 
has  been  a  mis-user  or  non-user  in  re- 
gard to  matters  which  are  of  the 
essence  of  the  contract  between  the 
corporation  and  the  state,  and  the  acts 
or  omissions  complained  of  have  been 
repeated  and  willful,  they  constitute 
just  ground  of  forfeiture." 

It  is  considered  a  mis-user  per  se  at 
common  law  to  neglect  the  perform- 
ance of  conditions  contained  in 
the  charter.  But  will  such  neglect 
always  constitute  grounds  for  forfeit- 
ure ?  Nelson,  C.  J.,  in  considering 
the  above  question,  in  People  v.  Kings- 
ton &  Middletown  Turnpike  Co.,  23 
Wend.  193,  observes ;  "  But  grant- 
ing this  to  be  the  general  principle, 
the  question  still  comes  up  for  con- 
sideration, what  departure  from  the 
provisions  of  the  charter  will  work  a 
forfeiture  ?  Shall  every  omission  or 
non-performance  of  a  condition  of  the 
grant  have  this  effect?  Though  the 
proceeding  by  information  be  against 
the  corporate  body,  it  is  the  acts  or 
omissions  of  the  individual  corpora- 
tors that  are  the  subject  of  the  judg- 
ment of  the  court.  The  powers  and 
privileges  are  conferred  and  the  con- 
ditions enjoined  upon  them,  they  ob- 
tain the  grant  and  engage  to  perform 
the  conditions,  and  when  charged 
with  a  breach  I  do  not  perceive  any 


reason  against  holding  them  account- 
able upon  principles  applicable  to  an 
individual  to  whom  valualjle  grants 
have  been  made  upon  conditions  pre- 
cedent or  subsequent.  As  to  him,  per- 
formance is  indispensable  to  the  vest- 
ing or  continued  enjoyment.  If  a 
feoff'ment  be  made  of  lauds  upon  con- 
dition of  paying  rent,  building  a 
house  or  planting  an  orchard,  and  a 
failure  to  perform,  the  feoffer  may 
enter  ;  so,  if  an  office  be  granted,  a  con- 
dition is  implied  tliat  the  party  shall 
faithfully  execute  it,  and  for  neglect 
the  grantor  may  discharge  him.  1 
Bacon,  639;  15  Wend.  291;  1  id. 
388  ;  3  id.  498  ;  13  id.  530. 

"  Placing  corporate  grants  upon  this 
footing  there  can  be  no  great  ditHculty 
in  ascertaining  the  principles  that 
should  govern  conditions  annexed  to 
them.  The  analogous  cases  of  individ- 
ual conditional  grants  will  give  the 
rule.  In  these  a  reasonable  and  sub- 
stantial performance  according  to  the 
intent  of  the  grantor  is  required.  Shep. 
Touch.  133  ;  15  Wend.  291. 

"  In  cases  of  conditions  subsequent, 
if  impossible  to  be  performed,  or 
rendered  impossible  by  the  act  of 
God,  the  grantee  is  excused,  and  the 
estate  is  absolute.  2  Bacon,  676,  tit. 
Condition  ;  Shep.  Touch.  133,  157. 

"  So  if  waste  be  committed  by  a 
stranger  it  shall  not  be  a  breach  of  the 
condition  of  the  lease.  2  Bacon,  652. 
The  whole  law  on  the  subject  will  be 
found  reasonable,  and  nothing  will  be 
found  unreasonable,  and  nothing  is 
required  but  what  is  within  the  means 
and  ability  of  the  party  to  comply 
with.  It  is  emphatically  denied  with 
respect  to  corporators,  for  we  all  know 
the  nature  of  the  conditions  in  their 
characters  depends  very  much  upon 
themselves  ;  they  usually  settle  the 
terms  of  the  grant,  and  therein  con- 
sult their  own  as  well  as  the  public 
interests. 

"  I  have  said  that  the  whole  law  on 
the  subject  of  performance  of  condi- 
tions precedent  or  subsequent  is  reason- 
able and  within  the  ability  of  the 
company  to  perform.  A  substantial 
performance  according  to  the  intent  of 


622 


Private  Corporations. 


pecuniary  gain,  mistakes  and  unintentional  errors  will  naturally 
occur  that  may  be  in  violation  of  the  charter  or  constating  instru- 
ments, and  that  not  unfrequently  the  line  between  such  acts  as 
may  be  authorized  and  those  which  are  not  will  be  indistinct. 

The  courts,  therefore,  especially  in  proceedings  by  quo  warranto 
for  a  forfeiture  of  the  grant  on  account  of  mis-user  or  non-nser, 
exercise  great  caution  and  seldom  adjudge  a  forfeiture  unless 
there  is  a  manifest  violation  of  the  grant.^  But  where  the  viola- 
tion of  the  charter  is  clear,  and  especially  if  frequently  repeated, 
or  where  there  is  an  exercise  of  powers  beyond  those  conferred, 
as  where  a  corporation  authorized  to  do  an  insurance  business 
enwasfes  in  a  sreneral  banking  business,  on  an  information  filed 
against  it  therefor,  in  a  court  of  proper  jurisdiction,  it  will  render 
a  judgment  of  forfeiture  or  ouster  against  such  corporation.'' 


the  charter  is  all  that  is  required. 
Under  the  issues  that  are  presented 
this  will  be  a  question  on  the  trial. 
If  such  a  performance  is  shown  the 
defendants  will  be  entitled  to  a  ver- 
dict. 

"The  law  in  respect  to  individual 
grants  on  condition  will  afford  familiar 
principles  to  guide  the  court  and  jury. 


Slight  departures  are  overlooked.  The 
learning  of  the  law  is  against  the 
party  claiming  the  forfeiture,  and  if 
the  failure  is  such  as  cannot  be  re- 
garded in'  a  court  of  law  upon  settled 
principles,  and  has  arisen  from  mis- 
take or  accident,  the  legislature  will 
apply  the  remedy.  They  and  not  the 
court  possess  the  dispensing  power." 


'  High  on  EKtra.  Leg.  Rem.,  §  649  ; 
State  v.  Commercial  Bank,  10  Ohio, 
535. 

'^  People  V.  Utica  Ins.  Co.,  15  Johns. 
358. 

In  a  case  where  an  information 
was  filed  by  the  prosecuting  officer  of 
the  state  on  its  behalf,  against  the  de- 
fendants, a  railway  corporation  in  the 
state  of  New  Hampshire,  alleging  a 
usurpation  on  the  part  of  the  defend- 
ants, of  the  exercise  of  corporate  func- 
tions within  the  state  of  Vermont  in  a 
manner  inconsistent  with  the  sover- 
eignty of  the  state,  and  claiming  pro- 
cess against  the  state  in  the  nature  of 
quo  warranto.  It  appeared  that  the 
defendants,  a  railroad  corporation, hav- 
ing a  line  of  railroad  through  the  state 
of  New  Hampshire,  to  line  of  the  state 
of  Vermont  at  Wells  river,  erected  a 
bridge  across  the  Connecticut  river, 
in  order  to  connect  with  certain  Ver- 
mont railroads,  which  connection  was 
authorized  by  express  statutes  of  that 
slate,    and    purchased    about    fifteen 


acres  of  land,  for  the  use  of  the  former 
road.useful  in  doing  business  at  the  line 
of  the  state,  if  they  should  not  unite  at 
the  line  of  the  state,  and  indispen- 
sable, if  they  should  thus  unite.  The 
question  presented  was,  whether  the 
purchase  by,  and  conveyance  to  them, 
of  the  land  in  Vermont  was  a  usurpa- 
tion of  sovereign  powers  of  the  state. 
On  this  question  Redfield,  J.,  ob- 
serves : 

"  By  their  charter,  it  is  admitted, 
this  corporation  have  permission  to 
hold  real  estate,  for  the  accommoda- 
tion of  their  business,  greatly  exceed- 
ing what  they  now  hold.  The  ques- 
tion then  is,  whether  the  having  pur- 
chased and  taken  a  conveyance  of  this 
land,  in  this  slate,  is  to  be  regarded 
as  any  usurpation  upon  the  sovereignty 
of  this  state  ?  And  it  seems  to  us  very 
obvious  that  they  have  committed  no 
such  usurpation  ;  that  they  have  as- 
sumed no  franchises  which  are  strictly 
of  a  prerogative  character.  By  that 
I  mean,  such  acts  as  neither  natural  or 


Quo  Warranto. 


623 


Sec.  417.  As  a  remedy  for  an  unlawful  usurpation  of  an  office  in  a  pri- 
vate corporation.-  It  has  bucii  a  disj)uted  (j[ucsti(ni  whether  an 
information  in  the  nature  of  quo  warranto  was  a  lawful  remedy, 
in  case  of  an  intrusion  into  an  office  of  a  private  corporation. 


artificial  persons  can  exercise  without 
special  grant  of  the  legislature.  All 
the  fuuctions  of  a  corporation  are,  in 
one  sense,  franchises.  The  right  to 
hold  property  in  the  corporate  name, 
to  sue  and  be  sued  in  that  capacity, 
to  have  and  use  a  corporate  seal,  and 
by  that  to  contract,  and  some  others, 
perhaps,  are  franchises,  which  con- 
stitute the  very  definition  of  a  corpora- 
tion .  And  whenever  and  wherever 
the  corporation  is  recognized,  for  any 
purpose,  the  existence  and  exercise  of 
tliese  franchises  must  all  be  recog- 
nized. But  the  right  to  build  and  run 
a  railroad,  and  take  tolls,  or  fares,  is  a 
franchise  of  the  prerogative  character, 
which  no  person  can  legally  exercise, 
without  some  special  grant  of  the 
legislature.  And  we  should  not,  of 
course,  be  expected  to  suffer  a  foreign 
niilroad  to  usurp  the  exercise  of  any 
franchises  of  this  character.  This  dis- 
tinction exists  in  regard  to  some  other 
classes  of  corporations.  It  is  only  the 
i^ssuing  of  notes  to  be  the  represen- 
tative of  specie,  and  to  form  a  por- 
tion of  the  currency,  and  the  other 
local  operations  of  hanking  —  mak- 
ing discounts  and  receiving  depos- 
its, and  the  like  —  which  are  of  a 
prerogative  character.  But  there  are 
many  other  franchises  of  foreign 
banks,  and  other  business  corpora- 
tions, of  which  it  is  of  daily  occur- 
rence to  allow  the  exercise,  in  every 
state  in  the  union.  They  are  allowed 
to  sue  and  collect  their  debts,  to  levy 
their  executions  upon  land,  and  take 
land  in  payment  of  debts,  when  mort- 
gaged, or  otherwise.  And  of  all  this 
110  doubt  is  entertained.  Mr.  Justice 
McKiNLEY  was  the  only  judge  who 
ever  had  the  boldness  to  hold  the  con- 
trary, and  his  decision  was  speedily 
reversed  by  the  supreme  court.  Bank 
of  Augusta  V.  Earle,  13  Pet.  519,  588. 
"  This  point  is  expressly  decided  in 
the  state  of  New  Hampshire,  in  the 
case  of  Lumbard  v.  Aldrich,  8  N.  H. 
31,  where  it  was  held  that  "  a  corpora- 
tion, created  by  the  laws  of  another 
state,  has    power  to  take  and  hold 


lands  in  this  state."  P.\rkeii,  J., 
says:  "If  they  may  sue,  they  may 
satisfy  their  judgment,  by  levy  upon 
lauds  ;  and  of  course  hold  the  land 
and  convey  it.  And  if  they  can  do 
this,  they  may  take  title  by  deed,  in 
satisfaction  of  a  debt,  by  agreement, 
or  upon  any  other  consideration."  The 
same  point  is  decided  in  The  Silver 
Lake  Bank  v.  North,  4  Johns.  Ch.  370, 
and  in  most  of  the  American  slates. 
Our  own  reports  are  filled  with  cases 
in  favor  of  and  against  foreign  cor- 
porations. Day  V.  The  Essex  County 
Bank,  13  Vt.  97;  Grafton  Bank  v. 
Doe,  19  id.  4G3 ;  Claremont  Bank  v. 
Wood,  10  id.  582,  occur  to  me  at  the 
moment,  and  there  are,  doubtless, 
twenty  other  cases  of  the  kind.  All 
the  chartered  bridge  coinjianies  across 
Connecticut  river  are,  of  course,  incor- 
porations, in  most  cases  the  charters 
having  been  granted  by  the  legisla- 
ture of  New  Hampshire  ;  and  it  was 
shown  to  us,  in  the  trial  of  this  cause, 
that  in  very  few  instances  has  any 
grant  been  obtained  from  this  state. 
But  these  bridges,  like  the  railroad 
bridge  in  question,  must  rest  at  their 
western  termini  upon  the  soil  of  this 
state.  And  all  this  has  been  acqui- 
esced in  for  fifty  years  and  more. 
This  will  not  indeed  settle  the  rights 
of  this  railroad  corporation  by  pre- 
scription, as  their  own  existence  is  of 
a  more  recent  date.  But  it  goes  very 
far,  in  my  apprehension,  toward  set- 
tling the  law  of  the  state,  in  regard  to 
road  and  bridge  corporations  in  the 
states  conterminous  with  this  state  ; 
and  especially  when  corporations  have 
been  created  in  this  state,  with  ex- 
press permission  to  unite  with  this 
railroad,  or  any  other  New  Hampshire 
road  at  this  point,  should  I  regard  it 
as  decisive  of  the  right  of  the  New 
Hampshire  corporation  to  build  their 
road  to  the  very  line  of  the  state,  if 
they  could  obtain  the  land  for  that 
purpose,  without  coercive  measures. 
They  could  not,  perhaps,  compel  the 
land-owners  to  yield  them  the  right 
of  way,  or  even   space  to  sustain  the 


624 


Private  Corporations, 


But  it  seems  now  settled  in  this  country  that  the  court  may  per- 
mit tlie  information  to  be  filed  in  such  cases  where  the  claim  is 
only  for  the  benefit  of  a  private  citizen.^    And  as  the  abuse  of  the 


western  abutment  of  their  bridge, 
without  a  grant  from  the  legislature, 
of  the  prerogative  power  to  exercise 
the  right  of  eminent  domain  over  lands 
in  tliis  state. 

"  But,  having  obtained  the  permission 
of  the  land-owners,  I  should  not  re- 
gard the  bringing  of  their  road  to  the 
very  limits  of  this  state,  under  the 
circumstances,  as  any  infringement  of 
the  sovereignty  of  the  state,  or  as  any 
exercise  of  a  prerogative  franchise. 
It  is  the  settled  law  of  England,  in 
regard  to  aliens  even,  that  if  they  pur- 
chase land  by  royal  license,  they  may 
hold  it.  And  in  the  present  case,  we 
could  scarcely  regard  the  permission 
given  the  Vermont  roads  by  their  acts 
of  incorporation,  or  acts  amendatory 
of  such  acts,  to  unite  with  this  or  any 
other  New  Hampshire  roads  at  the 
line  of  the  state,  at  this  point,  as  any 


thing  less  than  an  implied  permission 
to  the  New  Hampshire  roads  to  build 
their  superstructure  to  the  very  line 
of  the  state.  And  as  this  line,  at  this 
point,  is  the  '  westernmost  bank  of 
the  Connecticut  river,'  the  bridge 
must,  of  course,  in  order  to  bring  tiie 
rails  to  the  line  of  the  state,  rest  more 
or  less  upon  Vermont  soil.  Allowing 
them  then  no  prerogative  right  to  emi- 
nent domain  in  the  soil,  we  cannot 
regard  the  long  practice  of  bridge 
companies  across  the  Connecticut  river, 
the  actual  license  of  the  legislature, 
and  the  reason  of  the  case,  as  justify- 
ing any  interference  with  their  quiet 
possession  of  the  lajid,  for  the  pur- 
pose of  erecting  a  bridge,  by  permis- 
sion of  the  owners  of  the  fee  of  the 
laud,  or  by  means  of  obtaining  the  fee 
in  themselves."  State  of  Vermont  v. 
Boston,  etc.,  R.  Co.,  25  Vt.  433. 


^  In  Murphy  v.  Farmers'  Bank,  20 
Penn.St.  415,  Woodwakd,J.,  observes: 
"The  usurpation  of  an  office  estab- 
lished by  the  constitution,  under  color 
of  an  executive  appointment,  and  the 
abuse  of  a  public  franchise  under  color 
of  a  legislative  grant, are  public  wrongs 
and  not  private  injuries,  and  the  rem- 
edy by  qu.0  'Warranto,  in  this  court  at 
least,  must  be  ou  the  suggestion  of 
the  attorney-general  or  some  author- 
ized agent  of  the  commonwealth.  *  * 
In  questions  involving  merely  the 
administration  of  corporate  functions, 
or  duties  which  touch  only  individual 
rights,  such  as  the  election  of  officers, 
admission  of  a  corporate  officer  or 
member,  and  the  like,  the  writ  may 
issue  at  the  suit  of  the  attorney-gen- 
eral, or  of  any  person  or  persons  de- 
siring to  prosecute  the  same.  What 
is  a  corporation  ?  A  franchise.  And 
Blackstone  defines  a  franchise  to  be  a 
part  of  the  royal  prerogative,  existing 
in  the  hands  of  the  subject.  The 
sovereignty  of  every  state  must  be 
lodged  somewhere.  Limited  by  such 
concessions  as  popular  violence  has 
from  time  to  time  wrung  from  reluct- 
ant mouarchs,  it  resides,  in  England, 
in  the  crown.     In  Pennsylvania,  it  re- 


sides in  the  whole  mass  of  the  people, 
and  the  three  co-ordinate  departments 
of  government  are  the  trustees  ap- 
pointed by  the  people  for  the  exercise 
of  so  much  of  their  sovereignty  as 
they  have  not,  by  the  bill  of  rights, 
denied  them,  nor  by  the  constitution 
of  the  United  States  yielded  to  the 
general  government.  The  legislature 
of  Pennsylvania  may  establish  a  cor- 
poration, that  is,  grant  out  a  part  of 
the  sovereignty  of  the  state,  because 
being  a  general  trustee  for  the  people, 
and  not  forbidden,  they  are  qualified 
to  do  so.  The  general  government 
being  a  government  of  derivative  pow- 
ers, congress  cannot  establish  a  cor- 
poration, because  the  power  to  do  so 
is  not  granted.  Our  legislature  can, 
because  the  power  is  not  withheld.  A 
corporation  then  exists  in  Pennsylva- 
nia by  virtue  of  a  constitutional  ex- 
ercise of  the  sovereign  power.  Its 
existence  is  proof  of  the  public  will, 
which  is  nothing  else  than  the  will  of 
the  majority.  Can  one  man  so  em- 
ploy any  of  the  departments  of  the 
government  as  to  tear  down  the  fabric 
of  a  majority  ? 

"  Regarding  the  judiciary  as  one  of 
the  trustees  of  the  sovereignty  of  the 


Quo  Warranto. 


625 


franchise  is  a  public  wrong,  it  has  been  lield  that  the  proceedings, 
in  tlie  absence  of  other  statutory  regulations  on  the  subject,  should 
be  instituted  in  the  name  of  the  public  prosecutor  or  other  agent 
authorized  by  the  supreme  authority  of  the  state,  and  that  a  pri- 
vate citizen  is  not  entitled  to  the  remedy  even  though  he  be  a 
creditor  of  the  corporation.^ 


people,  by  which  I  mean  the  whole 
people,  how  can  its  functions  be  called 
into  exercise  against  the  existence  of 
a  public  institution,  except  upon  the 
suggestion  of  some  agent  of  the  whole 
people  ?  If  they  may,  if  individual 
caprice,  passipn,  prejudice,  or  interest 
may  use  the  judicial  arm  of  the  gov- 
ernment to  overthrow  what  the  legis- 
lative or  executive  arms  have  erected, 
the  sovereignty  of  the  majority  is  ex- 
tinguished, and  the  departments  of 
the  government  intended  to  work  in 
harmony  are  brought  into  fatal  con- 
flict. A  house  divided  against  itself 
cannot  stand,  and  no  more  can  a  state. 
If  quo  loarranto  be  given  to  individ- 
uals to  dissolve  corporations,  power 
will  cease  to  steal  from  the  many  to 
the  few,  for  here  will  be  a  transfer  of 
it  bodily.  With  a  corrupt  judiciary, 
which  the  history  of  other  countries 
teaches  us  is  not  an  impossible  sup- 

'  State  V.  Patterson  &  Hamb.  Turnp. 
Co.,  1  Zabr.  9 ;  Commonwealth  v. 
Farmers'  Bank,  2  Grant's  Cas.  393; 
Commonwealth  v.  Philadelphia,  etc., 
R.  Co.,  20  Penn.  St.  518  ;  Same  v. 
Alleghany  Bridge  Co.,  id.  185;  Murphy 
V.  Farmers'  Bank,  id.  415. 

And  it  is  said  that  there  is  no  in- 
stance in  England  where  informations 
have  been  allowed  by  leave  of  court 
against  persons,  for  usurping  a  fran- 
chise merely  private  in  its  nature, 
and  not  of  a  public  character.  High 
on  Extra.  Leg.  Rem.,  ^^  653  ;  King  v. 
Ogden,  10  B.  &  C.  230.  See,  also, 
Gay  lord  v.  Fort  Wayne,  etc.,  R.  Co., 
(5  Biss.  286. 

On  this  subject  Chief  Justice  Tilgh- 
MAN,  in  Commonwealth  v.  Arrison, 
15  S.  &  R.  127,  says  :  "  I  find  no  in- 
stance of  an  information  in  the  nature 
of  quo  loarranto  in  that  country  (Eng- 
land), except  in  a  case  of  a  usurpation 
of  the  king's  prerogative,  or  of  one  of 
his  franchises,  or  where  the  public,  or 
at    least  a    considerable    number  of 

79 


position,  acting  as  the  instrument  of 
private  passions,  any  institution  estab- 
lished by  the  immediate  representa- 
tives of  the  people,  and  existing  by 
will  and  consent  of  the  people,  and 
for  their  convenience  and  benefit,  may 
be  frustrated  without  appeal  or  re- 
course. These  are  general  views  which 
harmonize  with  the  doctrine  of  the 
cases.  And,  therefore,  whilst  I  recog- 
nize the  right  of  any  relator  to  have  a 
quo  warranto  in  the  supreme  court 
who  is  desirous  to  prosecute  the  same 
to  redress  any  private  grievance  that 
falls  within  that  remedy,  I  deny  the 
right  of  any  party  except  the  attorney- 
general,  or  other  officer  of  the  com- 
monwealth, to  sue  for  it  to  dissolve  a 
corporation."  See,  also,  High  on  Extra. 
Leg.  Rem.,  §  653 ;  Commonwealth  v. 
Graham,  64  Penn.  St.  339  ;  The  People 
V.  Tibbets,  4  Cow.  358. 


people,  were  interested.  Neither  do 
I  find  any  case  in  which  it  has  been 
denied  that  the  court  may,  in  its  dis- 
cretion, grant  it,  where  an  office  is 
exercised  in  a  corporation  contrary  to 
the  charter.  In  England  the  number 
of  corporations  is  very  small,  indeed, 
compared  witli  the  United  States  of 
America.  Consequently  the  quantity 
of  that  kind  of  business  which  may 
be  brought  into  our  courts  will  be 
much  greater  than  theirs.  But  that 
alone  is  not  sufficient  reason  for  re- 
jecting it.  We  are  now  to  decide  a 
general  question  on  the  right  of  the 
court ;  not  on  the  expediency  of  exer- 
cising that  right,  either  on  the  present, 
or  any  other  case. 

"  Now  to  establish  it  as  a  principle 
that  no  information  can  be  granted  in 
cases  of  what  the  counsel  call  private 
corporations  might  lead  to  very  seri- 
ous consequences.  Perhaps  it  may  be 
said  that  banks,  and  turnpike,  canal 
and  bridge  companies  are  of  a  public 
nature  ;  but  yet  they  have  no  concern 


G26 


Private  Corporations. 


And  in  all  cases  where  he  is  authorized,  a  private  party  must 
show  tliat  he  is  interested  in  the  matter,  before  the  court  w^ill 
allow  him  to  file  an  information.  But  a  corporation  is  regarded 
as  having  such  interest.  Such  a  party  may,  liowever,  by  his  acts, 
waive  his  rights  or  forfeit  his  claim  to  the  proceeding  ;  as  where 
he,  knowing  the  illegality  of  an  election,  participates  in  proceed- 
ings at  corporate  meetings,  and  recognizes  and  acquiesces  in  the 
result.^  The  privilege  of  filing  an  information,  on  the  part  of  a 
private  prosecutor,  rests  in  the  sound  discretion  of  the  court.^ 

Sec.  418.  Possession  and  user  of  the  usurped  office,  essential.  — No 
information  will  lie  unless  there  is  a  possession  or  user  of  the 
corporate  ofiice,  and  a  usurped  possession  must  be  shown  as  a 
condition  precedent  to  the  filing  of  an  information.^ 

Sec.  419.  Non-user  as  a  ground  for  forfeiture.  —  It  is  held  that  to 
constitute  grounds  for  forfeiture  for  non-user  it  should  be  a  total 


with  the  government  of  the  country 
or  the  administration  of  justice.  They 
are  no  further  public  than  as  they 
have  to  do  with  great  numbers  of 
people.  But  if  the  number  alone  is 
the  criterion,  it  will  often  be  difBcult 
to  distinguish  public  from  private  cor- 
porations. Let  us  consider  churches, 
for  example.  In  some  the  congrega- 
tion is  very  small.  How  is  the  court 
to  make  the  line  of  distinction  ?  If 
you  say  the  court  has  the  right  in 
both  cases  to  grant  or  deny  the  infor- 
mation, according  to  its  opinion  of 
the  expediency,  there  is  no  difficulty 
as  to  the  right.  But  if  it  be  alleged 
that  there  is  a  right  in  one  case  and 
not  the  other,  the  difficulty  will  be 
extreme,     I    strongly   incline   to  the 


opinion  that  in  all  cases  where  a  char- 
ter exists,  and  a  question  arises  con- 
cerning the  exercise  of  an  office 
claimed  under  that  charter,  the  court 
may,  in  its  discretion,  grant  leave  to 
file  an  information.  Because,  in  all 
such  cases,  although  it  cannot  be 
strictly  said  that  any  prerogative  or 
franchise  of  the  commonwealth  baa 
been  usurped,  yet,  what  is  much  the 
same  thing,  the  privilege  granted  by 
the  commonwealth  has  been  abused. 
The  party  against  whom  the  informa- 
tion is  prayed  has  no  claim  but  from 
the  grant  of  the  commonwealth,  and 
an  unfounded  claim  is  a  usurpation, 
under  pretense  of  a  charter  of  a  right 
never  granted . " 


'  State  V.  Lehre,  7  Rich.  234 ;  King 
V.  Stacey,  1  T.  R.  1.  In  England,  so 
far  as  relates  to  municipal  offices,  this 
is  regulated  by  act  of  parliament.  9 
Anne,  chap  20(1711). 

2  Guuton  V.  Ingle,  4  Cranch  (C.  C), 
438. 

3  Queen  v.  Pepper,  7  Ad.  &  E.  745  ; 
People  V.  Thompson,  16  Wend.  6o5. 

It  is  not  sufficient  to  allege  that  the 
defendant    has    accepted    the    office 


without  specifying  the  mode  of  ac- 
ceptance .  High  on  Extra.  Leg.  Rem., 
§  655.  But  if  the  party  has  acted  in 
the  office  this  is  sufficient.  Id.  See, 
also.  Queen  V.  Slatter,  11  Ad.  &  E.  505  ; 
Queen  v.  Quale,  id.  508  ;  People  v. 
Thompson,  16  Wend.  655. 

Every  presumption  will  be  made  in 
favor  of  long  possession  and  use  of  a 
franchise.  Queen  v.  Archdall,  8  Ad. 
&  E.  381. 


Quo  Waeranto.  627 

non-user,  and  not  a  mere  refusal  to  act  as  a  corporation,  or  a  mere 
refusal  to  pay  arising  from  insolvency.^ 

Sec.  420.  Destruction  of  the  objects  of  the  corporation  as  a  ground  of 
forfeiture.  —  It  is  a  general  doctrine  that  whenever  a  corpoi-ation 
does  an  act  or  suii'ers  an  act  to  be  done  which  entirely  destroys 
the  objects  and  purposes  for  which  the  corporation  was  instituted, 
it  is  a  ground  of  forfeiture.^ 

Sec.  421.  Pleadings  —  evidence.  —  It  is  not  within  the  proper 
scope  of  this  treatise  to  consider  thr  subject  of  pleadings,  practice 
and  evidence  in  their  relation  to  proceedings  in  the  nature  of 
quo  warranto.  Special  treatises  are  devoted  to  these  subjects,  in 
which  the  student  may  find  these  matters  fully  presented,  not 
only  in  so  far  as  they  relate  to  private  corporations,  but  also  gen- 
erally to  all  proceedings  of  that  nature. 

Sec.  422.  Judgment.  —  It  may  be  proper,  however,  to  briefly 
consider  the  form,  nature  and  effect  of  the  judgment  in  such 
cases  where  the  proceedings  relate  to  private  corporations.  On 
this  subject  Mr.  High  observes  :  "At  common  law  the  judgment 
upon  the  ancient  writ  of  qtio  warranio^ii  for  the  respondent, was 
that  he  be  allowed  his  oflice  or  franchise.  And  in  case  of  judg- 
ment for  the  king  for  a  usurpation  of  the  franchise,  or  for  its 
mis-user  or  non-user,  a  judgment  of  seizure  into  the  king's  hands 
was  rendered  if  the  franchise  was  of  such  a  nature  as  to  subsist 
in  the  hands  of  the  crown  ;  if  not  of  such  a  nature,  there  was 
merely  a  judgment  of  ouster  for  the  purpose  of  dispossessing  the 
party.  In  case  of  judgment  for  a  seizure  of  the  franchises  in  the 
king's  hands,  all  franchises  incident  and  subordinate  thereto,  and 
held  by  the  same  grant,  were  also  forfeited."^ 

Under  proceedings  in  the  nature  of  quo  warranto  the  form  of 
the  judgment  must  depend  upon  the  nature  and  character  of  the 

^  People  V.  Bank  of  Niagara,  6  Cow.  *  State  v.  Real  Estate  Bank,  5  Ark. 

196 ;  People   v.    Bank  of  Hudson,  id.  595  ;    People   v.  Bank  of    Hudson,  6 

217  ;  Kin^  v.  Stacey,  1  T.  R.  1.     See,  Cow.  217.     See,  also,  pos^  chap.  20. 

also,  De  Camp  v.  Alward,  53  Ind.  468  ;  *  High  on  Extra.  Leg.  Rem.,  §  745; 

Importing,  etc.,  of  Ga.  v.  Locke,  50  3  Bl.  Com.  263. 
Ala.    332 ;  Re  Franklin  Tel.  Co.,  119 
Mass.  447. 


628  Private  Corporations. 

proceedings.  In  a  case  of  €[110  wan^anto  in  N^ew  York,  Chief 
Justice  Savage  observes :  "  Whenever  individuals  or  a  corpora- 
tion shall  be  found  guilty  either  of  usurping  or  intruding  into 
any  office  or  franchise,  or  of  unlawfully  holding  it,  judgment  of 
ouster  shall  be  rendered,  and  a  fine  may  be  imposed  ;  but  where 
the  proceeding  is  against  a  corporation,  and  a  conviction  ensues 
for  mis-user  or  non-user,  or  surrender,  judgment  of  ouster  and  of 
dissolution  shall  be  rendered,  and  it  is  equivalent  to  judgment  of 
seizure  at  common  law.  If,  tlierefore,  tlie  information  in  this 
case  had  for  its  object  to  oust  the  defendants  from  acting  as  a  cor- 
poration and  to  test  the  fact  of  their  incorporation,  it  should  have 
been  tiled  against  individuals  ;  if  the  object  was  to  effect  the  dis- 
solution of  a  corporation  which  had  had  an  actual  existence,  or  to 
oust  such  corporation  of  some  franchise  which  it  unlawfully 
exercised,  then  the  information  is  correctly  filed  against  the  cor- 
poration." ^ 

Sec.  423.  Nothing  forfeited  to  the  state  but  the  franchise.  —  Where 
there  is  a  proper  case  for  a  judgment  of  forfeiture,  and  such  judg- 
ment is  entered,  the  rights  and  franchises  of  the  corporation  are 
remitted  to  the  custody  of  the  state.  But  it  does  not  follow  that 
the  state  is  entitled  to  the  property  of  the  corporation.  On  the 
other  hand,  it  has  been  held  to  be  error  to  award  it  to  the  state.** 
And  "  the  judgment  of  seizure  does  not  of  itself  work  a  disso- 
lution." ' 

'  People   V.   Saratoga  &   Rensselaer  casions  a  forfeiture  of  lands  or  goods, 

R.    Co.,    15    Wend.    113.     See,    also,  rights  or  credits,  or,  in  fact,  occasions 

People  V.   Bartlett,  6  id.  422  ;  Smith  any  other  forfeiture  but  the  franchises 

V.  The  State,  21  Ark.  294.  themselves.     The    consequence   of  a 

2  State  Bank  v.  The  State,  1  Blackf.  breach   of    the   implied   condition   on 

207.     In   this   case,    Holman,  J.,  ob-  which   their    liberties    were   granted 

served :  was  not  that  they  should  forfeit  their 

"There  are  but  two  grounds  on  property  or  possessions  if  they  abused 
which  it  can  be  contended  that  the  their  franchises,  but  only  that  tiiey 
corporate  effects  fall  into  the  hands  of  should  forfeit  tlieir  franchises.  That 
the  state  ;  1st,  as  a  forfeiture  for  abus-  which  comes  out  of  the  hands  of  the 
ing  the  franchises,  or  2d,  for  the  want  king  (or  sovereign  power)  is  the 
of  an  owner  by  the  dissolution  of  the  proper  subject  of  forfeiture  ;  the  king, 
corporation.  When  we  examme  the  by  the  seizure,  resuming  what  origin- 
first  of  these  grounds  we  find  nothing  ally  fiowed  from  his  bounty." 
in  the  books  to  support  the  idea  that  ^  High  on  Extra.  lieg.  Rem. ,  §  577  ; 
the  abuse  of  corporate  franchises  oc-  2  Kyd  on  Corp.  409. 


Liens  on  Corporate  Property  and  their  Priority.    629 


CHAPTEK  XIX. 

LIENS    ON    corporate    PROPERTY'   AND    THEIR   PRIORITY. 

Sec.  424.  Corporate  mortgages  and  bonds  secured  thereby. 

Sec.  425.  Can  the  corporation  by  mortgage  or  trust  deed  give  a  lien  on 

property  to  be  thereafter  acquired  ? 

Sec.  426.  What  may  be  conveyed  by  mortgage. 

Sec.  427.  Rolling  stock,  character  and  quality  of. 

Sec.  428.  Id. 

Sec.  429.  Mechanics  and  constructers'  liens. 

Sec.  430.  Id. 

Sec.  431.  Not  assignable. 

Sec.  432.  Priority  between  mortgage  and  mechanics'  liens. 

Sec.  433.  Id. 

Sec.  434.  Id. 

Sec.  435.  Id. 

Sec.  424.  Corporate  mortgages  and  bonds  secured  thereby.  —  The 
statutes  of  various  states  provide  that  corpoi*ations,  especially  rail- 
road corporations,  may  borrow  money,  and  for  that  purpose  may 
issue  bonds  and  execute  mortgages  or  deeds  of  trust  to  secure  the 
same,  and  that  said  mortgages  or  deeds  of  trust  may  by  their  terms 
include  and  cover  not  only  the  property  owned  by  them  and  in 
esse  at  the  time  of  the  execution  of  such  mortgages  or  trust  deeds, 
but  subsequently-acquired  property.  Provision  is  also  usually 
made  by  statute  in  reference  to  the  recording  of  such  instruments 
in  order  to  give  the  mortgagees,  or  cestui  que  trust,  liens  on  such 
property.  The  expedient  of  raising  money  in  this  way  is  fre- 
quently resorted  to,  in  order  to  enable  railroad  companies  to  com- 
plete their  undertakings,  where  their  paid-up  capital  is  not 
adequate  for  the  purpose.  The  practice  of  issuing  preferred  stock 
in  such  cases  amounts  to  about  the  same  thing.  The  power  in 
either  ease  is  liable  to  great  abuse  on  the  part  of  the  managers  of 
such  corporations  and  has  led  to  apprehensions  of  the  most  serious 
character. 


630 


Private  Corporations. 


Mr.  Redfield  suggests  legislative  action  as  a  means  of  prevent- 
ing the  evils  frequently  resulting  therefrom.^  The  right  to  mort- 
gage its  estate  is  incident  to  the  right  of  a  corporation  to  borrow 
money,  therefore,  where  by  the  charter  of  a  corporation,  or  by 
the  general  law,  it  is  clothed  with  the  power  to  borrow  money 
to  prosecute  its  business,  it  nva.j,  without  any  other  or  further 
legislation,  mortgage  its  lands  and  property  as  security  for  its 


1  On  this  subject  Mr.  Eedfield  ob- 
serves : 

"  In  this  country  these  mortgages 
have  usually  been  so  framed  as  to 
create  successive  liens,  in  the  order 
of  their  being  issued,  as  first,  second, 
and  third  mortgage  bonds.  These 
are  issued  in  large,  general  sums, 
subdivided  to  suit  the  w^ants  of  pur- 
chasers in  the  market,  and  when  sold 
at  par  and  above,  are  perhaps  the 
most  unobjectionable  mode  of  com- 
pleting an  enterprise  that  otherwise 
must  stop  in  modo.  But  when  sold, 
as  they  commonly  are,  at  reduced 
prices,  in  proportion  to  the  waning 
fortunes  of  the  company,  they  must 
of  course  destroy  at  once  the  credit  of 
the  stock  and  operate  harshly  upon 
its  holders.  This  is  not  the  place,  nor 
are  we  disposed  to  read  a  homily 
upon  the  wisdom  of  legislative  grants, 
or  the  moralities  of  moneyed  specula- 
tions in  stocks  or  on  the  exchange  or 
elsewhere.  But  it  would  seem  that 
legislation  upon  this  subject  should  be 
conducted  with  sufficient  deliberation 
and  firmness  so  as  not  to  invest  such 
corporations  with  such  unlimited 
powers  as  to  operate  as  a  net  to  catch 
the  unwary,  or  as  a  gulf  in  which  to 
bury  oitt  of  sight  the  most  disastrous 
results  to  private  fortunes,  which  has 
justly  rendered  American  investments, 
taken  as  a  whole,  a  reproach,  where- 
ever  the  name  has  traveled.  Expe- 
rience will  show  that  desperate  enter- 
prises require  desperate  means  for 
their  accomplishment,  and  will  always 
find  men  for  their  management  whose 
characters  will  conform  more  or  less 
to  the  necessities  of  their  position. 
And  if  by  legislative  restrictions  they 
are  precluded  from  the  more  obvious 
devices  and  expedients  for  the  relief 
of  their  straightened  fortunes,  they 
will  only  be  forced  to  the  adoption  of 
such  as  are  more  complex,  less  super- 


ficial and  consequently  the  more  likely 
to  seduce  capitalists  into  their  invest- 
ments. 

"  But  even  this  is  no  apology  for 
such  unrestricted  powers  as  are  often 
given  to  these  companies.  And  the 
mode  in  which  sucli  things  are  here 
carried  through  the  legislature,  by 
means  of  agents  who  have,  where 
there  are  no  rival  interests,  very  much 
their  ovvn  way,  without  even  the  ne- 
cessity of  subjecting  their  plans  to  any 
permanent  board  of  supervision,  who 
shall  have  such  matters  under  control 
and  devote  such  time  to  their  study, 
as  not  to  be  misled  by  the  devices  of 
the  interested  ;  this  mode  of  accom- 
plishing such  things  sufficiently  ex- 
plains why,  in  this  country,  no  restric- 
tions are  placed  upon  such  companies. 

"If  some  reliable  estimate  of  the 
cost  of  such  undertakings  were  ob- 
tained by  means  of  a  board  of  trade  or 
railway  commissioners,  and  no  work 
allowed  to  go  forward  until  a  large 
proportion,  or  the  whole  of  the  requi- 
site capital,  were  obtained  by  stock 
subscriptions,  it  wpuld  afford  great 
security.  And,  if  all  mortgages,  at 
whatever  time  given,  were  placed 
upon  the  same  footing  as  to  priority, 
it  would  give  far  less  temptation  to 
speculations  in  mere  bubble  invest- 
ments, which  is  too  much  the  case  in 
this  country.  But  there  is  perhaps  no 
remedy  for  this  incautious  legislation 
in  this  country  but  the  severe  and 
hard  discipline  of  that  most  painful, 
but  surest  teacher,  experience.  It  is, 
we  think,  rather  creditable  to  the  pro- 
moters of  railways  in  this  country 
that  with  such  unlimited  powers  as 
their  charters  confer  they  have  been 
so  little  abused,  and  this  in  the  main 
not  by  design  or  for  private  ends,  but 
through  inexperience  and  want  of 
skill."    SRedf.  onRaiL,  §234. 


-     Liens  on  Corpoeatb  Pkopeety  and  their  Priokity.     631 

loans.^  So  it  lias  been  held  that  a  power  given  in  a  charter  "  to 
sell  and  dispose  of  its  property  clearly  gives  a  power  to  mort- 
gage/ and  a  power  given  to  jnortgage,  for  the  purpose  of  build- 
ing on  its  lands,  gives  authority  to  mortgage  for  materials  and 
labor  in  erecting  a  building/  A  power  expressly  given  to  a  cor- 
poration to  mortgage  for  one  purpose  does  not  abridge  its  gen- 
eral authority  to  mortgage  for  another,  as  for  the  security  of  its 
creditors/ 


Sec.  425.  Can  the  corporation  by  mortgage  or  trust  deed  give  a  lien 
on  property  thereafter  to  be  acquired  ?—  The  question  whether  a  cor- 
poration can  execute  a  mortgage  that  will  be  effectual  as  a  lien  on 
property  not  in  esse,  or  on  property  thereafter  acquired,  has  been 
the  subject  of  controversy,  but  it  seems  now  well  settled  that 
such  liens  attach  under  such  circumstances  at  least  under  the  pro- 
visions of  statutes  providing  for  such  liens. 


'  Richards  v.  Merrimack ,  etc. ,  R.  R. 
Co.,  44  N.  H.  127;  Susquehanna 
Bridge,  etc.,  Co.,  v.  General  Ins.  Co., 
3  Md.  305  ;  Bardstowu,  etc.,  li.  R. 
Co.  V.  Metcalfe,  4  Mete.  (Ky.)  199. 

2  Gordon  v.  Preston,  1  Watts,  385. 
In  Leggett  v.  The  N.  J.  Banking  Co., 
1  N.  J.  Eq.  541,  the  charter  authorized 
the  company  to  hold  real  estate  neces- 
sary for  the  immediate  accommodation 
of  the  corporation  in  its  business,  and 
to  convey  the  same  for  its  use,  and  it 
was  held  that  this  conferred  upon  the 
corporation  authority  to  mortgage  its 
estate  for  the  use  of  the  corporation, 
and  that  the  question  as  to  whether  it 
was  given  in  payment  of  a  debt,  or  as 
security,  either  direct  or  collateral, 
was  immaterial. 

3  Miller  v.  Chance,  3  Edw.  Ch,  (N. 
Y.)  399. 

*  Mobile,  etc.,  R.  R.  Co.  v.  Talman, 
15  Ala.  472 ;  Allen  v.  Montgomery, 
etc.,  R.  R.  Co.,  11  id.  437. 

^  In  Willing  v.  Morris  Canal  &  Bank- 
ing Co.,  4  N  J.  Eq.  377,  it  was  held 
where  by  virtue  of  a  statute  passed  for 
such  purposes,  a  mortgage  of  a  canal 
was  executed,' in  which  the  canal  was 
described  by  its  extreme  termini,  and 
all  the  accompanying  works  of  the 
company,  such  as  locks,  aqueducts, 
bridges,  privileges,  etc.,  were  in-, 
eluded ;  that  the  instrument  conveyed 


"  A  mortgage  given 


tJie  entire  canal  when  completed,  al- 
though a  portion  of  it  teas  constructed 
upon  land  acquired  after  tlie  execution 
of  the  mortgage,  and  was  built  after  the 
date  of  the  mortgage,  and  that  the 
feeder  of  the  canal  passed  as  a  part  and 
parcel  thereof.  Pierce  v.  Emery,  33 
N.  H.  484;  Coe  v.  Pennock,  14  Ohio 
(N.  S.),  187  ;  Pennock  v.  Coe,  23  How. 
(U.  S.)  117;  Dunham  v.  Cincinnati, 
etc.,  R.  Co.,  1  Wall.  (U.  S.)  254  ;  Gal- 
veston R.  Co.  V.  Cowdrey,  11  id.  483  ; 
United  States  v.  New  Orleans  R.  Co., 
12  id.  362  ,  Railroad  Co.  v.  Soutter.  13 
id.  517  ;  Williamson  v.  New  Albany, 
etc.,  R.  Co.,  1  Bisa.  198  ;  Coe  v.  Colum- 
bus, etc.,  10  id.  372;  How  v.  Free- 
man, 14  Gray,  566  ;  State  v.  Northern 
R.  Co.,  18  Md.  193;  Morrill  v.  Noyes, 
56  Me.  458 ;  Haven  v.  Emery,  33  N. 
H.  66 ;  Seymour  v.  Canada,  etc.,  R. 
Co.,  25  Barb.  284;  Stevens  v.  Buffalo 
&  N.  Y.  R.  Co.,  31  id.  590 ;  Buffalo  & 
N.  Y.  R.  Co.  V.  Lampson,  47  id.  533  ; 
Benjamin  v.  Elmira  R.  Co.,  49  id.  441 ; 
Pbiiadelphia,  etc.,  R.  Co.  v.  Woelpper, 
46  Penn.  St.  369;  Ludlow  v.  Hard,  1 
Dis.  (Ohio)  552;  Coe  v.  McBrown,  33 
Ind.  252  ;  Pierce  v.  Milwaukee,  etc., 
R.  Co.,  24  Wis.  551  ;  Jessup  v.  Bridge, 
11  Iowa,  573  ;  Dunham  v.  Isett,  15  id. 
284.  But  generally  mortgages  do  not 
cover  after-acquired  property.  Bath 
V.    Miller,   53   Me.  308.     In  "Farmers' 


633  Private  Corporations. 

on  the  entire  property  of  a  railway,  including  future  receipts  for 
transportation,  with  an  agreement  that  property  on  the  roail  sub- 
sequently acquired  shall  be  bound,  and  a  conveyance  of  it  be  duly 
executed,  gives  an  equitable  lien  on  property  subsequently  ac- 
quired to  the  holders  of  the  bonds  secured  by  the  mortgage."  * 
The  question  as  to  whether  after-acquired  property  passes  under 
a  mortgage  by  a  corporation  of  its  corporate  property  depends 
entirely  upon  the  circumstances  whether  the  property  is  so  Gon- 
nected  with  the  husiness  of  the  corporation  that  it  may  he  said  to 
he  a  neoessary  incid.ent  thereof  and  attached  thereto.  If  so,  it 
is  treated  as  passing  under  a  mortgage  of  the  real  and  personal 
estate,  otherwise  not.  Thus,  in  a  Yermont  case,^  a  first  mortgage 
of  a  railroad  company  contained  the  following  words  as  descrip- 
tive of  the  property  conveyed  :  "And  all  other  personal  property 
belonging  to  said  company,  as  the  same  now  is  in  use  by  said 
company,  or  as  the  same  may  be  hereafter  changed  or  renewed 
by  said  company."  It  was  held  that  these  words  did  not  embrace 
certain  machinery  for  "  burnetizing "  ties  and  timber  so  as  to 
render  them  more  durable,  it  having  appeared  that  such  machinery 
was  not  in  existence  at  the  time  of  the  mortgage,  and  took  the 
place  of  nothing  that  was  therein  specified,  but  was  constructed 
subsequent  to  its  execution  as  an  experiment. 

In  the  conveyance  of  property  acquired  subsequently  to  this 
first  mortgage,  the  following  words  of  description  were  used : 
"All  the  articles  of  personal  property  acquired  by  the  company 
since  the  date  of  the  mortgage,  consisting,  among  other  things, 
of  the  following,  to-wit,"  and  then  followed  an  enumeration,  by 
name,  of  several  engines,  and  by  number  of  several  difiPerent 

Loan,  etc.,  Co.  v.  Commercial  Bank  of  ing  to  convey  materials  acquired  sub- 
Racine,  15  Wis.  424,  it  was  held  that  sequently  to  its  execution,  does  not 
a  railroad  mortgage  for  the  purpose  of  acquire  any  validity  as  to  such  mate- 
raising  money  to  complete  the  road,  rials  from  its  general  nature  and  ob- 
which  contains  no  language  purport-  ject. 

'  2  Redf .  on  Rail  ,  §  235.  out  the  knowledge  of  the  company  or 

2  Braiuerd    v.    Peck,    34    Vt.   496.  the  grantee  ;  and  the  property,  upon 

Where    an    ofBcer    of    a  corporation  the  execution  of  the  deed,  becomes  at 

purchases   property  with  the  money  once  subject  to  any  mortgage  upon  the 

of  the  corporation,  and  takes  the  deed  general  property  of    the  corporation. 

in  the  name  of  an  individual  director,  Buffalo,    N.    Y.   &  Erie  R.    R.  Co.  v. 

the  title  vests  in  the  corporation ,  al-  Lampson,  47  Barb.  533. 
though  the  transaction  was  done  with- 


Liens  on  Corporate  Property  and  their  Priority.      G33 

Iviuds  of  cars.  It  was  held  that  the  general  words  were  to  be 
construed  as  referring  to  articles  of  the  same  nature  and  kind  as 
those  specifically  named. 

In  a  Massachusetts  case,'  a  railroad  corporation,  empowered  by 
law  to  mortgage  their  franchise  and  property,  after  making  a 
mortgage  of  all  their  lands,  franchises  and  privileges,  and  "  all 
the  locomotive  engines,  cars  and  other  articles  of  personal  ])rop- 
erty  whatsoever,  now  owned  or  used  by  the  corporation,  or  which 
they  may  hereafter  own  or  use,"  authorized  their  directors  to 
issue  bonds  to  a  large  amount  to  pay  debts  contracted  in  building 
and  furnishing  their  road,  and  to  secure  such  bonds  by  "  an  addi- 
tional or  second  mortgage  of  the  road,  franchise  and  property  of 
every  description,  including  cars  and  engines,"  subject  to  the  first 
mortgage,  and  "as  full  and  complete"  as  that.  Bonds  were 
issued  pursuant  to  this  authority,  and  a  second  mortgage  made  of 
all  the  lands,  franchises,  etc.,  of  the  corporation,  "and  the  prop- 
erty and  premises  whatsoever  mentioned,  described,  or  referred 
to  "  in  the  first  mortgage.  It  was  held  that  the  second  mortgage, 
as  against  a  subsequent  attachment,  conveyed  engines  and  cars 
acquired  by  the  corporation  after  the  first  and  before  the  second 
mortgage. 

In  a  later  case  in  the  same  state,*  the  directors  of  a  railroad 
corporation,  authorized  by  vote  of  its  stockholders  "  to  execute  a 
mortgage  of  the  road  with  all  its  franchises,"  made  a  mortgage 
which  recited  this  vote  and  in  terms  conveyed  their  road,  houses, 
lands  and  superstructure,  and  all  their  locomotives,  cars,  tools  and 
implements,  "  with  all  improvements  made  upon  such  property, 
and  all  additions  thereto,  by  adding  new  locomotives,  cars  and 
other  things ;  "  and  the  legislature  afterward  ratified  and  con- 
firmed their  "  proceedings,  whereby  they  conveyed,  agreeably  to 
the  vote  of  the  stockholders,  their  railroad  and  property  in  mort- 
gage." It  was  held  that  cars  subsequently  purchased  by  the  cor- 
poration were  included  in  the  mortgage,  although  the  mortgagees 
had  not  taken  possession  for  foreclosure. 

In  a  Wisconsin  case,'  a  mortgage  was  executed  of  a  "  railroad 

'  Hensbaw  v.  Bellows  Falls  Bank,  '  Farmers'  Loan,  etc.,  Co.  v.  Com- 
10  Gray,  568.  mercial  Bank,  11  Wis.  207. 

^  Howe   V.  Freeman    14  Gray,  566. 

80 


634  Pkivate  Cokporations. 

witli  its  superstructure,  track  and  all  other  appui-teiiances  made 
or  to  he  made,  together  with  its  furniture,  m.aterials  and  every 
other  kind  of  'personal  jprojperty  which  should  he  used  for  ope- 
rating said  road  /  and  it  was  held  that  property  thereafter  ac- 
quired by  the  couipany  did  not  pass  by  the  niortga<^e,  excejjt  so 
far  as  it  should  heconie  appurtenant  to,  or  he  used  in  operating 
the  road,  and  therefore  that  chairs  subsequently  acquired,  but 
never  used,  did  not  pass  under  the  mortgage.  A  similar  rule  was 
adopted  in  Maine,^  and  in  a  case  where  a  railroad  corporation  by 
virtue  of  a  special  act  of  the  legislature  mortgaged  not  only  all 
the  property  then  owned  by  both  the  new  and  old  portions  of  the 
road,  but  "  all  the  property  of  said  extension  subsequently  to  be 
acquired,"  it  w^as  held  that  wood  subsequently  purchased  with  the 
earnings  and  for  the  use  of  the  whole  road  would  not  pass  by  said 
mortgage,  and  was  attachable. 

These  cases  illustrate  the  doctrine  stated  sufficiently,  and  no 
difiiculty,  with  the  rule  stated  in  view,  will  be  experienced  in  de- 
termining, in  a  given  case,  whether  after-acquired  property  is  cov- 
ered by  a  mortgage  or  not. 

Sec.  42G.  What  may  be  conveyed  by  mortgage.  —  It  was  formerly 
a  mooted  question  whether,  in  the  absence  of  statutory  provisions 
expressly  authorizing  it,  a  corporation  could  assign  or  convey  by 
mortgage  or  otherwise  its  franchises.^  But  it  is  now  a  common 
provision  of  the  statutes  that  franchises,  as  well  as  all  other  kinds 
of  property  and  interests,  may  be  mortgaged  by  railroad  corpora- 
tions, and  in  such  cases  at  least  the  franchises  may  be  conveyed  by 
mortgage  as  security.'  And,  independent  of  any  statutory  pro- 
vision, there  can  be  no  doubt  that  a  mortgage  of  all  the  cor- 
porate property,  under  competent  authority,  carries  xoith  it,  as  a 
necessary  incident,  all  its  franchises  so  far  as  necessary  to  make 

1  City  of  Bath  v.  Miller.  53  Me.  308.  N  W.  R.  Co.,  4  De  G.,  M.  &  G.  115  ; 

2  2  Kedf.  on  Rail.,  ^235, 12,  note  22  ;  Troy,  etc,  R.  Co.  v.  Kerr.  11  Barb. 
Wheelock  v.  Moulton,  15  Vt.  519;  581;  State  v.  Rives.  3  Ired.  297  ;  Coe 
Isham  V.  Benuino:ton  Iron  Co.,  19  id.  v.  McBrown,  22  Ind.  252;  Pennock  v. 
230;  Winch  v    Railway  Co.,  5  De  G.  Coe,  23  How.  (U   S  )  117. 

&  S.   562  ;  S.   C,   13  E.  L.  &  E.  506  ,        ^  First  Mort.  Bondholders  v.  Mays- 

S.  Y.  R.    Co.   V.   Great  N.  R.   Co.,  3  ville  &  L.  R.  Co.,  9  Am.  L.  Times,  No. 

De  G.,  M.  &  G.  576  ;  S.  C. ,  19  E.  L.  &  31  ;  cited  2  Redf.  on  Rail.,  i^  235.  14, 

E.    513;    Beman  v.    Rufford,    1    Sim.  note  26.     See,  also,  Pierce  v.  Emory, 

(N.  S.)  550;  S.  C.  6  Eng.  L.  &  Eq.  32  N.  H  484,  Phillips  v.  Winslow,  18 

106;  The  S.  &  B.  R.  Co.  v.  The  L.  &  B.  Monr.  430. 


Liens  on  Corpokate  Pkopkety  and  tiieik  Priority.      G35 

tlie  property  available  /  ^  as,  in  the  language  of  the  court  in  the 
case  first  cited  in  tlie  last  note,  "  an  authority  to  mortgage  a  rail- 
road and  its  property  must  design  a  transfer  of  the  right  to  ope- 
rate the  road,"  as  otlierwise  tlie  property  would  be  unavailable 
and  useless  in  the  hands  of  the  mortgagees,  and  when  it  came 
into  their  possession  they  would  find  that  the  security  they  had 
obtained  for  their  money  was  a  myth.  The  law  does  not  con- 
template any  such  result,  and  the  courts  would  not  for  a  moment 
give  countenance,  upon  any  technical  grounds,  to  any  such  device 
for  cheating  hona  fide  creditors  under  the  mortgage.  Strictly 
speaking,  at  the  common  law,  a  railroad  or  other  corporation  has 
no  authority  to  mortgage  its  franchises  ; "  and  in  one  case"'  it  has 
been  held  that  authority  conferred  by  the  charter  of  a  corpora- 
tion to  mortgage  "  its  road,  income  and  other  ptroperty^^  does  not 
authorize  a  mortgage  of  its  franchise.  In  another  case  in  the 
United  States  circuit  court  arising  in  New  Hampshire,*  the  court 
say :  "Among  the  franchises  of  a  corporation  is  that  of  being  a 
body  politic,  with  rights  of  succession  of  members,  and  of  acquir- 
ing, holding  and  conveying  property,  and  suing  and  being  sued 
by  a  certain  name.  Such  an  artificial  being  only  the  law  can  cre- 
ate, and  when  created  it  cannot  transfer  its  own  existence  into 
another  body,  nor  can  it  enable  natural  persons  to  act  in  its  name, 
save  as  its  agents,  or  as  members  of  the  corporation,  acting  in 
conformity  with  the  modes  required  or  allowed  by  its  charter. 

'  Bardstown,  etc.,  R.  R.  Co.  v.  Met-  and  for  the  public  benefit,  either  in 

calfe,  4    Mete.    199.     In   Eldridge   v.  tlieir  own   or  any   otlier  name  ;    and 

Smith,  34  Vt.  484,  it  was  held  that  a  consequently    that    when    the    mort- 

mortgage  by  a  railroad  company  of  its  gagees   take    possession   of   the   road 

road  and  francliises  as  security  for  a  under  their  mortgage,    the   personal 

debt  does  not  convey  its  corporate  ex-  property  then  left  thereon  cannot  be 

istence  or  its  general  corporate  pow-  taken  by  a  creditor  of  the  corporation 

ers,  but  only  the  franchise  necessary  upon  a  judgment  against  the  corpora- 

to  make  the  conveyance  beneficial  to  tion. 

the    grantees,   and    to    maintain  and  -  Comm.  v.  Smith,  10  Allen,  448.    In 

manage  the  railroad  and    receive  the  Steiner's  Appeal,  27  Penn.   St.  313,  a 

profits  thereof  for  their  own  benefit,  canal   company  was  held  not  to  have 

This  doctrine  was  also  adopted  in  an  authority  without  the  consent  of  the 

Illinois   case,    Palmer   v.  Forbes,    23  legislature  to  mortgage  either  its  tolls 

111.  300,  where  it  was    held  that  the  or  such  real  estate  as  is  necessary  for 

mortgage  of  a  railroad  company  under  the  enjoyment  of  its  franchises, 

legislative   authority   necessarily  car-  ^  Pullam    v.  Cincinnati,  etc.,  R.  R. 

ries  with  it  authority,  on  the  part  of  Co.,  4  Biss.  35. 

the  trustees,  to  exercise  the  franchise  **  Hall  v.  Sullivan  R.  R.  Co.,  11  Law 

of  the   road  to  satisfy  the  mortgage  Reporter  (N.  S.),  138. 


636  Private  Corpobations. 

The  franchise  to  be  a  corporation  is,  therefore,  not  a  subject  of 
sale  and  transfer,  unless  the  law  by  some  positive  provision  has 
made  it  so,  and  pointed  out  the  modes  in  which  such  sale  and 
transfer  may  be  effected.  But  the  franchise  to  build,  own  and 
manage  a  railroad,  and  to  take  tolls  thereon,  are  not  necessarily 
corporate  rights ;  they  are  capable  of  existing  in  and  being  en- 
joyed by  natural  persons,  and  there  is  nothing  in  their  nature 
inconsistent  with  their  being  assignable.  Whether  when  they 
have  been  granted  to  a  corporation  created  for  the  purpose  of 
holding  and  using  them,  they  may  legally  be  mortgaged  by  such 
corporation,  in  order  to  obtain  means  to  carry  out  the  purpose  of 
its  existence,  must  depend  upon  the  terms  xcpon  which  they  are 
granted  /  or,  in  the  absence  of  any  thing  special  in  the  grant 
itself,  upon  the  intention  of  the  legislature  to  he  deduced  from  the 
general  purposes  it  had  in  view,  the  means  it  intended  to  have 
employed  to  execute  those  purposes,  and  the  course  of  legislation 
on  the  same  or  similar  subjects  i  or,  as  it  is  sometimes  compendi- 
ously exj^ressed,  upon  the  public  policy  of  the  state." 

This  seems  to  us  to  embody  the  true  rule  in  relation  to  this 
question,  to-wit,  that  the  question  whether  or  not  under  authority 
conferred  by  statute  upon  a  corporation  to  mortgage  its  prop- 
erty authority  to  mortgage  its  franchises  is  conferred  depends 
upon  the  evident  intention  of  the  legislature  to  be  gathered  from 
the  lano-uao-e  of  the  statute,  and  the  nature  and  character  of  the 
cor23orate  property  and  pui-poses,  and  that  such  a  right  may  be 
implied,  where,  under  such  rule,  such  was  the  intention  of  the 
legislature.  In  Jesup  v.  Bridge,  Lowe,  C.  J.,  observes :  "As  a 
matter  of  fact,  it  is  well  known  that  railroads  are  built  with  capi- 
tal. To  obtain  this,  companies  are  compelled  to  conform  to  the 
laws  and  customs  which  regulate  its  use.  They  are  de- 
pendent, in  a  great  measure,  upon  the  negotiation  of  their 
bonds  for  the  means,  carrying  forward  their  enterprises.  These 
bonds  can  only  be  negotiated  by  indemnifying,  as  best  they 
can,  the  creditors  for  the  principal  debt,  and  secure  the  pe- 
riodical payment  of  the  accruing  interest.  For  this  purpose 
and  as  a  means  to  an  end,  it  becomes  essential  frequently 
for  the  company  to  mortgage  all  its  property  and  franchises,  and 


Liens  on  Cokporate  Pkopekty  and  their  Priority.  G37 

even  the  future  earnings  after  paying  the  necessary  operating  ex- 
penses." ' 

Sec.  427.  Rolling  stock  —  character  and  quality  of.  —  It  may  be 
appropriate  to  notice  the  controversy  which  has  occurred  in  refer- 
ence to  tlie  character  and  nature  of  that  property,  necessary  to 
the  operation  of  raih-oads,  and  usually  denominated  "  rolling 
stock."  This  term  embraces  all  the  carnages,  cars,  engines  and 
other  vehicles,  that  move  on  wlieels  on  railroad  tracks.  Is  such 
property  personal  or  real  ?  Does  it  pass  by  a  conveyance  of  the 
real  estate  ?  May  it  be  sold  and  transferred  as  real  property  ?  Do 
the  recording  laws  relating  to  real,  or  personal  property,  apply  to 
it  ?  Various  decisions  have  been  given  in  tlie  various  states  on 
these  questions.  It  has  been,  in  many  cases,  both  in  the  federal 
and  state  courts,  a  perplexing  question,  and  of  great  interest  to 
parties ;  and  their  remedy  frequently  turns  upon  the  solution  of 
it.  The  legislation  of  many  of  the  states  has  settled  the  question 
and  determined  its  character  in  this  respect  by  statutory  provisions.* 
But  in  others  it  is  an  open  one,  and  the  subject  of  controversy. 
In  JSTew  Hampshire,  in  the  absence  of  any  statutory  provisions 
on  the  subject,  it  has  been  held  not  to  be  a  fixture  or  belong  to 
the  real  estate  ;  and  this  seems  to  be  the  doctrine  in  Massachusetts, 
Maryland,  Wisconsin  and  Missouri.^     But  a  contrary  or   some- 

'  11  Iowa,  573.  In  Vermont,  also, there  is  a  statutory 

2  Rolling    stock   is   made    personal  regulation   on  the  subject.     Vt.  Gen. 

property  by  a  constitutional  provision  Stat.  (I860)  237.  §§  101,  102  ;  Miller  v. 

in  Illinois.     See  Const.   111.,  art.  11,  j^  Rutland,  etc.,  R.  Co.,  36  Vt.  4.02. 

10.     The  statutes   of  Neb.  (1873)  197,  ^  Boston,  etc.,  R.  Co.  v.  Gilmore,  37 

provide,  that  "  any  mortgage  or  deed  N.  H.  410;  Pierce  v.  Emory,  32  id.  485; 

of  trust  made  upon  the  lands,  roads,  Howe  v.  Freeman,  14  Gray,  5G6  ;  Mc- 

or  other  property  of  any  railroad  com-  Kim  v.  Mason,  3  Md.  Ch.  201  ;  Wells 

pany,  shall  Ijind  all  the  property  men-  &  Miller  v.   Canton   Co.,  3    Md.  231; 

tioned  in  such  deed  or  mortgage,  in-  Denraead  v.  Bank  of   Bait.,  9  id.  179  ; 

eluding    rolling    stock,    and    that   to  Coe  v.  Columbus  Piqua,  etc.,  R.  Co.,  10 

secure   the   rights  of    mortgages  and  Ohio  St.  372  ;  Ludlow  v.  Hurd,  1   Dis. 

parlies  interested  under  deeds  of  trust,  (O.)  552  ;  Pacific  R.  Co.  v.  Cass  Co.,  53 

the    rolling   stock,   personal  property  Mo.  17  ;  Hill  v.  Lacrosse,  etc.,  R.  Co.,  16 

and  material  necessary  for  operating  Wis.  214. 

the  road,  belonging  to  the  road   and  As  to  the  construction   of  the  pres- 

appertaining  thereto,  shall  be  deemed  ent  statutes  of  Wisconsin  ou  this  ques- 

a  part  of  the  road,  and  said  mortgages  tion,    see    Chicago,    etc.,    R.    Co.     v. 

and  deeds,  when  recorded,  shall  have  Borough    of    Fort   Howard,    21    Wis. 

the  same  eifect    both  as  to  notice  and  44. 
otherwise,  as  to   the  real  estate  con- 
veyed by  them." 


038  Pkivate  Corporations. 

what  qualified  doctrine  lias  been  adopted  in  various  other 
states.^  In  a  recent  case  in  New  York,  Commissioner  Johnson, 
in  reviewing  the  decisions  on  this  question  in  that  state,  observes  : 
"  The  first  question  necessarily  to  be  decided  in  this  case  is, 
whether  the  rolling  stock  of  a  railroad  is  personal  property,  or 
whether  it  is  to  be,  deemed  constructively  annexed  to  the  road 
upon  which  it  runs,  so  as  in  law  to  be  I'egarded  as  a  part  of  the 
realty.  If  it  be  determined  that  rolling  stock  retains  its  charac- 
ter of  personal  pro]3erty,  then  the  question  arises  whether  a  mort- 
gage of  a  railroad  and  its  equipment  needs  to  be  filed  imder  the 
statute  of  1833,  requiring  mortgages  of  personal  property  to  be 
filed  when  the  possession  of  the  property  is  not  innnediately  deliv- 
ered to  the  mortgagee.'^  *  *  *  "pj^g  questions  thus  presented 
are  not  authoritatively  determined  in  this  state.  The  opinion  of 
the  supreme  court  has  been  given  in  four  reported  cases.  The 
earliest  was  that  of  The  Farineri  Loan  <&  Trust  Co.  v,  Hendrick- 
son,  25  Barb.  484,  in  which  the  judgment  rendered  in  October, 
1857,  by  Justices  S.  B.  Strong,  Bibdseye,  and  Davies,  declared 
that  as  between  the  mortgagees  and  judgment  creditors,  the  rolling 
stock  was  to  be  deemed  fixtures,  and,  consequently,  that  such  a 
mortgage  did  not  need  to  be  filed  under  the  act  of  1833.  In 
this  case  the  mortgage  specified  engines,  tenders,  cars,  etc.,  as  a 
part  of  the  property  mortgaged,  and  the  rights  of  the  plaintiffs 
might  have  been  sustained  by  holding  either  that  the  chattel 
mortgage  law  did  not  apply  to  raih^oad  mortgages,  or  that  the 
engine  and  cars  were  fixtures.  The  court  rejected  the  former 
ground,  and  placed  the  decision  on  the  position  that  the  rolling 
stock  was  part   of  the  realty.^     *     *     ■sf     Looking  now  at  the 

■    '  Covey  V.  Pittsburg,  etc.,  R.  Co.,  8  poses  of  taxation.     Louisville, etc.,  R. 

Phila.   173  ;  Ammant  v.  New  Alexan-  Co.  v.  State,  25  Ind.  177. 

dria,   etc.,   R.    Co.,    13   S.    &   R.  210;  ^  Laws  1833,  chap.  279,  p.  403. 

Applegate   v.   Eruest,  3    Busli,    649;  ^  The    learned    judge    proceeds    to 

Winchester  T.   Co.    v.  Viuionnt,  5  B.  refer  to  numerous  cases  in  that  state, 

Mour.  2  ;  Palmer  v.  Forbes,  23  111.  301 ;  viz.;  Beardsley  v.    Ontario   Bank,    31 

Hunt   V.   Bullock,   id.  320  ;    Titus   v.  Barb.  619  ;  Hoyle  v.  Plattsburgh,  etc, 

Mabee,  25  id.  257  ;  Titus  v.Ginheimer,  Co.    (same   as   now   under    con.sidera- 

27   id.    462.      But   these   decisions   in  tion),  51  Barb.    45  ;  Murdock    v.    Cilif- 

Illinois  were,  before  the  constitution  ford,  18  N.  Y.  30  ;  Mott  v.  Palmer,  1 

was   adopted  fixing   the  character  of  id     564 :    Leroy    v.  Piatt,    4    Paige, 

rolling   stock   as    personal     property,  77 ;  as  well  as  Pierce  v.  Emory,  32  N. 

alone  referred  to.     In  Indiana  rolling  H.  484  ;  and  Pennock  v.  Coe,  23  How. 

stock  ia  treated  as  realty  for  the  pur-  (U.  S.)  117. 


''  Liens  on  Couporate  Pkopkrty  and  their  Priority.  G39 

rolling  stock  of  a  railroad,  it  is  originally  personal  in  its  charac- 
ter, it  is  subservient  to  a  mere  personal  trade,  the  transportation 
of  freight  and  passengers.  The  track  exists  for  the  use  of  the 
cars  rather  than  the  cars  for  the  use  of  the  track.  There  is  no 
annexation,  no  immobility  from  weight,  there  is  no  localization  in 
use.  The  only  element  on  which  an  argument  can  be  based  to 
support  the  character  of  realty  is  adaptation  to  use,  with  and 
upon  the  track.  Even  in  respect  to  this,  were  the  same  contri- 
vances adopted  by  a  tenant  for  the  use  in  his  trade  upon  leased 
lands,  his  right  to  remove  both  cars  and  track  would  be  beyond 
question.  It  is  j)erhaps  fortunate  that  this  question  was  not 
finally  adjudicated  in  the  early  days  of  railroad  enterprise,  for 
then  unity  of  ownership  in  track  and  cars  and  independence  of 
roads  of  each  other  seemed  to  render  it  possible  to  consider  roll- 
ing stock  part  of  the  realty  without  introducing  great  inconven- 
ience. At  the  present  time  independent  companies  exist  owning 
no  tracks,  whose  trains  run  through  state  after  state  on  the  rail- 
road track  of  other  companies.  It  is  no  uncommon  sight  to  see 
the  cars  of  half  a  dozen  companies  formed  into  a  single  train  and 
running  from  New  York  to  Illinois  and  Missouri.  It  is  impos- 
sible to  deal  with  such  property  as  a  part  of  the  realty  without 
introducing  anomalies  and  uncertainties  of  the  gravest  char- 
acter." ^ 

Sec.  428.  The  opinions  of  the  supreme  court  of  the  United 
States  have  left  this  question  in  a  state  of  uncertainty."  In  Min- 
nesota Company  v.  St.  Paul  Company,^  Nelson,  J.,  says  :  "  We 

'  Hoyle  V.  Pittsburg,  etc.,  R.  Co.,  54  484,  bad  held  that  tlie  rolling  .stock  of  a 

N.    Y.    314.     See,  also,  Benjamin   v.  railway  was  accessory  to  real  estate, 

Elmira,  etc.,  R.  Co.,  id.  675.  and  would  pass  by  a  deed  of  mortgage 

-  See  Farmers'  Loan,  etc.,  Co.  v.  St.  of  the  railway,  and  that  such  a  mort- 

Joseph,  etc.,  R.  Co.  (U.  S.C.C.  Kansas,  gage    need    not    be   filed   as  a  chattel 

June  Term,  1875,  not  reported.)  mortgage,  under  the  recording  laws  of 

»  3  Wall.  609.  See.also, Railroad  Co.  the  state.     In   this   case    Mr.   Justice 

V.  James,  6  Wall.  750.     But  see,  also,  Strong  observed  : 

PuUan   V.  Cincinnati,  etc.,  R.  Co. ,4  "The   property  of   a  railroad  com- 

Biss.  35  ;  Galveston  R.  Co.  v.  Cowdrey,  pany  consists  mainly  of  the  road-bed, 

11  Wall.   450;  United  States  v.  New  the  rails  upon  it,  the  depot  erections 

Orleans,  etc.,  R.  Co.,  12  id.  363.  and  the  rolling  stock,  and  the  fran- 

Previous  to  the  decision  of  the  court  chise  to  hold  and  use  them.     The  road- 

of  appeals  of  New  York,  iu  Hoyle  v.  bed,  tlie  rails  fastened  to  it,  and  the 

Plattsburgh,   etc.,  R.   Co.,  supra,  the  buildings  at  the  depots  are  clearly  real 

supreme   court   of    that   state,  in  the  property.     That  the   locomotives  and 

case  of  The  Farmers'  Loan  and  Trust  passenger,  baggage    and    freight  cars 

Company   v.    Hendricksou,    35   Barb,  are  a  part  and  a  necessary  part  of  the 


640 


Private  Corpokations. 


agree  that  the  rolHng  stock  upon  this  road  is  covered  by  the  sev- 
eral mortgages,  and  as  respects  any  other  valid  liens  upon  the 


entire  establishment  there  can  be  no 
doubt.  Are  they  so  permanently  and 
inseparably  connected  with  the  more 
substantial  realty  as  to  become  con- 
structively fixtures '? 

"  Railways  being  a  modern  inven- 
tion and  of  a  novel  character,  we  have 
no  decisions  upon  this  question,  and 
those  relating  to  and  governing  old 
and  familiar  subjects  do  not  absolutely 
control  us,  although  we  must  neces- 
sarily resort  to  them  as  guides.  J  udge 
Weston  well  remarks,  in  Farrar  v. 
Stockpole,  6  Greenl.  157,  that  modern 
times  have  been  fruitful  of  inventions 
and  improvements  for  the  more  secure 
and  comfortable  use  of  buildings,  as 
well  as  of  many  other  things  which 
administer  to  the  enjoyment  of  life. 
Venetian  blinds,  which  admit  the  air 
and  exclude  the  sun,  whenever  it  is 
desirable  so  to  do,  are  of  modern  use  ; 
so  are  lightning  rods,  which  have 
now  become  common  in  this  country 
and  in  Europe.  Those  might  be  re- 
moved from  buildings  without  dam- 
age ;  yet,  as  suited  and  adapted  to  the 
buildings  upon  which  they  are  placed, 
and  as  incident  thereto,  they  are 
doubtless  part  of  the  inheritance,  and 
would  pass  by  a  deed  as  appertaining 
thereto.  The  general  principles  of 
the  law  must  be  applied  to  new  kinds 
of  property,  as  they  spring  into  exist- 
ence in  the  progress  of  society,  accord- 
ing to  their  nature  and  incidents,  and 
the  common  sense  of  the  community. 
It  may  be  that  if  an  appeal  should 
be  made  to  the  common  sense  of 
the  community,  the  term  '  fixtures ' 
could  not  well  be  applied  to  such 
movable  carriages  as  railway  cars. 
But  such  cars  move  no  more  rapidly 
than  do  pigeons  from  a  dovecote,  or 
fish  in  a  pond,  both  of  which  are 
annexed  to  the  realty.  Judge  COWEN 
admits,  in  Walker  v.  Sherman,  that 
a  machine,  movable  in  itself,  may 
become  a  fixture,  from  being  connected 
in  its  operations  by  boards,  or  in  any 
other  way,  with  the  permanent  ma- 
chinery. It  results  from  many  cases 
that  it  is  not  absolutely  necessary  that 
things  should  be  stationary  in  any  one 
place  or  position,  in  order  that  they 
should  be  technically  deemed  fixtures. 


The  movable  quality  of  these  cars  has 
frequently,  if  not  generally,  induced 
the  opinion  that  they  are  personal 
property.  Hence,  railway  mortgages 
of  rolling  slock  have,  as  1  understand, 
been  generally  filed  in  the  offices  of 
the  clerks  of  all  the  towns  through 
which  the  roads  pass.  That  was  un- 
doubtedly the  more  prudent  course, 
as  it  saved  any  question  as  to  the  char- 
acter of  the  property.  Even  the 
learned  counsel  has  gone  no  further 
than  to  denominate  the  cars  '  quasi ' 
fixtures.  Public  opinion,  however, 
although  respectable  in  matters  of 
fact,  is  an  unsafe  guide  as  to  legal  dis- 
tinctions. 

"  That  railway  cars  are  a  necessary 
part  of  the  entire  establishment,  with- 
out which  it  would  be  inoperative  and 
valueless,  there  can,  of  course,  be  no 
doubt.  Their  wheels  are  fitted  to  the 
rails,  they  are  constantly  upon  the 
rails,  and  except  in  cases  of  accidents, 
or  when  taken  off  for  repairs,  nowhere 
else  ;  they  are  not  moved  off  the  land 
belonging  to  the  company.  [This 
claim  is  not  justified  by  the  facts  in 
modern  times.  See  opinion  of  JoiiN- 
SON,  J.,  in  Hoyle  v.  Plattsburgh,  etc., 
R.  Co.,  sup7-a.]  They  are  peculiarly 
adapted  to  the  lase  of  the  railway,  and 
in  fact  cannot  be  applied  to  any  other 
purpose,  they  are  not  like  farming 
utensils,  and  possibly  the  machinery 
in  factories  and  many  of  the  movable 
appliances  in  stores  and  dwellings,  the 
object  of  general  trade;  they  are  per- 
manently used  on  the  particular  road 
where  they  are  employed,  and  are  sel- 
dom, if  ever,  changed  to  any  other. 
Many  of  these  are  strong  characteris- 
tics of  the  realty  ;  some  of  them  have 
often  been  deemed  conclusive.  *  *  * 
If  railroad  cars  were  used  in  any  other 
place  than  upon  the  lands  belonging 
to  the  company,  or  for  any  other  pur- 
pose than  in  the  execution  of  its  busi- 
ness, or  were  constructed  in  such  shape 
and  so  extensively  as  to  become  ob- 
jects of  general  trade,  or  were  not  a 
necessary  part  of  the  entire  establish- 
ment, I  might  consider  myself  as  com- 
pelled by  the  weight  of  authority  to 
decide,  that  as  they  are  not  physically 
annexed  to  what  is  usually  denomi- 


Liens  on  Corporate  Property  and  their  Priority.  041 

same,  is  inseparably  connected  with  the  road  ;  in  other  words,  is 
in  technical  language  a  lixture  of  the  road,  so  far  as  in  its  nature 
and  use  it  can  be  called  a  lixture." 


Sec.  429.  Mechanics'  and  constructors'  liens.  —  It  has  been  a  com- 
mon provision  of  the  statutes  of  many  if  not  ijiost  the  states  that 
mechanics,  laborers  and  the  furnisher  of  materials  might  secure 
a  hen  upon  the  building,  erection  or  improvement  upon  which 
the  labor  was  bestowed  or  for  which  the  material  was  furnished, 
and  the  land  on  which  the  erection  or  improvement  is  located,  for 
the  labor  done  or  material  furnished  upon  complying  with  certain 
provisions  of  the  statute  in  relation  thereto. 

Sec.  430.  The  legislature  of  various  states  have  extended 
these  liens,  and  by  express  provisions  of  statutes,  they  embrace 
the  w^ork  and  labor  done,  and  material  furnished  on  or  about  any 
work  of  internal  improvement,  including  the  construction  of  rail- 
roads, and  give  to  the  laborer  or  furnisher  of  material  on  such 
works  the  same  remedy  formerly  limited  to  buildings  and  other 
improvements  of  private  individuals.  The  general  principles 
and  doctrines  of  the  courts  in  the  interpretation  of  such  statutes 
and  their  application,  relating  to  natural  persons,  would  be  equally 
applicable  to  corporations.     These  must  necessarily  depend  upon 


nated  real  estate,  they  must  be  deemed  mortgage,    if    it    should    be    deemed 

personal  property  ;  but  as  each  and  all  personal    property,    and    few,  if  any, 

of   these    characteristics  or   incidents  would  be  willing  to  loan  their  money 

are  wanting,  the  considerations  which  upon  such  an  uncertainty,  but  it  would 

I  have  mentioned,  or  to  which  I  have  be  otherwise  if  the  additions  should 

alluded,  leading  to  an  opposite  conclu-  be    considered    as    made  to   the  real 

sion,  require  us  to  determine  that  they  estate."     See,  also,   same  doctrine  in 

are  included  as  fixtures  or  necessary  Palmer  v.  Forbes,  23  111.  300;  Hunt  v. 

incidents  in  a  conveyance  of  real  estate.  Bullock,  id.  320;  Pennock  v.  Coe,  28 

In  thus  deciding  we  shall  unquestion-  How.  117. 

ably   carry   out  the  intention   of   the        The  reasoning  of  the  learned  judge 

parties,  as  it  could   not  have  been  the  in    this   case   is    ba.sed    upon    certain 

design  of  such  parties  —  certainly  not  facts.     But  the  facts  themselves  can- 

of  the  mortgagees  —  that  the  security  not  be  assumed  to  be  correct,  as  shown 

should    be    diminished   by    the    wear  by  the  court  in  the  subsequent  case  in 

and    tear  of   the    machinery,  and  the  the  court  of  appeals  in  the  same  state, 

inevitable  accidents  to  which  it  is  sub-  See  Hoyle  v.  Plattsburgh,  etc.,  R.  Co., 

jected.     Possibly  the  substituted  ma-  supra. 
chiuery  might  not  be  included  in  the 

81 


(542 


Private  Corporations. 


the  language  and  provisions  of  the  statutes,  and  hence  no  general 
rules  can  be  laid  down  as  applicable  to  cases  generally.' 

Sec.  431.  Not  assignable.  —  A  carrier's  lien,  like  all  other  liens 
arising  by  operation  of  law,  applies  only  to  the  goods  trans- 
ported, and  is  not  assignable  unless  made  so  by  a  well-established 
usage,  or  by  statute.  The  right  is  a  personal  one,  and  does  not 
pass  by  an  assignment  or  a  sale  or  pledge  of  the  goods,  and  cannot 
be  set  up  by  any  other  person  as  against  the  true  owners.' 

SeO.  432.  Priority  between  mortgage  and  mechanics'  liens.  —  Contro- 
versies have  recently  arisen  between  mortgagees  and  the  labor- 
ers, contractors  and  builders  of  railroads,  in  reference  to  the  pri- 
ority of  their  respective  liens.  The  question  must  depend  upon 
the  language  and  construction  of  the  provisions  of  the  statutes  in 
reference  to  such  liens. 


'  A  provision  of  statute  of  Iowa  will, 
perhaps,  indicate  the  general  scope 
and  purpose  of  such  statutes.  It  is 
as  follows  :  "  Every  mechanic,  or  other 
person  who  shall  do  any  labor  upon 
or  furnish  any  materials,  machinery 
or  fixtures  for  any  building,  erection 
or  other  improvement  upon  land,  in- 
cluding those  engaged  in  the  construc- 
tion or  repair  of  any  work  of  internal 
improvement  by  virtue  of  any  contract 
with  the  owner,  his  agent,  trustee, 
contractor  or  sub-contractor,  upon  com- 
plying with  the  provisions  of  this 
chapter,  shall  have  for  his  labor  done 
or  materials,  machinery  or  fixtures 
furnished,  a  lien  upon  such  building, 
erection  or  improvement,  and  upon 
the  land  belonging  to  such  owner  on 
which  the  same  is  situated,  to  secure 
the  payment  of  such  labor  done  or 
materials,  machinery  or  fixtures  fur- 
nished." Iowa  Code  (187^^  chap,  14, 
§  2130. 

It  is  provided  by  other  sections  for 
the  filing  of  such  liens  with  the  clerk 
of  the  district  court  of  the  county,  and 
giving  notice  of  the  same.  It  is 
further  provided  in  reference  to  the 
priority  of  such  liens  as  follows: 

"  The  liens  for  labor  done  or  things 


furnished  shall  have  priority  in  the 
order  of  the  filing  of  the  accounts 
thereof  as  aforesaid,  and  shall  be  pre- 
ferred to  all  other  liens  and  incum- 
brances which  may  be  attached  to  or 
upon  such  buildings,  erection  or  other 
improvement,  and  to  the  land  on 
which  the  same  is  situated,  or  either 
of  them,  made  subsequent  to  the  com- 
mencement of  said  building,  erection 
or  other  improvement."     Id.,  i^  2139. 

"The  lien  for  the  thing  aforesaid, 
or  work,  shall  attach  to  the  buildings, 
erections  or  improvements  for  which 
they  were  furnished  or  done,  in  prefer- 
ence to  any  prior  lien  or  incumbrance, 
or  mortgage,  upon  the  land  upon 
which  the  same  is  erected  or  put,  and 
any  person  enforcing  such  lien  may 
have  such  buildings,  erections  or 
other  improvements  for  which  they 
were  furnished  or  done  in  preference 
to  any  prior  lien,  or  incumbrance,  or 
mortgage  upon  the  land  upon  which 
the  same  is  erected  or  put,  and  any 
person  enforcing  such  lien  may  have 
such  building,  erection  or  other  im- 
jirovement  sold  under  execution,  and 
the  purchaser  may  remove  the  same 
within  a  reasonable  time  thereafter," 
Id.,§  2141. 


'  Everett  v.  Saltus,  15  Wend.  474 ;  Ames  v.  Palmer,  42  Me.  197. 


Liens  on  Corporate  Property  and  their  Priority.  643 

Sec.  433.  The  statutes  of  Iowa  ])n:)vide  in  reference  to  railroad 
mortgages  and  trust  deeds,  that  "  said  mortgages  or  deeds  of  trust 
may,  by  their  terms,  inchide  and  cover  not  only  the  property  of 
the  corporation  making  them  at  the  time  of  their  date,  but  ])rop- 
erty,  both  real  and  personal,  which  may  thereafter  be  acquired, 
and  shall  be  as  valid  and  eftectual  for  that  purpose  as  if  the 
property  were  in  possession  at  the  time  of  the  execution  thereof." 
And  in  reference  to  the  liens  of  parties  "  who  shall  do  any  hibor 
or  furnish  any  materials,  machinery  or  fixtures  for  any  building, 
erection  or  other  improvement  u])on  land,  including  those 
engaged  in  the  construction  or  repair  of  any  work  of  internal 
improvement,"  that  "  the  lien  for  the  things  aforesaid,  or  work, 
shall  attach  to  the  building,  erections  or  improvements  for  which 
they  were  furnished  or  done,  in  preference  to  any  prior  lien  or 
incumbrance  or  mortgage  upon  the  land  upon  which  the  same  is 
erected  or  put,  and  any  person  enforcing  such  lien  may  have  such 
building,  erection  or  other  improvement  sold  under  execution, 
and  the  purchaser  may  remove  the  same  within  a  reas6nable  time 
thereafter;"  that  "  the  liens  for  labor  done  or  things  furnished 
shall  have  priority  in  the  order  of  the  filing  of  the  accounts 
thereof  as  aforesaid,  and  shall  be  preferred  to  all  other  liens  and 
incumbrances  which  may  be  attached  to  or  upon  such  building, 
erection  or  other  improvement,  and  to  the  land  on  which  the 
same  is  situated,  or  either  of  them,  made  subsequent  to  the  com- 
mencement of  said  building,  erection  or  other  improvement." 
Under  these  provisions  it  has  been  held  that  the  mechanic's,  labor- 
er's or  furnisher's  lien,  dates  from  the  commencement  of  the  struc- 
ture, and  is  paramount  to  a  mortgage  executed  after  the  com- 
mencement of  the  same,  though  before  the  particular  work  was 
done  or  materials  furnished  for  which  the  lien  is  claimed.^ 


I  Iowa  Code  (1873),  §§  3131,   2133-  utes  of  Iowa.  The  intervenors  alleged 

2139,  2140,  3141  ;  Nelson  et  al.  v.  The  that  they  were  the  holders  of  bouils  of 

Iowa  Eastern  R.   Co.,    defendant  and  the  company  secured   by   a  mortgage 

others,  intervenors.  West  Jur.,  V.  10,  upon  the  road,  and  entitled  to  priority 

No.l0.i).604 (to  be  reported  in  44  Iowa),  by  virtue  of  such   mortgage  over  the 

In    thia    case    Nelson    and    others  lien  of  the  plaintiffs.     The  court  gave 

claimed  of  the  railroad   company   $3,-  judgment  for  the   claim   against    the 

180.83  on  account  of  ties  furnished  the  company  subject  to  the  lien  of  the  in- 

company   for  the  construction   of  its  tervenors.     On  appeal  to  the  supreme 

road,  and  asked   that  a  lien  therefor  court  of  that  state,  Adams,  J.,  deliver- 

inight  be  established  under  the  stat-  lug  the  opinion,  observed  as  follows  : 


644 


Private  Cokporations. 


Sec.  434.  The  same  doctrine  was  held  in  construing  a  similar 
statute  in  Montana,  which  provided :  "  The  liens  for  work  and 
labor  done  or  things  furnished,  as  specified  in  this  act,  shall  have 


"  It  is  claimed  by  tlie  plaintiffs  that 
the  intervenors'  mortgage  was  exe- 
cuted after  the  commencement  of  the 
improvement.  It  is  claimed  by  the 
intervenors  that  it  was  executed  be- 
fore. The  fact  is,  the  mortgage  was 
executed  after  the  road  was  com- 
menced, but  before  the  ties  were  fur- 
nished. We  have  only  to  determine 
then  what  is  the  '  improvement'  with- 
in the  meaning  of  the  statute.  If  it 
is  the  road,  the  mechanics'  lien  has 
priority.  If  it  is  the  ties,  the  mort- 
gage has  priority.  *  *  *  * 
The  idea  that  the  mechanics'  lien 
attaches  only  from  the  commencement 
of  the  particular  work  is  wrought  out 
through  the  supposition  that  the  word 
'  improvements,' as  used  in  the  stat- 
ute, denotes  the  several  distinct  and 
successive  jobs  of  work  performed  by 
the  different  mechanics.  But  this  con- 
struction is  precluded  by  the  use  of 
the  word  '  other '  before  '  improve- 
ments.' The  lien  is  to  attach  from 
the  commencement  of  '  the  building, 
erection  or  other  improvements.'  The 
statute  implies  that  a  building  is  an 
improvement  and  that  there  may  be 
others  still.  We  understand  by  '  other 
improvements,'  the  results  of  mechan- 
ical labor  or  materials  fu'-uislied  other 
than  buildings  or  erections  upon  real 
estate.  But  suppose  '  other  improve- 
ments'  to  mean  the  different  parts  of 
a  building.  It  follows  that  a  building 
is  one  improvement,  its  walls  another, 
and  its  doors  a  third.  But  the  walls 
of  a  building  are  not  other  than  the 
building.  The  words  '  other  improve- 
ment,' as  used  in  the  statute,  cannot 
properly  mean  either  buildings,  erec- 
tions or  constituent  parts  thereof. 

"  Besides  a  constituent  part  of  a 
thing  is  not  an  improvement  of  a  thing, 
in  any  proper  sense  of  the  word.  How 
can  we  say  that  the  walls  of  a  house 
are  an  improvement  of  the  house  ? 
The  house  could  have  no  antecedent 
existence.  Ties  and  rails  are  not  an 
improvement  of  a  railroad  for  the 
same  reason.  Yet  whatever  is  an  im- 
provement is  an  improvement  of  some- 
thing. A  house  is  an  improvement  of 
the  premises  on  which  it  ia  situated. 


A  railroad  is  an  improvement  of  the 
country  which  is  benefited  thereby. 
That  which  enters  into  the  original 
construction  of  a  liouse  or  railroad  is 
a  part  of  an  improvement  and  nothing 
more.  *  *  *  But  it  is  said  that  it 
would  be  unjust  to  the  mortgagee  who 
has  taken  a  mortgage  upon  a  partially 
constructed  building,  erection  or  other 
improvement,  to  make  his  mortgage 
subject  to  mechanics'  liens  for  work 
subsequently  commenced.  It  is  argued 
that  the  mechanic  may  always  know 
what  incumbrances  rest  upon  the 
property  by  mortgage,  but  that  the 
mortgagee  cannot  know  what  incum- 
brances may  come  to  rest  upon  the 
property  by  mechanics'  liens.  To  this, 
it  may  be  said  that  where  a  person 
takes  a  mortgage  ujjon  a  partially  con- 
structed building,  erection,  or  other 
improvement,  the  possibility  of  me- 
chanics' liens  attaching  upon  the  prop- 
erty is  distinctly  foreshadowed  by 
the  condition  of  the  property.  It  is 
true,  the  mortgagee  cannot  know  the 
amount.  He  cannot  know,  indeed, 
at  the  time  the  mortgage  is  executed, 
whether  the  building,  erection,  or 
other  improvement,  will  be  com- 
pleted by  the  mortgagor.  But  we 
think  that  the  mortgagee  may  prop- 
erly be  required  to  rely  upon  the 
good  faith  and  prudence  of  the  person 
whom  he  elects  to  make  his  mort- 
gagor. Furthermore,  the  increased 
value  of  the  security  may  be  presumed 
to  be  somewhat  in  proportion  to  the 
expense  incurred  upon  the  property. 
Without  denying  that  the  statute,  as 
we  construe  it,  may  sometimes  work 
a  hardship,  the  danger  to  be  appre- 
hended is  not  such  as  to  exert  much 
influence  in  the  construction  of  the 
statute,  the  language  employed  being 
almost,  if  not  entirely,  free  from  am- 
biguity. Another  objection  urged 
against  this  construction  of  the  stat- 
ute is,  that  it  may  be  impracticable 
oftentimes  for  the  mortgagee  to  de- 
termine whether  a  building,  erection, 
or  other  improvenaent,  has  or  has  not 
been  commenced  upon  the  premises. 
It  has  been  askt^d  in  argument, 
whether  a  mortgagee  o  f  a  rail  road  shaU 


Liens  on   Cokporate  Property  and  their  Priority.  045 

priority  in  the  order  of  filing  the  accounts  thereof,  as  aforesaid, 
and  shall  be  prior  to  all  other  liens  and  incumbrances  which  may 
be  attached  to  or  upon  the  building,  erection  or  other  improve- 
ment, and  to  the  land  upon  "vvhich  the  same  is  situated,  to  the 
extent  aforesaid,  or  either  of  them,  made  subsequent  to  the  com- 
mencement of  said  building,  erection  or  other  improvement." 

In  construing  this  statute  the  supreme  court  of  the  United  States 
(per  Bradley,  J.)  observe :  "  The  liens  secured  to  the  mechanics 
and  material  men  have  ])recedence  over  all  other  incumbrances  put 
upon  the  property  after  the  commencement  of  the  building.  And 
this  is  just.  Why  should  a  purchaser  or  lender  have  the  benelit 
of  the  labor  or  materials  which  go  into  the  property  and  give  it 
its  existence  and  value  ?     At  all  events,  the  law  is  clear."  '     The 


take  notice  that  tlie  construction  of 
the  road  has  been  commenced  if  only 
a  shovelful  of  dirt  has  been  thrown. 
"This  objection,  whether  great  or 
small,  applies  equally  to  the  construc- 
tion contended  for  by  the  intervenors. 
If  the  statute  should  not  be  construed 
as  requiring  notice  to  be  taken  of  the 
commencement  of  a  railroad,  because 
that  may  consist  in  the  throwing  of  a 
shovelful  of  dirt,  it  should  not,  for 
the  same  reason,  be  understood  as  re- 
quiring that  notice  should  be  taken  of 
the  commencement  of  any  particular 
job  of  work  upon  the  railroad,  for  that, 
too,  must  be  equally  small.  It  is 
further  objected,  that  abuilding,  erec- 
tion, or  other  improvement,  when 
partially  constructed,  is  sometimes 
abandoned  and  the  work  is  afterward 
resumed.  If,  in  the  mean  time,  a 
mortgage  has  been  executed  upon  the 
premises, the  mortgagee  having  no  rea- 
son to  suppose  that  the  work  would 
be  resumed,  he  might,  it  is  said,  be 
virtually  deprived  of  his  security 
without  any  fault  or  negligence  on  his 
part.  What  should  be  the  rule  ia 
such  a  case  it  is  not  proper  for  us  now 
to  determine.  It  is  sufficient  for  us 
to  say  that  we  do  not  think  that  such 
a  case  would  involve  any  great  ditii- 
culty.  If  a  partially  erected  structure 
is  in  a  condition  to  be  completed,  we 

,  Davis  V.  Bilsland,  18  Wall.  659. 
See,  also,  Dubois  v.  Wilson,  21  Mo. 
214;  American  Fire  Ins.  Co.  v.  Prin- 
gle.2  S.  &  R.  138  :  Wells  v.  Canton  Co., 
3  Md.  234;  Getchell  v.  Allen,  34  Iowa, 
559,  where  it  is  observed  by  Beck,  J., 


be  justified  in  presuming  that  a  cessa- 
tion of  the  work,  however  long  con- 
tinued, was  an  absolute  abandonment. 
"  In  regard  to  the  policy  of  the  stat- 
ute, as  we  construe  it,  this  may  be 
said  :  It  is  not  desirable  that  the  exe- 
cution of  a  mortgage  upon  the  land, 
upon  which  a  building  or  other  im- 
provement is  in  process  of  construc- 
tion, should  arrest  the  work  and  pre- 
vent its  completion.  Both  mortgagor 
and  mortgagee  are  iuterestfed  in  its 
completion.  Without  it,  the  money 
already  expended  must  ordinarily  to 
a  great  extent  be  lost.  Take  the  pres- 
ent case  as  an  illustration.  The  inter- 
venors are  holders  of  mortgage  bonds 
upon  a  road,  sixteen  miles  of  which 
had  been  graded  at  the  time  the  mort- 
gage was  made.  The  value  of  their 
security  depended  upon  the  further 
construction  of  the  road  ;  they  fore- 
saw that  work  and  materials  must  be 
furnished  by  somebody,  or  nothing 
could  be  realized  from  what  had  been 
done.  Yet,  the  construction  of  the 
statute  they  contended  for  would  re- 
quire the  mortgagor  to  keep  a  fund  on 
baud  for  the  daily  payment  of  the 
laborers  and  material  men,  or  that 
the  work  and  material  should  be  prac- 
tically furnished  without  security." 


that  "the  word  'improvement,'  as 
here  used,  does  not  mean  an  addition 
to  or  betterment  of  a  building,  but  is 
applied  to  some  independent  erection 
on  the  land." 


6i6 


Private  Coeporations. 


same  question  was  recently  presented  to  the  United  States  circuit 
court  for  the  district  of  Iowa,  where  the  controversy  was  between 
the  mortgagees  of  a  railway  company  and  the  builders,  laborers 
and  material  men,  as  to  the  priority  of  their  respective  liens  under 
the  Iowa  statute ;  and  where  it  was  held  that  the  liens  of  the 
latter,  following  the  decisions  of  the  state  court,  dated  from  the 
commencement  of  the  building  of  the  railway  and  not  from  the 
time  when  the  particular  work  was  done  or  the  material  fur- 
nished.^ 


1  Taylor  et  al.,  Trustees,  v.  The  Bur- 
lington C.  R.  R.  &  M.  Co.,  West.  Jur., 
vol.  11,  No.  (),  p.  336  (May  Term, 
1877). 

Ill  this  case,  Dillon,  J.,  observes: 
"The  trustees  m  these  mortgages  re- 
sist the  right  to  any  lien  whatever  iu 
many  cases  [then  pending  in  the  court 
involving  the  same  question]  and  par- 
ticularly resist  the  establishment  of  a 
mechanics'  lien  in  any  case  where  the 
labor  was  done  or  the  materials  were 
furnished  after  the  recording  of  the 
mortgage,  which  shall  have  priority 
over  the  mortgage.  There  are  also 
questions  as  to  the  lien  for  repairs  af- 
ter the  road  has  been  completed  as 
distinguished  from  the  right  to  a  lien 
for  original  construction  ;  and  ques- 
tions also  as  to  limitation  of  the  lien 
of  the  mechanic.  *  *  *  The  me- 
chanics' lien  statute  (Code.  §^  3130- 
2132)  extends  i/ite?'  (ilia  to  all  persons 
'  who  construct  or  repair  any  work  of 
internal  improvement,'  including  rail- 
ways, and  gives  a  lien  '  for  labor  done 
or  materials,  machinery  or  fixtures 
furnished  '  upon  '  such  building,  erec- 
tion or  improvement,  and  upon  the 
land  belonging  to  the  owner  on  which 
the  same  is  situated.'  ***** 
Section  3139  first  provides  for  the  pri- 
ority of  mechanics'  liens  as  among 
themselves,  making  the  same  depend 
upon  the  order  of  filing,  and  then  pro- 
ceeds to  enact  that  such  liens  'sliall 
be  preferred  to  all  other  liens  and  in- 
cumbrances which  may  be  attached  to 
or  upon  such  building,  erection  or 
other  improvement  and  to  the  land  on 
which  the  same  is  situated,  or  either 
of  them,  made  subsequent  to  the  com- 
mencement of  said  building,  erection 
or  improvement.'  The  lien  extends  to 
the  entire  land  to  th«} extent  of  the  in- 


terest of  the  person  for  whom  the  me- 
chanic did  the  work  or  furnished  the 
materials,  and  to  a  leasehold  interest, 
as  to  which  the  provision  is  that  the 
forfeiture  of  the  lease  shall  not  impair 
the  mechanics'  lien  as  to  the  build- 
ings, but  the  same  may  be  sold  to  sat- 
isfy the  lien  and  be  moved  off'  within 
thirty  days  after  the  sale  (i^  2140) 

"  Section  2141  provides  for  still  an- 
other case,  in  these  words:  'The  lien 
for  the  things  aforesaid,  or  work,  shall 
attach  to  tlie  buildings,  erection,  or 
improvements  for  which  they  were 
furnished  or  done,  in  preference  to 
any  prior  lien,  or  incumbrance,  or 
mortgage  upon  the  land  upon  which 
the  same  is  erected  or  put,  and  any 
person,  enforcingeuch  lien,  may  have 
such  building,  erection  or  other  im- 
provement sold  under  execution,  and 
the  purchaser  may  remove  the  same 
within  a  reasonable  time  thereafter.' 
(§2510.)  We  hold  as  follows:  1. 
Section  2139  contemplates  and  pro- 
vides for  a  case  where  at  the  time  of 
the  commencement  of  the  building  or 
railway,  there  is  no  recorded  lien  or 
incumbrance  thereon,  and  where  such 
lien  or  incumbrance  is  created  subse- 
quent to  the  commencement  of  the 
building  of  the  railway  ;  in  which  case 
the  mechanic  has  a  lien  which  relates 
back  to  the  commencement  of  the 
building  or  railway,  although  the  par- 
ticular work  of  that  mechanic  was 
done  or  his  materials  were  furnished 
after  a  mortgage  was  recorded  or  lien 
created." 

In  Ohio  &  Miss.  R  Co.  v.  Davis.  23 
Ind.  .'553,  the  supreme  court  of  Indiana 
held,  in  reference  to  the  appointment 
of  a  receiver,  that  it  did  not  operate 
to  derange  the  priority  of  legal  or 
equitable  liens;  that  money  or  prop- 


Liens  on  Corporate  Property  and  theik  Priority.    647 

Sec.  435.  These  decisions  relate  to  the  construction  of  local 
statutes.  But  as  the  statutes  of  various  states  have  similar  pro- 
visions, we  have  deemed  it  a  matter  of  sufficient  interest  to  refer 
to  the  decisions  where  the  statutes  have  been  construed,  and  to 
set  forth  the  reasoning  and  determination  of  the  courts,  both  state 
and  national,  in  relation  thereto. 


erty  in  his  hands  was  in  tlie  custody 
of  the  law,  and  that  he  held  it  for 
whoever  was  entitled  to  it ;  that  where 
there  are  various  mortgagees,  if  prior 
mortgagees  do  not  assume  possession 
of  the  property  or  take  steps  to  fore- 
close their  mortgages, any  subsequent 
incumbrancer  may  have  a  receiver  ap- 
pointed to  take  the  rents  and  profits 


for  his  benefit,  until  those  who  have  a 
prior  right  claim  them  by  some  pro- 
ceeding for  that  purpose  ;  but  that  a 
subsequent  incumbrancer  who  has  re- 
ceived rents  and  profits  will  not  be 
compelled  to  refund  to  a  prior  incum- 
brancer who  subsequently  takes  pos- 
session or  brings  suit 


64:8  Private  Corporations. 


CHAPTER  XX. 

DISSOLUTION. 

Sec.  436.  Cause  for  which  corporations  may  be  dissolved  or  which  consti- 
tute  a  dissolution. 

Sec.  437.  Reserved  power  in  the  legislature  to  dissolve. 

Sec.  438.  Id. 

Sec.  439.  Where  the  reserved  povrer  is  subject  to  a  condition. 

Sec.  440.  Expiration  of  the  time  limited  for  its  continuance. 

Sec.  441.  Neglect  or  abuse  of  powers. 

Sec.  442.  Id. 

Sec.  443.  Mode  of  proceeding  in  such  cases. 

Sec.  444.  Id. 

Sec.  445.  Dissolution  by  the  voluntary  act  of  members. 

Sec.  446.  When  the  majority  may  surrender  the  franchise. 

Sec.  447.  Dissolution  under  statutes  providing  for  the  winding-up  of  cor- 
porations. 

Sec.  448.  Id. 

Sec.  449.  Dissolution  by  the  death  of  all  the  members. 

Sec.  450.  Effect  of  dissolution  generally  at  common  law. 

Sec.  451.  Effect  of  dissolution  upon  creditors. 

Sec.  453.  Forfeiture,  not  the  subject  of  collateral  inquiry. 

Sec.  453.  When  corporate  existence  may  be  inquired  into,  collaterally. 

Sec.  436.  Causes  for  ■which  corporations  may  be  dissolved,  or  which 
constitute  a  dissolution.  —  There  are  various  modes  in  wliich  moneyed 
corporations  may  be  dissolved,  and  various  causes  for  such  disso- 
lution. They  may  be  dissolved:  1.  By  virtue  of  a  power  re- 
served in  the  legislature,  by  the  act  or  general  law,  by  or  under 
which  they  were  created,  or  by  other  general  lawsorconstitntional 
provisions.  2.  By  expiration  of  the  time  limited  for  their  continu- 
ance, either  by  the  special  or  general  statutes,  by  or  under  which 
they  were  created.  3.  For  neglect  or  abuse  of  their  franchises. 
4.  By  the  voluntary  acts  of  the  members.  5.  By  proceedings 
under  statutes  relating  to  dissolution  and  the  winding-up  of  the 
affairs  of  the  corporation. 

Sec.  437.  Reserved  power  in  the  legislature  to  dissolve. —  The  power 
of  parliament,  according  to  the  British  constitution,  being  om- 
nipotent, it  could  dissolve  any  public  or  private  corporation.  The 
power  could  be  exercised  in  an  arbitrary  manner,  but  it  has,   "  to 


Dissolution.  649 

the  honor  of  the  British  nation,"  seldom  been  exercised.  And 
those  instances  of  arbitrary  exercise  of  it  have  been  cliaracterized 
by  ijord  Thuklow  as  "  an  atrocious  violation  of  private  property, 
which  cut  every  Englishman  to  the  bone."  But  in  this  country, 
although  the  power  of  our  legislatures  in  the  various  states  is,  un- 
less restrained  by  our  written  constitutions,  as  omnipotent  as  the 
parliament  of  Great  Britain,  yet  in  respect  to  repealing  or 
amending  charters,  they  are  restrained  at  least  by  that  provision 
of  the  federal  constitution,  which  prohibits  any  state  law,  im- 
pairing the  obligation  of  contracts.*  The  doctrine,  as  we  have 
seen  in  this  country,  is,  that  the  provisions  of  a  charter  or  of 
general  statutes  providing  for  incorporation,  when  once  accepted 
by  the  corporators,  becomes  a  contract  between  the  state  and  them, 
and  the  state  cannot  violate  this  contract  or  in  anv  manner  chansre 
or  avoid  it  by  legislative  action,  without  the  consent  of  the  cor- 
porators.* 

But  this  doctrine  has  no  ap])lication  where  the  right  to  resume, 
alter  or  amend  the  franchises  or  charter  conferred  upon  a  corpora- 
tion was  contained  in  the  special  or  general  statutes  under  which 
it  was  constituted,  or  in  the  constitution  or  general  laws  of  the 
state,  at  the  time  of  its  creation.  And  where  such  a  power  exists 
in  any  of  these  ways,  the  legislature  in  its  discretion,  and  by 
virtue  of  its  paramount  authority,  may  exercise  it  in  respect  to 
any  of  the  reserved  powers,  and  such  use  of  its  powers  will  not 
violate  the  original  contract.' 

»  Coust.  U.  S  ,  art.  1 ,  §  10.  Michip:an    B'k   v.    Hastings,    1  Doug. 

'  See  a»<e,  1^  35,  36;  Dartmouth  Col-  225;    Yarmouth   v.    North  Yarmouth, 

lege   V.    Woodward,    4    Wheat.  518;  2  34  Me.  411  ;  City  of  Louisville  v.  Uni- 

Kent's    Cora.    305  et    seq.  ;    Green  v.  versity  of  Louisville,  15  B.  Monr.  642; 

Bidde,  8  Wheat,  1;   Fletcher  v.  Peck,  Boston  R.  Co.  v.  Salem  K.  Co.,  2  Gray, 

6    Cranch,   88;  State    v.  Wilson,  7  id.  1;    Commonwealth    v.    New   Bedford 

164;  Terret  v.  Taylor,    9  id.  43;  Town  Br.,  id.  339  ;  Aurora   T.  Co.    v.  Holt- 

of  Pawlett    V.  Clark,    id,    292;   Brook-  house,  7  id.  59;  Enfield  Toll  Br.   Co. 

lyn  C.  R.  Co.  v.  Brooklyn  City  R.  Co.,  v.  Connecticut  Riv.  Co.,  7  Conn.  53. 
82  Barb.  358,  McLaren  v.  Pennington,  ^  See  ante,  chap.  3.  See,  also,  Bailey 

1  Paige,  107;  Wales  v.  Stetson,  2  Mass.  v.  Methodist   Epis.  Ch.,   6  R.   I.  491  ; 

143;  Regents,  etc.,  V.  Williams,  9  G.  Hyatt     v.    Whipple,    87    Barb.    595; 

&  J.  402;  Payne  V.  Baldwin,  3  S.  &  M.  Miners'    Bank    v.    United    States,     1 

661;  Aberdeen  Female  Acad.   v.  Aber-  Morris   (Iowa.),    482;    Erie  R.  Co.    v. 

deen,  13  id.  645  ;   Young  v.  Harrison, 6  Casey,  26  Penn.  St.   287;    Sherman  v. 

Ga.  130;  Bush  v.   Shipman,   4  Scam.  Smith,  1  Black,  587.     In  the  Matter  of 

190  ;  People  v.    Marshall,    0  111.    G72  ;  the  Reciprocity  Bank,  29  Barb.  369  ;  22 

Bruffet  v.  Great  W.  R.  Co.,  25  id.  3")3;  N.  Y.   9  ;  Suydam    v.  Moore,   8    Barb. 

People  V.  Jackson,  P.  R.  Co.,  9  Mich.  358;    Massachusetts    Gen.     Hosp.    v. 

285  ;  State  v.  Com.  B'k,  etc.,  7  Ohio,  State  Asso.  Co.,  4  Gray,  227  ;  Bangor 

125  ;  State  v.  Wash.Soc.  Lib.,  9  id.  96;  R.  Co.  v.  Smith,  47  Me.  34. 

82 


650  Private  Corporations. 

Sec.  438.  id.  — The  reserved  power  in  such  cases  may  exist,  as 
we  have  suggested,  either  in  the  charter  granting  the  franchise  or 
in  the  general  acts  for  incorporation,  or  in  the  general  laws  of  the 
state  applicable  to  all  cases,  or  in  the  constitution  of  the  state. 
And  this  power  may  be  absolute  and  unqualified,  or  it  may  be 
limited  and  qualified.  Thus,  it  is  sometimes  provided,  only  that 
the  power  may  be  exercised  in  case  the  corporation  shall  fail  to 
go  into  operation,  or  in  case  it  shall  abuse  or  misuse  its  franchises.' 

Sec.  439.  Where  the  reserved  power  is  subject  to  a  condition.  — 
Where  the  right  to  exercise  the  reserved  power  is  unqualified,  the 
legislature  may  repeal  the  act  at  any  time  in  their  discretion  ;  and 
even  a  creditor  who  may  be  thereby  prejudiced  cannot  interpose 
to  prevent  the  exercise  of  it,  even  though  he  may  have  a  suit 
pending  against  the  corporation  and  property  attached  therein.' 

When  the  right  is  qualified,  in  the  manner  we  have  noticed, 
the  legislature,  it  seems,  may  determine  the  questions  as  to  the 
sufficiency  of  the  cause  under  the  qualifying  provisions,  and  re- 
peal or  amend  the  charter  according  to  the  power  reserved.' 
Under  a  statute  of  Massachusetts  which  provided  that  every  act 
of  incorporation  shall,  at  all  times,  be  subject  to  amendment, 
alteration  or  repeal,  at  the  pleasure  of  the  legislature,  provided 
that  no  act  of  incorporation  shall  be  repealed  unless  for  some 
violation  of  its  charter  or  other  default,  when  the  duration  of  the 


'  Dartmouth  College  v.  Woodward,  mercial  Bank,  28  Penn.  St.  383  ;  Com- 

4   Wheat.    518  ;  Terrett  v.    Taylor,    9  monwealth  v.  Pittsburgh,  etc.,  R.  Co., 

Cranch,  51  ;  4  Wheat.  661  ;  Mumniav.  58  id.  26  ,    State  v.  Commercial  Bank, 

Potomac   Co.,  8  Pet.  281  ;  Penobscot  33  Miss.  474;  Washington,  etc.,  R.  v. 

Boom   Co.  V.    Lamson,    16    Me.    224;  State,  19  Ind.  239;  Canal  Co.  v.  Rail- 

Hodsdon  V.  Copeland,id.314 ;  Paschall  road  Co.,  4   G.  &   J.  1  ;  Atchafalaya 

V.  Whetsett,  11   Ala.  (N.  S.)  472  ;  Mo-  Bank  v.  Dawson,  13  La.  497  ;  State  v. 

bile,  etc.,  R.  Co.  v.   State,  29  id.  573  ;  Pawtuxet  T.  Co.,  8  R.  1. 183,521  ,  Mc- 

State  V.  Bradford,  32  Vt.  50  ;  Common-  lutire  Poor  School  v.  Zanesville  Canal 

wealth  V.  Union  Ins.  Co.,  5  Mass.  230;  Co.,  9  Ohio,   203  ;    John   v.  Farmers' 

Charles  Riv.  Br.  v.  Warren  Bridge,  7  Bank,  2  Black,  367. 

Pick.  371;  People  v.  Manhattan  Co.,  '  Read  v.  Frankfort  Bank.  23  Me. 

9   Wend.   351;    People   v.   Kingston,  318  ;  Crease  v.  Babcock,  23  Pick.  .334 , 

etc.,  T.  Co., 23  id.  193  ;  People  v.  Bank  ErieR.  Co.  v.  Casey.  26  Penn.  St.  287  ; 

of   Niagara,  6   Cow.  195  ;    People    v.  Miners'    Bank    v.    United    States,    1 

Washington  Bank,  id.  211  ;    People  v.  Greene  (Iowa.),  553  ;  State  v.  Curran,  13 

Bank  of  Hudson,   id.  217;  People  v.  Ark.  321. 

Dispensatory,  etc.,  Soc,  7   Lans.  305  ;  ^  Crease  v.  Babcock,  and  Erie  R.  Co. 

Lehigh  Bridge  Co.  v.  Lehigh  Coal  Co..  v.  Casey,  supra. 
4  Rawle,  9  ;  Commonwealth  v.  Com- 


Dissolution,  651 

same  is  limited  by  some  express  provision,  it  has  been  held  that 
the  legislature  may  determine  in  what  manner  a  railroad  shall 
exei'cise  its  franchises,  and  may  provide  for  changes  in  the  level, 
grade  and  connections  thereof ;  direct  the  construction  of  a  new 
connecting  track,  and  in  what  manner  and  under  whose  super- 
vision the  work  shall  be  done  and  how  paid  for ;  '  that  it  may  re- 
quire a  station-house  to  be  built  ;it  a  particular  place, "  and  require 
several  railroad  corporations,  having  tracks  terminating  in  a  city, 
to  unite  at  one  station/ 

But  it  has  been  further  held  that  the  legislature  is  not  the  final 
judge  of  the  existence  of  the  conditions  upon  which  the  right  to 
declare  a  forfeiture  depends,  and  that,  whether  the  facts  warrant 
the  exercise  of  the  power  or  not,  is  for  the  determination  of  the 
courts  ;  that  the  (;ourts  must  declare  a  forfeiture  and  not  the  leg- 
islature ;  *  and  that  the  courts  can  inquire  into  tlie  facts  and  deter- 
mine for  them  whether  there  are  grounds  for  forfeiture,  and 
according  to  such  finding  and  determination  of  the  courts,  the 
act  of  the  legislature  on  the  subject  is  valid  or  void.^ 

Sec.  440.  Expiration  of  the  time  limited  for  its  continuance.  —  An- 
other mode  in  which  a  corporation  may  be  dissolved  is  by  expira- 
tion of  the  time  for  which  it  was  created.  This  time  is  fre- 
quently, if  not  generally,  fixed  in  the  constating  instruments,  or 
by  some  general  law.  If  the  limit  of  corporate  power  is  thus 
fixed,  when  the  time  arrives  the  corporation  is  dissolved  with  all 
the  consequences  of  a  dissolution  by  any  other  niode.^  But  if  the 
continuance  beyond  a  certain  time  is  made  to  depend  npon  the 
performance  of  a  certain  condition,  the  non-performance  of  it  has 
been  held  a  mere  ground  of  forfeiture,  and  not  an  absolute  disso- 
lution.' 

'  Fitchburg   R.  Co.  v.  Grand  June-  etc.,  R.  Co.,  58  Penn.  St.  26;  Erie  R. 

tion  R.  Co.,  4  Allen,  198.  Co.  v.  Casey,  26  id.  387. 

■''  Commonwealth  v.  Eastern  R.  Co.,  *  Id.     See,  also,  Commonwealth  v. 

103  Mass.  254.  Essex  Co.,  13  Gray,  239  ;  Delaware  R. 

3  Mayor,  etc. ,  of  Worcester  v.  Nor-  Co.  v.  Tharp,  5  Harr.  454  :  Cur  ran  v. 

wich  R.  Co.,  lOi!  Mass.  103.     See,  also.  State,  15  How.  (U.   S.)  304  ;  Flint,  etc., 

Parker  v.  Metropolitan,  etc.,  R.  Co,  P.   R.  Co.  v.  Woodhi^ill,  25  Mich.  99. 

id.  506;  Commissioners    v.    Holyoke  ^  Bank  of   Mississippi  v.  Wrenn,  3 

Water    Power   Co.,  104   id.    446";    af-  S.  &   M.    791;    Commercial    Bank    v. 

firmed,  Ilolvoke,   etc.,    Co.  v.   Lyman  Lockwood,     2    Harr.    8;     Wilson    v. 

15  Wall.  500.  Tesson,  12  Ind.  285. 

*  Brutl'eit  V.  Great  West.    R.  Co.,  25  ''  La  Grange,  etc.,  R.  Co.  v.  Rainey, 

111.  353  ;  Commonwealth  v.  Pittsburg,  7  Cold.  420. 


652  Pkivate  Coeporations. 

The  comtnoTi  remedy  for  avoiding  in  such  cases  the  reversion 
or  forfeiture  of  property,  the  loss  of  debts  and  otlier  ordinary 
consequences  of  a  dissolution,  where  the  statute  does  not  provide 
for  a  continuance  of  corporate  powers  for  the  purpose  of  closing 
up  its  affairs,  is  to  make  a  transfer  of  the  property  and  interests 
of  the  corporation  to  a  trustee  for  the  benefit  of  stockholders  or 
creditors,  before  the  period  for  dissolution  occurs.' 

But  it  has  been  held,  in  reference  to  municipal  corporations 
dissolved  by  repeal  of  charters,  that  the  rights  of  creditors  will  be 
protected  from  invasion,  by  the  constitution  of  the  United  States, » 

Sec.  441.  Neglect  or  abuse  of  powers. —  This  is  one  of  the  most 
common  causes  for  dissolution.  The  contract  between  the  state 
and  the  corporators,  on  the  acceptance  of  the  provisions  of  the 
statute  relating  to  incorporation  for  private  and  pecuniary  pur- 
poses, becomes,  as  we  have  seen,  inviolable.  But  the  condition 
imposed  upon  the  corporators  is,  that  they  shall  carry  out  the  pur- 
poses of  the  corporation  on  their  part  and  not  assume  powers  not 
conferred  upon  them  by  virtue  of  the  authority  given.  A  neglect 
of  duty  or  abuse  of  the  power,  or  an  assumption  of  authority  not 
conferred,  is  ground  of  forfeiture  of  the  franchise.'  But  in  these 
cases  it  can  only  be  dissolved  by  the  judicial  determination  of  a 
court,  on  an  inquiry  into  charges  made  in  this  respect,  and  which 
authorize  a  decree  of  dissolution." 

'Id.     See,  also,  Cooper  v.  Curtia,  30  Wheat.  658;  Penobscot  Boom  Co.  v. 

Me.    488;     Ingraliam     v.     Terry,     11  Lainson,    IG    Me.    234;    Hodsdon    v. 

Humph.  572  ;  Nicoll  v.  New  York  R.  Copeland,  id.  314  ;  All  Saints  Church 

Co.,  13  Barb.  460  ;  People  v.  Walker,  v.  Lovett,  1  Hall,  198  ;  John  v.  Farm- 

17  N.  Y.  503,  as  to  construction.  ers'  Bank,  3  Blackf.  367  ;  Hamtramck 

'■'Lansing  v.  Treasurer,  etc.,  1  Dill.  v.   Bank  of  Edwardsville,  3  Mo.  169; 

(C.  C.)523;  Butz  V.  Muscatine, 8  Wall.  Day   v.  Stetson,  8   Me.  372;  State   v. 

575  ;  Gelpcke  v.  Dubuque,  1  id.   175;  New  Orleans  Gas  L.  Co.,  2  Rob.  (La.) 

Thomson  V.  Lee,  3  id.  337  ,  Soutter  v.  539;    Commonwealth    v.    Commercial 

Madison,  15  Wis.  30  ;  Smith  v.  Apple-  Bank,  28  Penn.  St.  383. 
ton,  19  id.  468;  Blake  V.  Railroad  Co.,        *Id.      See,    also,    Turnpike    Co.    v. 

39  N.  H.  435.  State,  3  Wall.  310  ;  People  v.  Society, 

» 3  Kyd  on  Corp.  474 ;   Wilcoc   on  etc.,  1   Paine   (C    C),   660  ;    State   v. 

Corp.  334  ;    1    Blackst.  Com.  485 ;    2  Bradford,  33  Vt.  50  ;  Lea  v.  American 

Kent's  Com.   312  et  seq. ;  Taylors  of  Canal  Co..  3  Abb.  Pr.  (N.S.)  1  ;  Kisha- 

Ipswich  V.  Sherring,  1  Roll.  4;  Res  v.  coquillas  T.  R.  Co.  v.  McConaby.  16  S. 

Orosvenor,  7  Mod.  199  ;  Rex  v.  Saund-  &  R.  145;  Canal  Co.  v.  Railway  Co.,  4 

ers,  3   East,  119  ;  Rex  v.   Pasmore,  3  G.  &  J.  1  ;  University  of  Maryland  v. 

T.  R.  246  I  Eastern  Archipelago  Co.  v.  Williams,  9    id.  365  ;    Washington    & 

Reginam,3  E.   &   B.  857;  Story,  J.,  B.  T.  R.    v.    Maryland,   19    Md.   239; 

in    Ferrett   v.   Taylor,  9   Craach,  51  ;  State  v.   Cincinnati,  23  Ohio   St.  445  ; 

Dartmouth   College  v.   Woodward,   4  Baker  v.  Backus,  33  HI,    79  ;  Liudell 


1 


Dissolution.  653 

Sec.  442.  Same  continued.  —  The  dissolution  in  sucli  cases  must 
be  decreed  bj  a  court  of  competent  jurisdiction,  and  for  the  right 
to  claim  a  forfeiture,  it  may  be  waived  by  the  state.^ 

On  this  subject  the  supreme  court  of  New  York  observe  j 
"  Where  a  corporation  has  abused  its  power,  or  committed  acts 
whicli  are  unlawful,  it  nevertheless  continues  legally  to  exist  as  a 
corporate  body  until  the  state  or  government  which  created  it 
shall,  by  a  proper  proceeding,  procure  an  adjudication  and  enforce 
a  forfeiture  of  the  charter.  But  all  such  proceedings  are  at  the 
instance  or  on  behalf  of  the  state  or  government.  Acts  which 
are  improper  do  not  of  themselves  work  a  dissolution."  '''  And  in 
all  such  cases  the  state  may  M^aive  its  right  to  forfeiture  for  the 
failure  of  the  corporation  fully  to  perform  its  contract  with  it,  in 
the  same  way  as  an  individual  may  w^aive  breaches  of  contract. 
This  may  be,  by  some  act  of  the  legislature,  recognizing  the  cor- 
poration after  previous  acts  which  would  warrant  a  judgment  of 
forfeiture  ; '  or  it  may  be  by  a  refusal  or  neglect  to  prosecute  the 
delinquent  corporation  for  the  purpose  of  obtaining  a  judgment 
of  forfeiture  by  a  competent  court.^  But  in  order  to  infer  a 
waiver  of  the  default  of  a  corporation  and  of  the  conditions  of  a 
charter,  by  legislative  action,  the  intention  in  this  respect  must  be 
distinctly  declared  by  the  legislature,  or  it  must  be  clearly  infer- 
able from  its  acts.^ 

V.  Benton,  6  Mo.  361;  Attorney-General  cial  Bank,  33  Miss.  474;  State   v.  Ur- 

V.  Tudor  Ice  Co.,  104  Mass.    239;  At-  bana   Ins.   Co.,  14   Ohio,  6;  Common^ 

torney-General  v.  Bank  of  Niagara,  1  wealth  v.   Fitchburg  R.  Co.,  13  Gray, 

Hopk.   324  ;  Slee   v.  Bloom,  5   Johns.  180;  Ward  v. Sea  Ins.  Co.,  7  Paige,294; 

Ch.  303  ;  S.    C,   19   Johns.    456;  Ver-  Jackson  v.  Marine  Ins.  Co.,  4  Sandf, 

planck  V.  Mercantile  Ins.  Co.,  1   Edw.  Ch.  559;  People  v.  Washington  Bank, 

Ch.  84  ;  Doyle  v.  Peerless,  etc.,  Co.,  44  6  Cow.  211  ;  People  v.  Bristol  T.  Co. , 

Barb.  239  ;  State   v.  Merchants'    Ins.,  23  Wend.  222  ;  State  v.  Fa  veil,  24  N. 

etc..   Co.,   8    Humph.    235 ;    Baker   v.  J.  L.  370. 
Backus,  32  111.  79  ;  State  v.  Commer- 

'  State   V.  Paterson,  etc.,  T.  Co.,  21  20   Ark.  495;  State   v.  Fourth   N.  H. 

N.  J.  L.  9.  Turnpike  Co.,  15   N.  H.    162  ;  People 

^  Ormsbv  v.  Vermont  Copper  Mining  v.  Manhattan  Co.,  9  Wend.  351;   Same 

Co.,  65  Barb.  360;  People  v.  Manhat-  v.    Fishkill   P.  R.  Co.,  27    Barb.    445; 

tan  Co.,  9  Wend.  351  ;  Bank  of  Niag-  Baltimore,   etc.,  R.    Co.    v,   Marshall 

ara  v.  Johnson,  8  id.  645  ;  Bear  Camp  Co.,  3  W.  Va.  319. 

River   Co.  v.   Woodman,    2   Me.  404;  *  (^Qj^^onwealth  v.  Union  Ins.  Co.,  5 

Mickles   v.  Rochester   City   Bank,  11  Mass.  230  ;  Chester  Glass  Co.  v.  Dewey, 

Paige,  118  ;  People  v.  Hillsdale  T.  Co.,  16  id.  94  ;  Boston  Glass  Man.  v.  Lang- 

23  Wend.  254.  don,  24  Pick. 52;  Quincy  Canal  v.  New- 

2  State   V.    Paterson,  etc.,  R.  Co.,  1  comb,  7  Mete.  276  ;  Kuowlton  v.  Ack- 

Zabr.  9.  ley,  8Cush.    95;  Heard    v.   Talbot,   1 

4  State  V.   Mississippi,  etc.,  R.  Co.,  Gray,     120;     Brookville   T.     Co.    v. 


654 


Private  Corpokations. 


Skc.  443.  Mode  of  proceeding  in  such  cases.  —  We  liave  observed 
that  in  certain  cases  the  corporation  may  be  dissolved  without 
any  adjudication  to  that  effect,  as  where  the  time  of  its  linuta- 
tion  has  expired,  and  there  is  no  condition  annexed  to  the  charter 
in  this  respect.' 

But  in  other  cases,  an  adjudication  may  be  necessary,  in  order 
to  determine  its  rights  and  prevent  future  action. 

The  ancient  common-law  modes  of  procedure  for  this  purpose 
were  by  scire  facias  or  quo  warranto.  The  former,  it  has  been 
considered,  ^vas  the  proper  mode  of  proceeding,  where  a  corpora- 
tion had  a  legal  existence  and  was  capable  of  acting,  but  by  rea- 
son of  neglect  or  abuse  of  its  powers  it  should  no  longer  be 
permitted  so  to  do ;  the  latter,  where  an  association  or  body  cor- 
porate de  facto  undertakes  to  act  as  a  lawful  corporate  body,  but 


McCarty,  8  Ind.  393  ;  Cleveland,  etc., 
R.  Co.  V.  City  of  Erie,  27  Perm.  St.  380  ; 
Commonwealth  v.  Alles^lieny,  etc.,  Co  , 
20  id.  185  ;  Dyer  v.  Walker,  40  id.  157; 
Vermont,  etc.,  R.  Co.  v.  Vermont  C.  R. 
Co. ,  34  Vt.  57  ;  Connecticut  R.  Co.  v. 
Bailey,  24  id.  465  ;  Silver  Lake  Bank 
V.  North,  4  Johns.  Ch.  379  ;  Slee  v. 
Bloom,  5  td.  366  ;  19  Johns.  456 ; 
Vernon  Society  v.  Hills,  6  Cow.  23  ; 
Thompson  v.  New  York  R.  Co.,  3 
Sandf.  Ch.  652  ;  Caryl  v.  McElrath,  3 
Sandf.  176;  Enfield  Toll  ^r.  Co.  v. 
Connecticut  Riv.  Co.,  7  Conn.  46; 
Pearce  v.  Olney,  20  id.  544.;  Kishaco- 
quillas  T.  Co.  v.  McConaby,  16  S.  &  R. 
145,  Dyer  v.  Walker,  40  Perm.  St. 
157  ;  Brookville  T.  Co.  v.  McCarty,  8 
Ind.  392  ;  John  v.  Farmers'  Bank,  2 
Blackf.  367 ;  Pierce  v.  Somerswortli, 
10  N.  H.  875,  per  Parker,  C.  J.  ; 
State  V.  Fourth  N.  H.  Turnp.  Co.,  15 
id.  162 ,  Cahill  v.  Kalamazoo  Ins.  Co., 
2  Doug.  (Mich.)  124,  141  ;  Bohannon  v. 
Binns,  31  Miss.  355  ;  Cramp  v.  United 
States  Min.  Co.,  7  Gratt.  352;  Canal 
Co.  v.  Railroad  Co.,  4  G.  &  J.  1  ; 
Planters'  Bank  v.  Bank  of  Alexandria, 
10  id.  346  ;  University  of  Md.  v.  Wil- 
liams, 9  id.  365  ;  Hamilton  v.  An- 
napolis R.  Co. ,  1  Md.  Ch.  Dec.  107  ; 
Atchafalaya  Bank  v.  Dawson,  13  La. 


497  ;  State  v.  N.  0.  Gas.  L.  Co.,  2  Rob. 
(La.)  529;  Webb  v.  Moler,  8  Ohio, 
548  ;  Bank  of  Cir.  v.  Renick,  15  id. 
322  ;  Johnson  v.  Bentley,  16  id.  97  ; 
Myers  v.  Manhattan  Bank,  20  id.  283  ; 
Bank  of  Mo.  v.  Merchants'  Bank,  10 
Mo.  123  ;  Bank  of  Galliopolis  v.  Trim- 
ble, 6  B.  Monr.  599  ;  Harrison  v.  Lex- 
ino^ton  R.  Co.,  9  id.  470;  Young  v. 
Harrison,  6  Ga.  130  ;  Salem  R.  Co.  v. 
Tipton,  5  Ala.  805  ;  Duke  v.  Cabawba 
Xav.  Co.,  16  id.  372  ;  State  v.  Center- 
ville  Br.  Co.,  18  id.  678;  Smith  v. 
Plankroad  Co.,  30  id.  650  ;  Bayless 
V.  Orne,  Freem.  (Miss.)  173;  Smith  v. 
Mississippi  R.  Co.,  6  S.  &  M.  179; 
Grand  Gulf  Bank  v.  Archer,  8  id.  151  ; 
Rex  V.  Slaverton,  Yelv.  190  ;  Rex  v. 
Carmarthen,  1  W.  Bl.  187  ;  2  Burr. 
809  ;  Rex  v.  Amery,  2  T.  R.  515 ;  Rex 
v.  Pasmore,  3  id.  244 ;  Terrett  v.  Tay- 
lor, 9  Cranch,  51  ;  2  Kent's  Com.  313  ; 
Brice's  Ultra  Vires,  647  et  seq. ; 
People  V.  Kingston  T.  Co.,  23  Wend, 
193;  People  v.  Phoenix  Bank,  24  id. 
431.  And  this  doctrine  of  waiver  does 
not  apply  where,  by  the  express  terms 
of  the  charter,  the  franchise  absolutely 
determines  on  failure  to  perform  cer- 
tain conditions.  People  v.  Manhattan 
Co.,  9  Wend.  351  ;  Commonwealth  v. 
Union  Ins.  Co.,  5  Mass.  232 


'  Bank,  etc.,  v.  Wrenn,  3    S.    &   M. 
791 ;  Commercial  Bank  v.  Lockwood, 


2  Harr.  (Del.)  8;  Ang.  &  Am.  on  Corp., 

S  778. 


Dissolution.  055 

has  no  legal  authority  to  exercise  such  powers.^  But  the  iiK^d- 
ern  proceeding  in  such  cases  is  in  the  nature  of  <iuo  %oarranto? 
For,  as  we  have  before  noticed,  although  the  ancient  writ  of  quo 
warranto  Avas  the  method  whereby  legal  incpiiry  was  made,  as  to 
the  authority  of  a  body  of  persons  assuming  to  act  as  a  corporate 
body,  to  legally  perforin  such  functions,^  information  in  the 
nature  of  quo  warranto  is  a  modem  mode  of  correcting  not  only 
tlie  usurpations,  but  the  mis-user  or  non-user  of  a  corporate  fran- 
chise/ For  various  reasons  the  ancient  proceedings  in  England, 
by  writ,  fell  into  disuse,  and  the  modern  remedy  by  information 
in  the  nature  of  quo  warranto  was  substituted/  Informations 
of  this  character  may  be  hied  by  the  attorney-general  or  the 
attorney  representing  the  state,  or  by  any  other  erson,  by  leave 
of  the  court. 

"  The  principle  is  now  firmly  established,"  observes  Mr.  High, 
"  that  the  granting  or  withholding  leave  to  file  an  information,  at 
the  instance  of  a  private  relator,  to  test  the  right  to  an  office  or 
franchise,  rests  in  the  sound  discretion  of  the  court  to  which  the 
application  is  made,  even  though  there  be  a  substantial  defect  in 
the  title  by  which  the  office  or  franchise  is  held."  In  the  exer- 
cise of  this  discretion,  upon  the  application  of  a  private  relator,  it 
is  proper  for  the  court  to  take  into  consideration  the  necessity  and 
policy  of  allowing  the  proceedings,  as  well  as  the  position  and 
motives  of  the  relator  in  proposing  it,  since  this  extraordinary 
remedy  will  not  be  allowed  merely  to  gratify  a  relator  who  has 
no  interest  in  the  subject  of  inquiry.'     The  court  will  also  weigh 

'  See  opinion  of  AsnURST,  J.,  inRex  ing    by    information    in    tlie    nature 

V.  Pasraore,  3  T.  R.  244  ;  Regents,  etc.,  thereof.     See.also,  3  Blackst.  Com.  263; 

V.  Williams,  9  tt.    &   J.    365;    Brice's  Attorney-General  v.  Barstow,  4  Wis. 

Ultra  Vires,  589.  659. 

n  Blackst.  Com.  485;  2  Kyd on  Corp.  «  People  v.  Waite,  111.  (1874).  Chic. 

474;  ante,  ^453;  People  v.  Bank  of  Leg.  News,  175;  State  v.  Tolan,33N. 

Niao'ara,  6  Cow.  196  ;   People  v.  Bank  J.  Eq.  195  ;  State  v.  Schnierle,  5  Rich, 

of  Huddon,  id.  217;  Same  V.  Washing-  299;     State    v.    Fisher,    28    Vt.    714; 

ton,  etc.,  Bank,  id.  211;   3  Blackst.  Com.  Commonwealth   v.    Reigart,   14   S.  & 

262;  Commonwealth  V.  Small,  26  Peun.  R.  216;  State  v.    Brown,  5    R.   I.    1. 

St.  31  ;  State  v.  Ashley,  1  Ark.  279.  See,   also,  Stone   v.  Wetmore,  44  Ga. 

3  High  on   Extra.  Leg.   Rem.,  §  593  495 ;     Commonwealth     v.    Cluley,    56 

etseq  ,  and  notes.  Penn.  St.  270  ;  People  v.  Sweeting,  2 

•*  Id.,  §  601   et  seq.,  and  notes.  Johns.  184.     But  see  State  v.  Burnett, 

5  See  id  ,  §  591  et  seq.,  for  a  history  2  Ala.  140. 

of  quo  warranto,  and  of  the  proceed-  "^  State  v.  Brown,  5  R.  I.  1. 


656 


Private  Corporations. 


tlie  considerations  of  public  convenience  involved,  and  will  com- 
pare them  with  the  injmy  complained  of,  in  determining  M'hether 
to  grant  or  refuse  the  application."  '  It  is  not  within  the  proper 
scope  of  this  treatise  to  consider  f  idly  the  various  ordinary  and 
extraordinary  remedies,  whicli  may  be  had  by  and  against  corpora- 
tions, or  those  related  to  them  as  stockholders  and  creditors. 
Special  treatises  are  devoted  to  these  matters,  especially  the  com- 
mon-law remedies,  by  mandamus,  quo  warranto,  injunction,  etc., 
the  general  principles  relating  to  which  are  as  applicable  to  cor- 
porations as  to  individuals.'' 

Sec.  414.  "We  have  already  noticed,  that  to  warrant  a  judg- 
ment of  forfeiture  against  a  corporation  on  the  ground  of  neglect 
or  abuse  of  corporate  powers,  such  neglect  must  be  more  than 
the  result  of  mere  omission  to  use  certain  powers  possessed  or  a 
mere  accident,  and  such  abuse  must  be  willful  and  not  the  result 
of  mistake.'  Thus,  it  is  not  a  cause  of  forfeiture  for  a  corporation 
to  neglect  to  enforce  its  rights  against  a  delinquent  stockholder 


1  Hig-li  on  Extra.  Leg.  Rem.,  §  60o. 
See,  also,  State  v.  Scbnierle,  5 
Rich.  299.  In  former  times  it  was 
rather  a  common  occurrence  for  pro- 
ceedings to  be  instituted  by  the  crown 
against  corporations  for  misusing  their 
franchises  or  against  individuals  for 
usurping  such  principles.  State 
reasons  were  generally  the  motive 
cause.  The  municipal  corporations 
during  the  middle  ages,  and  till  a 
period  at  least  as  late  as  the  Revolu- 
tion of  1688,  formed  one  of  the  main 
stays  of  English  liberty.  The  sover- 
eigns encouraged  them  as  the  centers 
of  trade,  and  repressed  them  by  every 
means,  when  they  attempted  to  make 
subservient  to  political  objects  the 
great  power  which  the  union  and 
periodical  meetings  of  their  members 
gave  them.  Other  incentives  there 
were,  too,  which  prompted  the  almost 
continual  interference  of  the  crown 
with  the  corporations.  Every  addition 
to  the  importance  and  strength  of  them 
was  assumed  to  be  an  encroachment 
upon  and  a  diminution  of  the  preroga- 
tive. Moreover,  the  fines  imposed 
upon  corporative  bodies,  and  often 
upon  the  luckless  corporators   them- 


selves, were  a  lucrative  source  of 
revenue.  However,  with  the  increase 
of  individual  freedom,  and  the  pro- 
tection for  the  expression  of  individual 
opinions,  the  political  importance  of 
these  bodies  has  greatly  diminished  ; 
consequently  seldom,  if  ever,  does  the 
crown  now  attack  them  for  an  en- 
croachment upon  its  own  privileges,  or 
for  any  other  reason  of  offense  to  it- 
self.    Brice's  Ultra  Vires,  649. 

■^  See  ante,  chap.  18  ;  also  High  on 
Extra.  Leg.  Rem.,  tit.  Mandamus  and 
Quo  Warranto ;  Tapping  on  Man- 
damus; High  on  Injunctions;  also,  'post, 
chap.  21,  for  a  treatment  of  mandamus. 

^  A  neglect  to  elect  proper  officers,  or 
the  death  of  officers,  does  not  usually 
constitute  a  cause  of  dissolution.  Vin- 
cennes  Univ.  v  Indiana,  14  How.  (U. 
S.)  2G8;  Russell  v.  McClelland,  14 
Pick.  63  ;  Kuowlton  v.  Ackley,  8  Cush. 
94  ;  Evarts  v.  Killing  worth  Co.,  20 
Conn.  447 ;  Phillips  v.  Wickham,  1 
Paige,  590;  Rose  v.  Turnpike  Co.,  3 
Watts,  46  ;  Commonwealth  v.  Cullen, 
13  Penn.  St.  133  ;  Blake  v.  Hinkle,  10 
Yerg.  218  ;  Nashville  Bank  v.  Petway, 
3  Humph.  (Tenn.)  524  ;  Cahill  v.  Kala- 
mazoo Ins.  Co. ,  2  Doug.  140. 


Dissolution.  657 

by  omitting  to  sell  his  shares  of  stock  in  the  company,  or  to  sue 
such  stockliolder  for  iiupiiid  calls,'  or  for  the  refusal  of  an  insur- 
ance company  to  insure  in  certain  cases,''  or  for  refusing  to  insure 
in  any  case,  and  discontinuing  all  ordinary  business  (except  set- 
tling up  its  affairs)  for  the  period  of  a  year  ; '  nor,  generally,  that 
proceedings  have  been  instituted  against  the  corporation  under 
insolvent  laws,^  or  that  a  receiver  has  been  appointed/ 

"  In  general,  to  work  a  forfeiture,  there  must  be  something 
wrong,  arising  from  willful  abuse  or  improper  neglect ;  something 
more  than  accidental  negligence,  excess  of  power,  or  mistake  in 
the  mode  of  exercising  an  acknowledged  power.  A  single  act  of 
abuse  or  willful  non-feasance  in  a  corporation  may  be  insisted  on 
as  a  ground  of  total  forfeiture,  but  a  specific  act  of  non-feasance^ 
not  committed  willfully  or  negligently^  not  producing  nor 
having  a  tendency  to  produce  mischievous  consequences  to  any 
one,  and  not  being  contrary  to  any  particular  recpiisition  of  the 
charter,  willnot  work  a  forfeiture." '  Slight  deviations  from  the 
provisions  of  a  charter  would  not  necessarily  be  either  an  abuse 
or  mis-use  of  it  and  ground  for  its  annuUment,  although  it  would 
be  competent,  by  apt  words,  to  make  the  continuance  of  the 
charter  conditional  upon  the  strict  and  literal  performance  of 
them.''  The  duties  assigned  by  an  act  of  incorporation  are  con- 
ditions annexed  to  the  grant  of  the  franchises  conferred.  Hence 
non-compliance  with  the  requirements  of  an  act  incorporating  a 
turnpike  company  as  to  the  construction  of  the  road  is,  per  se,  a 

»  Commercial  Bank,  etc.,  v.  State  of  Conn.  233  ;  Pondville  Co.  v.  Clark,  25  id. 

Miss.,  6  S.  &  M.  615.  97  ;   Hoyt    v.    Sheldon,  3  Bosw.  267  ; 

"  State  v.Urbana  Ins.  Co.,  14  Ohio,  6.  Nimiuons  v.  Tappan,  2  Sweeney,  652. 

Acts  of  neglect  do  not  work  a  disso-  But  see,  under  the  National  Banking 

lution  ipso  facto,  but  entitle  a  stock-  Statutes,  National  Bank  v.  Colby,  21 

holder  or  creditor  to  take  proceedings  Wall.  609. 

to  have  it  judicially  declared.     Mickles        ^Taylor   v.    Franklin   Ins.  Co.,  115 

V.  Rochester  City  Bank,  11  Paige,  118.  Mass.  278. 

3  Jackson    Marine    Ins.  Co.,  In   the        *  People  v.  Bristol  T.  R.,  23  Wend. 

Matter  of,  4  Sandf .  Ch.  550.  222  ;   Bank   Commissioners   v.    Bank, 

*  Coburn    v.    Boston    Papier   Mache  etc.,  6  Paige,  497  ;  Ward  v.  Sea  Ins. 

Manuf.  Co.,  10  Gray,   248;  Rollins  v.  Co.,  7  id.   294;  Paschall  v.  Whitsett, 

Clay,  33  Me.  132  ;  Brandon  Iron  Co.  v.  11  Ala.  472 ;  State  v.  Merchants'  Ins. 

Gleason,  24  Vt.  228  ;  State  Nat.  Bank  Co.,  8  Humph.  235  ;  Frederick  Female 

V.    Robadoux,   57    Mo.   446;  Piatt   v.  Seminary  v.  State,  9  Gill,  379  ;  State  v. 

Archer,  9  Blatchf.  559  ;  Boston  Glass  Coll.  &  H.  P.  R.  Co..  2  Sneed,  254. 
Manuf.  V.  Langdon,  24  Pick.  49  ;  Coburn         ''Eastern  Archipelago  Co.  v.    Regi- 

V.  Boston  Papier  Mache  Manuf.  Co.,  10  nam,  2  Ellis  &  B.  857. 
Gray,  248  ;   Catlin   v.  Eagle   Bank,  6 

83 


658  Pkivatk  Corpokations. 

mis-user,  subjecting  the  privileges  and  franchises  of  tlic  company 
to  forfeiture.' 

Indeed  the  non-performance  of  a  particular  act  required  by  the 
charter,  whether  for  the  benefit  of  an  individual  or  the  state,  is,  or 
may  be,  a  cause  of  forfeiture,  although  not  especially  declared  to 
be  such  by  the  charter  itself.'^  The  non-payment  of  the  portion 
of  the  capital  required  by  the  charter  for  the  beginning  of  busi- 
ness, and  the  sending  in  by  the  directors  of  a  false  certificate  that 
it  was  paid  and  thereupon  commencing  business,  is,  as  a  breach 
of  the  conditions  of  the  charter  or  an  abuse  of  its  franchises, 
cause  of  forfeiture.^ 

"  A  suhstantial  performance  of  conditions,  however,  is  all  that 
is  required  whether  they  be  conditions  precedent  or  subsequent.''''  * 

Sec.  445.  Dissolution  by  the  voluntary  act  of  members.  —  The  doc- 
trine that  a  private  moneyed  corporation  may  be  dissolved  by  the 
voluntary  action  of  a  majority  of  its  members,  in  thfe  absence  of 
positive  provisions  to  the  contrary,  contained  in  the  constating 
instruments,  seems  generally  received  in  England.  On  this  sub- 
ject Mr.  Brice  says  :  "  The  majority  of  a  corporation  may,  against 
the  wishes  of  the  minority,  dissolve  by  winding  up,  and  the  more 
generally  received  opinion  is,  that  they  can  do  so  by  any  otlier 
process  which  is  purely  voluntary."  ^     And  in  this  country  the 

1  People    V.   Kingston    T.    Co..    23  poration    therefor."      Code    (1873),    § 

Wend.     193.     And    see    Lumbard    v.  1086. 

Stearns,  4   Cusli.  60  ;  People  v.  Jack-  ^  Brice's  Ultra  Vires,  651  ;  Ward  v. 

son  T.  Co. ,  9  Mich.  285.  Society    of    Attorneys,    3    Coll.    370; 

^  Attorney-Gen.    v.    Petersburgh    R.  Bank  of  Switzerland  v.  Bank  of   Tur- 

Co.,  6  Ired.  (N.  C.)  456.  key,  5  L.  T.  (N.  S.)  549.     In  England 

*  Eastern  Archipelago  Co.  v.  Regi-  it  is  now  expressly  provided  liy  act  of 
nam,  2  Ellis  &  B.  857  ;  22  Eng.  L.  &  parliament  (Companies  Act,  1862,  25  & 
Eq.  328  ;  13  id.  167.  26  Vict.,  chap.  89,  §  79),  that  a  corpora- 

*  People  V.  Thompson,  21  Wend,  tion  may  be  wound  up  in  the  following 
235 ;    S.    C.    in    error,   Thompson    v.  cases  : 

People,  23  id.  537  •,  Commonwealth  v.  1.  Whenever     the      company     has 

Alleglif;ny  Co.,  20  Penn.  St.  185.     If  a  passed  a  special  resolution  requiring 

railroad  corporation  should  suffer  their  the    company  to  be   wound    up  by  the 

road  to  be  sold  on  execution,  it  would  court. 

be     cause     of     forfeiture.      State     v.  3.   Whenever  the  company  does  not 

Rives,  5    Ired.    (N.    C.)   309.     But    in  commence  its  business  for  the  space  of 

Iowa  it   is  provided:    "  The  franchises  a  whole  year. 

of  a  corporation  may  be  levied  upon  3.  Whenever  the  members   are  re- 

under  execution  and  sold,  but  the  cor-  duced  in  number  to  less  than  seven. 

poration  shall  not  become  thereby  dis-  4.   Whenever  the  company  is  unaljle 

solved,  and  no  dissolution  of  the  origi-  to  pay  its  debts. 

nal    corporation    shall  affect  the  fran-  5.   Whenever  the  court  is  of  opinion 

chise,   and     the     purchaser    becomes  that   it  is  just   and  equitable  that  it 

vested  with  all  the  powers  of  the  cor-  should  be  wound  up. 


Dissolution.  659 

right  of  a  private  corporation  for  peciuiiary  gain  to  voluntai-ilj 
dissolve  seems  generally  conceded,  notwithstanding  the  charter 
constitutes  a  contract,  to  which  there  must  necessarily  be. at  least 
two  parties  and  the  assent  of  both  parties  is  essential  to  the 
abroo^ation  of  the  contract.^ 

But  it  has  sometimes  been  held  in  this  country  that  such 
voluntary  surrender  must,  in  order  to  be  effective,  be  accepted 
by  the  state/  In  some  cases  surrender  has  been  presumed 
merely  from  the  neglect  to  use  the  corporate  powers  ; '  and  in 
others  that  neither  non-user,  suspension  of  business,  nor  the  sale 
or  assignment  of  the  corporate  property,  will  necessarily  constitute 
a  surrender  of  the  corporate  francliises/  But  acts  which  destroy 
the  end  for  which  the  corporation  was  created  have  been 
held  to  be  a  surrender  of  its  corporate  rights  and  powers/  And 
it  is  evident  that  such  conduct  on  the  part  of  the  corporation 
would  be  ^oltra  vires,  and  be  just  ground  for  a  judgment  of  for- 
feiture against  it.  In  this  country  it  has  been  held  that  cor- 
porations for  pecuniary  gain  may,  by  a  vote  of  a  majority  of  its 
members,  wind  up  their  affairs  ;  or  they  may  sell  the  whole  of 
their  property  to  a  new  corporation  and  take  shares  of  its  stock 

'  Riddle  v.  Locks,  etc.,  Co.,  7  Mass.  Y.  93  ;  State  v.  Bank   of  Md.,  6   G.  & 

185  ;  Hampshire  v.  Franklin,  16  id.  86  ;  J.  205  ;  University  of  Md.  v.  Williams, 

Savage    v.  Walshe,  26  Ala.   619;  Mo-  9    id.    365;  Town    v.    Bank    of    River 

bile,  etc.,  R.  Co.  v.  State,  29  id.  573  ;  2  Raisin,  2  Dougl.  (Mich.)  541 ;  Bruffett 

Kent's  Com.  310  ;  Mumma  v.  Potomac  v.  Great  Western  R.  Co.,  25  111.  353. 

Co.,  8  Pet.  281  ;  Penobscot    Boom  Co.  *  Id.  ;  Penobscot    Boom  Co.  v.  Lam- 

V.   Lamson,  16  Me.    234;  Hodsdou  v.  son,  16  Me.  224;  Brandon  Iron  Co.  v. 

Copeland,    id.   314;    Enfield  Toll   Br.  Gleason,  24  Vt.  328  ;  Newton,  etc.,  Co. 

Co.    V.    Connecticut,   etc.,     R.    Co.,  7  v.  White,  43  Ga.  148. 

Conn.   45;  Slee   v.    Bloom,  19    Johns.  =- Strickland  v.  Prichard,  37  Vt.  834; 

456;  McLaren  v.  Pennington,  1  Paige,  Slee  v.  Bloom,  19  Johns.  456;  Penni- 

107  :  Canal  Co.  v.  Railroad  Co.,  4  G.  &  man   v.  Briggs,  1  Hopk.    300;  S.  C, 

J.  1  ;  Attorney-Gen.   v.  Clergy  Soc,  10  S  Cow.  387  ;  People  v.  Hudson,  6  id. 

Rich.  Eq.  604  ;  Mclntire  v.  Zanesville  317  ;  Moore  v.  Whitcomb,  48  Mo.  543. 

Canal     Co.,    9   Ohio,   203;    1    Kyd    on  Mr.    Dillon    observes    in    relation    to 

Corp.  1,  9, 10  ;  Res  v.  Amery,  3  T.   R.  municipal     corporations:   "Since    all 

531  ;  Rex  v.  Gray,  8  Mod.  361.  our    charters    of    incorporation    come 

^  Revere    v.    Boston   Copper  Co.,   15  from    the  legislature,  there  can  be  no 

Pick.  351  ;  Boston    Glass  Co.  v.  Lang-  dissolution  of  a  municipal  corporation 

don,  24  id.  49  ;  Enfield  Toll  Br.  Co.  v.  by  a  surrender  of  its  franchise    *   *  * 

Connecticut,  etc.,  R.  Co.,  7  Conn.  45.  If  there  could  be   any  such  thing,  it 

^  Brandon  Iron  Co.  v.  Gleason,  24  Vt.  would,  from  necessity,  have  to  be  made 

238  ;  Brinkerhoif  v.    Brown,  7  Johns,  to   the  legislature,  and  its  acceptance 

Ch.    217;  Barclay  v.  Talman,  4   Edw.  would  have  to  be  manifested  by  appro- 

Ch.  123;  People  V.   Bank  of  Hudson,  priate  legislation."  Dill  on  Mun.  Corp., 

6  Cow.  217  ;  Bradt  v.  Benedict,  17  N,  §  111. 


C)<50 


Pkivate  Corporations. 


ill  paynieiit,  to  be  distributod  ainoug  the  members  of  tlie  old  com- 
pany who  are  willing  to  take  them.'  And  under  an  existing  stat- 
ute of  Massachusetts  a  majority  of  members,  or  those  represent- 
ing a  majority  of  shares,  may,  by  application  to  the  supreme 
court,  setting  forth  reasonable  grounds  therefor,  secure  a  dissolu- 
tion of  the  corporation." 

Sec.  ttiG.  When  the  m^ority  may  surrender  the  franchise. —  The 
question  as  to  the  nnanimity  required  by  the  corporators  in  order 
to  accomplish  a  voluntary  surrender  of  corporate  franchises  may 
depend  upon  the  provisions  of  the  charter.  If  there  is  no  pro- 
vision upon  this  subject,  and  no  definite  period  of  limitation  to 
corporate  existence,  it  has  been  uniformly  held  that  a  majority 
may,  by  resolution,  surrender  its  charter ;  ^  but  if  it  is  other- 
wise provided  in  the  constating  instruments,  or  if  the  duration  of 
the  coi-poration  is  fixed  by  them,  unanimity  of  the  stockholders  is 
held  essential  to  a  surrender  * 


•  Wilson  V.  Central  Br.  Co.,  9  R.  I. 
590;  Tread  well  v.  Salisbury  Man.  Co., 
7  Gray,  393. 

^  (ien.  Stat.  Mass.,  chap.  68,  §  35. 
See,  also,  Stat.  1852,  chap.  55  ;  Pratt  v. 
Jewutt,  9  Gray,  34.  The  Code  of  Iowa, 
§  103G  (1873).  provides  :  "No  corpora- 
tion shall  be  dissolved  prior  to  the 
period  fixed  in  tlie  articles  of  incor- 
poration, except  by  unanimous  consent, 
unless  a  different  rule  has  been  adopted 
in  their  articles."  A  private  corpora- 
tion may  surrender  its  franchise.  The 
People  V.  The  President,  etc.,  of  the 
College  of  California,  38  Cal.  166 ;  1 
With.  Corp.  Cas.  161. 

^  See  authorities  already  cited  on 
the  question.  See,  also,  Treadwell  v. 
Salisbury  Man.  Co.,  7  Gray,  393  ;  Wil- 
son v.  iProprietors,  etc.,  9  R.  I.  590; 
Zabriskie  v.  Hackensack  R.  Co.,  18  N. 
J.  Eq.  193;  Black  v.  Delaware,  etc., 
Canal  Co.,  7  id.  404,  McCurdy  v.  Myers, 
44  Penn.  St.  435.  But  see  Kean  v. 
Johnston,  1  Stockt.  401 ;  Revere  v. 
Boston  Cop.  Co.,  15  Pick.  351;  Curien 
V.  Santiui,  16  La.  Ann.  27;  Polar  Star 
Lodge  v.  Polar  Star  Lodge,  id.  53. 

*  Von  Schmidt  V.  Huntington,  1  Cal. 
55. 


Chancellor  Zabriskie  in  Black  v. 
Delaware,  etc..  Canal  Co.,  supra,  ob- 
serves :  "  But  there  is  no  case  that 
holds  that  a  majority  of  corporators, 
where  a  time  is  not  specified  for  which 
the  enterprise  must  be  continued, may 
not  abandon  the  enterprise  and  sell  out 
the  property  of  the  company.  *  *  * 
Becoming  incorporated  for  a  specified 
object  without  any  specified  time  for 
tlie  continuance  of  the  business  is  no 
contract  to  continue  it  forever  any 
more  than  articles  of  partnership  with- 
out stipulations  as  to  time."  Corpora- 
tions cannot  be  compelled  to  use  their 
powers  where  their  interests  will  not 
be  subserved  thereby.  People  v.  Al- 
bany, etc.,  R.  Co..  24  N.  Y.  261;  Tread- 
well  v.  Salisbury  Man.  Co.,  7  Gray,  398. 

And  provision  is  frequently  made 
by  statute  that,  in  case  of  dissolution 
either  by  expiration  of  the  time  fixed 
by  law  or  by  tlie  voluntary  act  of  the 
stockholders,  corporate  functions  con- 
tinue for  the  purpose  of  winding  up 
the  corporate  concerns.  Iowa  Code 
(1873),  §  1080.  In  Revere  v.  The  Bos- 
ton Copper  Co.,  15  Pick.  351,  the  de- 
fendant had  made  a  contract  with  the 
plaintiff   to   serve  its  interest  during 


Dissolution. 


G61 


Sec.  447.      Dissolution  under  statutes  providing  for  the  winding-up  of 
corporations.    -There  are,  perhaps,  generally,  statutory  j^rovisions 


life,  and  promised  in  consideration 
thereof  the  payment  of  a  fixed  salary 
so  long  as  the  services  contiuued  to  be 
faithfully  performed.  The  court  say: 
"The  defendant  corporation  was  es- 
tablished by  the  legislature  iu  P'ebru- 
ary,  1825,  and  about  a  month  after  its 
incorporation  made  the  contract  on 
which  the  question  arises. 

"That  agreement  was  made  in 
March  15,  1825,  and  the  cause  depends 
upon  its  construction.  It  purports  to 
be  a  mutual  agreement  between  the 
corporation  on  the  one  part  and  the 
plaiiititf  and  another  individual  on  the 
other  ])art.  It  is  contended  by  the  de- 
fendants that  by  the  proceedings  stated 
in  the  case  this  corporation  was  dis- 
solved and  determined,  and  so  by  the 
limitation  in  the  contract  itself  the 
term  for  which  the  plaintiff  was  en- 
gaged had  ceased.  Without  deter- 
mining whether  such  a  voluntary  dis- 
solution of  the  corporation  was  the 
event  contemplated  by  the  parties  in 
the  clause  alluded  to,  we  are  of  the 
opinion  that  by  the  acts  disclosed  this 
corporation  was  not  dissolved.  By  a 
reference  to  the  act  of  incorporation, 
Stat.  1824,  chap.  61,  amended  as  to  the 
name  by  Stat.  1825,  chap.  124,  it  ap- 
pears, that  the  company  was  not  incor- 
porated for  any  determinate  time,  and 
was,  therefore,  iu  its  nature,  perpet- 
ual. We  think  such  a  corporation  can- 
not dissolve  itself , and  terminate  its  own 
existence,  at  its  own  will,  by  a  bare 
notice  to  the  executive  department  of 
the  government.  It  may  be  asked, 
then,  what  could  have  been  contem- 
plated by  the  clause  in  the  contract, 
Umiting  the  term  of  the  plaintiff's  en- 
gagement to  the  time  for  which  the 
corporation  was  established  ;  or  how  a 
corporation  not  limited  in  its  duration 
can  be  dissolved  and  terminated.  I 
suppose  no  reasonable  doubt  can  exist, 
that  the  power  to  create,  by  the  con- 
sent of  parties,  may  with  the  like  con- 
sent dissolve  a  corporation.  An  act 
of  incorporation  is  deemed  to  be  a  con- 
tract, between  its  members  and  the 
sovereign,  formed  by  the  consent  of 
both  parties;  and  it  is  conformable  to 


the  spirit  of  the  law  of  contract,  that 
with  the  like  consent,  it  may  be  abro- 
gated and  discharged,  and,  therefore 
it  would  be  competent  for  the  legisla- 
ture, by  a  formal  act,  to  acce))t  such  a 
surrender,  and  thereupon  dissolve  the 
corporation.  This  would  afTord  a  se- 
curity to  the  public  and  to  all  those 
who  might  have  an  interest  in  the  con- 
cerns of  such  corporation,  that  no  dis- 
solution would  be  sanctioned  by  the 
legislature,  which  would,  in  its  conse- 
quences, impair  their  rights.  But 
there  is  another  circumstance  which 
may  be  deemed  sufficient  to  give  a 
meaning  and  effect  to  this  part  of  the 
agreement.  Although  this  act  of  in- 
corporation had  no  provision  limiting 
its  duration  to  any  certain  time,  yet  it 
was  made  subject  in  all  respects  to 
the  provisions  of  the  general  act  regu- 
lating manufacturing  corporations, 
Stat.  1808,  chap.  65,  §  7,  by  which  it 
is  provided,  that  the  legislature  shall 
have  power  at  any  time  afterward 
to  modify  or  wholly  repeal  any 
act  of  incorporation  thereafterward 
to  be  made.  This  provision  is,  there- 
fore, substantially  embodied  into  the 
act  of  incorporation  and  made  part  of 
it.  In  consec[uence  of  this  provision, 
the  act  was  in  efiect  held  at  the  pleasure 
of  the  legislature,  and  had  they  passed 
an  act,  repealing  it  after  a  certain  time, 
the  period  thus  limited  would  deter- 
mine the  time  for  which  it  was  incor- 
porated, and  fix  a  limit  to  the  term  of 
the  plaintiff's  engagement.  But  as  no 
such  act  was  passed,  and  no  act 
was  done  which  in  our  opinion  would 
dissolve  the  corporation,  the  time  for 
which  the  plaintiff  engaged  has  not 
been  limited  or  fixed  by  the  clause  in 
question.  The  question  then  recurs, 
upon  the  construction  and  legal  effect 
of  this  contract. 

"  The  first  and  fundamental  rule  in 
the  construction  of  a  contract  is  to  as- 
certain the  meaning  and  intent  of  the 
parties;  and  the  second  is  to  look  at 
every  clause  and  word  of  the  instru- 
ment in  which  they  have  embodied 
their  contract,  to  ascertain  that  mean- 
ing. The  engagement  of  the  plaintiff  to 


GG2 


Pkivate  Cokpokations. 


in  the  varioiis  states,  for  tlic  dissolution  of  corporations  and  tlie 
^vinding  np  of  tlieir  affairs  by  j)roceedings  in  court.  These  fre- 
quently provide  when,  for  what  causes,  imd  in  what  mode  corpo- 


perform  services,  being  for  the  time 
tor  wliich  the  corporation  was  estab- 
lished, when  applied  to  a  corporation, 
constituted  as  already  stated,  is  for  an 
Indefinite  time,  determinable  by  the 
dissolution  of  the  corporation  in  a 
mode  fixed  by  law.  The  stipulation 
of  the  corporation  is  to  pay  the  sala- 
ries to  the  plaintiff  and  the  other  indi- 
vidual, so  long  as  they  shall  continue 
to  perform  their  part  of  this  agree- 
ment. They,  without  any  further 
provision,  must  render  the  contract  de- 
terminable by  the  death  of  the  plaint- 
iff, or  by  any  failure  to  perform  his 
part  of  the  contract.  But  this  is  not 
left  to  inference.  The  next  and  last 
clause  provides  that,  in  case  of  the 
death  or  refusal  to  perform  the  agree- 
ment of  the  said  Revere,  or  other  in- 
dividual, the  corporation  is  to  be  dis- 
charged from  all  obligation  except  to 
the  survivor  or  party  continuing  to 
perform.  This  clause,  to  my  mind, 
carries  a  necessary  implication  that, 
until  the  death  of  the  plaintiff  or  his 
refusal  to  perform  his  agreement,  the 
corporation  is  not  discharged,  but  the 
obligation  to  pay  continues,  and  fur- 
ther, that  upon  the  death  or  refusal  to 
perform  of  one,  the  obligation  of  the 
corporation  is  to  continue  as  to  the 
other.  This  makes  it  essentially  a 
contract  with  each,  for  life.  For  al- 
though this  term  is  not  used,  yet  a 
contract  with  a  corporation,  which  is 
in  its  nature  perpetual,  but  determin- 
able by  some  contingent  event,  is  a 
contract  for  an  indefinite  time,  and  a 
stipulation  by  the  corporation  to  pay 
so  long  as  the  other  party  shall  per- 
form, with  a  proviso  that,  by  the  death 
of  the  party  contracting  to  perform 
services,  the  corporation  shall  be  dis- 
charged, is  in  legal  effect  a  contract 
for  life.  Such,  it  appears  to  the  court, 
was  the  contract  in  the  present  case. 

"In  opposition  to  this  view,  it  is 
contended,  in  the  able  argument  for 
the  defendants,  that  this  could  not 
have  been  the  meaning  and  intent  of 
tlie  parties,  because  it  would  be  un- 
equal ;  in  case  of  the  ill  success  of  the 
contemplated  enterprise,  injurious  and 
ruinous  to  the  company  ;  and  as  the 


obvious  intent  and  expectation  of 
the  company,  of  whom  the  plaintiff 
was  one,  was  to  carry  on  a  useful,  and 
successful,  and  profitable  business, 
the  contract  must  be  taken  to  have 
been  made  with  the  necessary  limita- 
tion, that,  if  the  business  proved  un- 
profitable, the  defendants  must  be  at 
liberty  to  bring  it  to  a  close,  that 
should  terminate  their  obligation  to 
employ  and  pay  the  plaintiff  for  ser- 
vices. They  contend,  that  the  parties 
contemplated,  not  the  legal  dissolu- 
tion of  the  corporation,  but  the  det^■r- 
mination  of  its  business  existence,  and 
this  they  had  a  right  to  determine 
whenever  they  should  find  the  enter, 
prise  unsuccessful,  after  a  full  and 
fair  trial,  and  should  in  good  faith 
for  that  cause  judge  it  expedient  to 
bring  its  business  to  a  close.  These 
views  would  certainly  deserve  great 
consideration,  and  a  more  thorough 
investigation,  if  the  terms  of  the 
contract  were  doubtful  or  ambiguous, 
and  if  it  were  open  to  construction. 
But  if  the  terms  of  the  contract  are 
plain  and  perspicuous,  it  is  not  enough 
to  say,  that  the  parties  could  not  have 
intended  what  their  language  has 
plainly  expressed.  The  bargain  may 
have  been  hasty  or  improvident,  or 
one  of  which  we  cannot  see  the  rea- 
sons or  ground.  Still,  if  such  was  the 
contract,  and  entered  into  fairly,  it  is 
not  for  a  court  of  law  to  vary  or  alter 
it,  or  change  its  legal  effect,  upon 
vague  notions  of  improvidence  or  ine- 
quality, or  on  account  of  its  being 
founded  upon  expectations  which 
have  not  been  realized.  But,  although 
in  the  result  it  may  have  proved  un- 
profitable to  the  corporation,  the  court 
cannot  perceive  that  it  was  unequal 
as  between  the  parties.  It  is  to  be 
presumed  that  the  plaintiff  had  skill 
and  experience  in  his  business,  and 
was  so  considered  by  the  company. 
They  require  him  to  stipulate  that  he 
will  devote  the  whole  of  his  time, 
skill  and  attention  to  their  business 
for  his  life,  and  will  engage  in  no 
other  business.  The  court  are  not 
informed  what  business  the  plaintiff 
and  Blake  were  in  before,  what  good- 


Dissolution. 


663 


rations  may  be  wound  np.^  In  the  absence  of  statutory  regula- 
tions, which  frequently  provide  for  the  continuance  of  the  corpo- 
rate functions,  after  dissolution,  for  the  purpose  of  saving  the 


will  or  run  of  custom,  or  profitable 
concern,  they  gave  up  and  in  effect 
brought  to  the  corporation  by  this 
agreement,  or  what  offers  or  expecta- 
tions they  might  have  had  from  rival 
companies.  Whatever  they  were 
they  were  relinquished  forever  by 
this  contract.  Tlie  corporation  se- 
cured to  themselves  the  exclusive 
benefit  of  the  services  of  these  indi- 
viduals ;  and,  although  it  may  not 
have  been  beneficial  to  the  corporation, 
it  may  have  deprived  the  plaintiff  and 
his  associate  of  profitable  engagements 
elsewhere. 

"  One  other  ground  of  defense  sug- 
gested, but  I  think  not  very  confidently 
urged  by  the  defendants'  counsel,  is, 
that  the  plaintifi  himself  was  one  of 
the  corporation,  and  as  such  was  bound 
by  its  acts  ;  and  that,  when  a  major- 
ity of  the  corporation  voted  to  dissolve 
and  wind  up  the  business  of  the  com- 
pany, he  was  bound  by  it,  though  he 
individually  dissented. 

"  But  we  think  it  clear  that  this 
argument  cannot  be  sustained.  So 
far  as  his  rights,  duties  and  obliga- 
tions as  a  corporator  were  concerned, 
no  doubt  he  is  bound  by  the  acts  of  a 
majority,  but  no  further.  Here  he 
claims,  not  as  a  corporator,  but  upon  a 
contract  in  which  he  is  one  party 
and  the  corporation  the  other.  One  of 
the  main  purposes  and  principal 
effects  of  incorporation  is  to  create  a 
separate  person  in  law,  capable  of 
acting  and  contracting  in  a  separate 
capacity  ;  and  such  conventional  per- 
son and  body  politic  has  a  legal 
existence   independent  of   that  of  all 

1  See  Gen.  Stat.  3Iass.  (1860),  388,  p§ 
35-39  ;  N.  Y.  Stat,  at  Large  (Edmonds' 
ed.),  vol.  I,  557 ;  vol.  II,  48S  ;  Curwin's 
R.  S.  Ohio,  chap.  592,  §§  1-2,  p.  1153 ; 
Swan  k  Saylor's  Sup.  p.  243  ;  Statutes 
of  111.  (1871),  p.  577,  §  25  ;  Wagner's 
Stat..  Mo.,  p.  293,  §ii  21-22;  Bright- 
lev's  Purdon's  Dig.  Penn.  (1862).  p.  197  ; 
Code  of  Iowa  (1873),  i?  1074.  Accord- 
ing to  the  provisions  of  the  Iowa  Code 
intentional  fraud,  in  failing  to  comply 


its  members,  and,  therefore,  may  as 
well  contract  with  one  of  its  own 
members,  as  with  other  persons.  It 
follows,  as  a  necessary  consequence, 
that  such  contracts  must  be  construed 
and  carried  into  effect  in  the  same 
manner  as  contracts  between  other 
parties,  and  that  the  votes  and  acts  of 
the  corporation  can  have  no  effect  to 
deprive  the  plaintiff  of  rights  which 
he  claims,  not  as  a  corporator,  but  as 
a  contractor  with  the  corporation. 

"  As  the  damages  are  not  assessed, 
it  may  be  proper  to  say  a  few  words 
upon  that  subject.  We  consider  the 
true  effect  of  this  agreement  to  be 
this,  to  employ  the  plaintiff  and  to 
pay  him  an  annual  salary  during  such 
employment ;  and  the  action  is 
brought  for  a  breach  of  that  promise. 
The  defendants  have  broken  up  their 
establishment,  and  given  the  plaintiff 
formal  notice  that  they  have  no 
further  occasion  for  his  services. 
This  discharges  the  plaintiff  from  his 
obligation  to  serve  them  and  to  engage 
in  no  other  business,  and  puts  him  in 
a  condition  to  engage  in  any  other 
employment  at  his  pleasure.  This 
being  in  violation  of  the  defendants' 
contract  with  the  plaintiff,  to  employ 
and  pay  him,  gives  him  a  claim  for 
damages.  The  measure  of  his  dam- 
ages is  an  indemnity  for  the  loss  he 
has  sustained  by  reason  of  not  being 
thus  employed  and  paid,  and  the 
damages  are  to  be  assessed  on  that 
principle."  See,  also,  Curran  v. 
State  of  Arkansas,  15  Uow.  (U.  S.) 
304. 


with  the  articles  of  incorporation,  or 
in  deceiving  the  public  or  individuals 
in  reference  to  the  means  and  liabili- 
ties of  the  corporation,  shall  cause  a 
forfeiture  of  all  the  privileges  con- 
ferred by  incorporation,  and  the  courts 
may  proceed  to  wind  up  its  business, 
by  an  information  in  the  manner  pre- 
scribed by  law.  Id.  See,  also,  §g  1071, 
1072. 


()G4c 


PltlVATK  COKI'OKATIONS. 


rii^litsof  interested  parties,  and  closing  up  of  its  affairs,  tlio  rights 
of  creditors  would,  perhaps,  in  most  cases,  he  saved  and  protected 
by  the  application  of  the  liberal  equitable  doctrine  now  generally 
recoo'iiized  in  such  cases,"  that  the  property  and  funds  of  a  cor-, 
poration  are  held  in  trust  for  the  j)ayment  of  creditors,  and  that 
they  may  be  followed  for  this  purpose  into  the  hands  of  any 
party,  save  such  as  are  hona  fide  purchasers  without  notice/ 

Sec.  448.  The  act  of  congress  in  relation  to  national  banks 
provides  in  reference  to  dissolution  as  follows  :  "Any  association 
\i.  e.,  banking  association  organized  under  the  statutes  of  the 
United  States]  may  go  into  liquidation  and  be  closed  by  the  vote 
of  its  shareholders  owning  two-thirds  of  the  stock."  ^ 

This  act  provides  in  detail  as  to  the  mode  of  proceeding  in  case 
of  a  dissolution  ;  the  duties  of  the  receiver  appointed  in  such  cases,* 
and  what  is  required  to  wind  up  a  natioilal  banking  association.* 


^  Id.  See,  also,  Pomerov  v.  Bank,  1 
Wall.  23  ;  McGoon  v.  Scales,  9  id.  23  ; 
Muscatine  Turn  Verein  v.  Funck,  18 
Iowa,  469  ;  Crease  v.  Babcock,  10  Mete. 
525  ;  Grew  v.  Breed,  id.  5G9  ;  Lea  v. 
American,  etc.,  R.  Co  ,  3  Abb.Pr.  (N.S.) 
1  ;  Stetson  v.  City  Bank,  I'd  Ohio  St.  " 
577;  Herrou  v.  Vance,  17  Ind.  595; 
Franklin  Bank  v.  Cooper,  36  Me.  179  ; 
Mariners'  Bank  v.  Sewall,  50  id.  220  ; 
Blake  v.  P.  &  C.  R.  Co.,  39  N.  H.  435. 

2  Chicago,  R.I.  &  P.R.  Co.  v.  Howard, 
7  Wall.  392  ;  The  People  v.  The  Presi- 
dent and  Trustees  of  the  College  of 
California,  38  Cal.  166  ;  Wood  v.  Dum- 
mer,  3  Mason,  308  ;  Mumnia  v.  Poto- 
mac Co.,  8  Pet.  281  ;  Currau  v.  State, 
15  How.  (U.  S.)  304  ;  Bacon  v.  Robert- 
son 18  id.  480  ;  Sum  v.  Robertson,  6 
Wall.  277  ;  Read  v.  Frankfort  Bank, 
23  Me.  318  ;  Nathan  v.  Whitlock,  9 
Paige,  152;  Tinkham  v.  Borst.  31 
Barb.  407  ;  Gillett  v.  Moody,  3  N.  Y. 
479  ;  State  V.  Bailey,  16  Ind.  46  :  Adler 
V.  Milwaukee,  etc.,  Co.,  13  Wis.  57; 
Hightower  v.  Thornton,  8  Ga.  486; 
Nevitt  V.  Bank,  etc.,  6  S.  &  M.  513  ; 
Paschall  v.  Whitsett,  11  Ala.(N.S.)471. 

3  Rev.  Stat  of  Q.  S.,  1873-4,  tit.  62. 
chap.  4,  §  5220.  The  English  Act,  25 
&  26  Vict.,  chap.  89  ;  Buckley,  p.  263, 
provides  as  follows  : 

"A  company  under  this  act  may  be 
wound  up  voluntarily  ; 

"  1.  Whenever  the  period,  if   any, 


fixed  for  the  duration  of  the  company 
by  the  articles  of  association  expires, 
or  whenever  the  event,  if  any,  occurs, 
upon  the  occurrence  of  which  it  is 
provided  by  the  articles  of  association 
that  the  company  is  dissolved,  and  the 
company  in  general  meeting  has  passed 
a  resolution  requiring  the  company  to 
be  wound  up  voluntarily. 

* '  2.  Whenever  the  company  has 
passed  a  special  resolution  requiring 
the  company  to  be  wound  up  volun- 
tarily. 

"3.  Whenever  the  company  has 
passed  an  extraordinary  resolution  to 
the  effect  that  it  has  been  proved  to 
their  satisfaction  that  the  company 
cannot,  by  reason  of  its  liabilities, 
continue  its  business,  and  that  it  is 
advisable  to  wind  up  the  same." 

*  Id.  See  ii  234  et  seq.  ;  Kennedy  v. 
Gibson,  8  Wall.  498  ;  Bank  of  Bethel 
V.  Pahquioque  Bank,  14  id.  383; 
Bank  v.  Kennedy,  16  id.  19  ;  In  re 
Piatt,  Receiver,  etc.,  1  Ben.  534. 

^  It  is  provided  for  the  winding  up 
of  such  associations  as  follows  . 

"  Sec.  5226.  Whenever  any  national 
banking  association  fails  to  redeem  in 
lawful  money  of  the  United  States 
any  of  its  circulating  notes,  upon  de- 
mand of  payment  duly  made  during 
the  usual  hours  of  business,  at  the  of- 
fice of  such  association,  or  at  its  desig- 
nated place  of  redemption,  the  holder 


Dissolution. 


665 


Sec.  449.   Dissolution  by  the  death   of   all    the  members.  —  Tt     18    a 
recognized  common-law  doctrine  tliat  private  cor])()rations  become 


may  cause  tlie  same  to  be  protested, 
in  oue  package,  by  a  notary  public, 
unless  the  president  or  cashier  of  the 
association  whose  notes  are  presented 
for  payment,  or  the  president  or  cash- 
ier of  the  association  at  the  place  at 
which  they  are  redeemable,  otTers  to 
waive  demand  and  notice  of  the  pro- 
test, and,  in  pursuance  of  such  offer, 
makes,  signs,  and  delivers  to  the  party 
making  such  demand  an  admission  in 
writing,  statiug  the  time  of  the  de- 
mand, the  amount  demanded,  and  the 
fact  of  the  non-payment  thereof.  The 
notary  public,  on  making  such  protest, 
or  upon  receiving  such  admission,  shall 
forthwith  forward  such  admission  or 
notice  of  protest  to  the  comptroller  of 
the  currency,  retaining  a  copy  thereof. 
If,  however,  satisfactory  proof  is  pro- 
duced to  the  notary  public  that  the 
payment  of  the  notes  demanded  is 
restrained  by  order  of  any  court  of 
competent  jurisdiction,  he  shall  not 
protest  the  same.  When  the  holder 
of  any  notes  causes  more  than  one 
note  or  package  to  be  protested  on 
the  same  day,  he  shall  not  receive  pay 
for  more  than  one  protest. 

"  Sec.  5237.  On  receiving  notice  that 
any  national  banking  association  has 
failed  tj  redeem  its  circulating  notes, 
as  specified  in  the  preceding  section, 
the  comptroller  of  the  currency,  with 
the  concurrence  of  the  secretary  of 
the  treasury,  may  appoint  a  special 
agent,  of  whose  appointment  imme- 
diate notice  shall  be  given  to  such  as- 
sociation, who  shall  immediately  pro- 
ceed to  ascertain  whether  it  has  re- 
fused to  pay  its  circulating  notes,  and 
if  in  default,  be  shall,  within  thirty 
days  after  he  has  received  notice  of 
such  failure,  declare  the  bonds  depos- 
ited by  such  association  forfeited  to 
the  United  States,  and  they  shall 
thereupon  be  so  forfeited. 

"  Sec.  5338.  After  default  on  the  part 
of  an  association  to  pay  any  of  its  cir- 
culating notes  has  been  ascertained 
by  the  comptroller,  and  notice  of  for- 
feiture of  the  bonds  has  been  given  by 
him  to  tbe  association,  it  shall  not  be 
lawful  for  the  association  suffering 
the  same  to  pay  out  any  of  its  notes, 
discount  any  of  its  bills,  or  otherwise 
prosecute  the  business  of  banking,  ex- 

84 


^cept  to  receive  and  safely  keep  money 
belonging  to  it,  and  deliver  special 
deposits. 

"  Sec.  5229.  Immediately  upon  de- 
claring the  bonds  of  an  association 
forfeited  for  the  non-payment  of  its 
notes,  the  comptroller  sliall  give  no- 
tice, in  such  manner  as  the  secretary 
of  the  treasury  shall,  by  general  rules, 
or  otherwise,  direct,  to  the  holders  of 
the  circulating  notes  of  such  associa- 
tion, to  present  them  for  payment  at 
the  treasury  of  the  United  States ; 
whereupon  the  comptroller  may,  in 
liis  discretion,  cancel  an  amount  of 
bonds  pledged  by  such  association 
equal  at  current  market  rates,  not  ex- 
ceeding par,  to  the  notes  paid. 

"Sec.  5330.  Whenever  the  comp- 
troller has  become  satisfied,  by  the 
protest  or  the  waiver  and  admission 
specified  in  section  5236,  or  by  the 
report  provided  for  in  section  5337, 
that  any  association  has  refused  to 
pay  its  circulating  notes,  he  may, 
instead  of  canceling  its  bonds,  cause 
so  much  of  them  as  may  be  neces- 
sary to  redeem  its  outstanding  notes 
to  be  sold  at  public  auction  in  the 
city  of  New  York,  after  giving 
thirty  days'  notice  of  such  sale  to 
the  association.  For  any  deficiency 
in  the  proceeds  of  all  the  bonds  of  an 
association,  when  thus  sold,  to  reim- 
burse to  the  United  States  the  amount 
expended  in  paying  the  circulating 
notes  of  the  association,  the  United 
States  shall  have  a  paramount  lien 
upon  all  its  assets,  and  such  deficiency 
shall  be  made  good  out  of  such  assets 
in  preference  to  any  and  all  other 
claims  whatsoever,  except  the  neces- 
sary costs  and  expenses  of  administer- 
ing the  same. 

"Sec.  52ol  The  comptroller  may,  if 
lie  deems  it  for  the  interest  of  the 
United  States,  sell  at  private  sale  any 
of  the  bonds  of  an  association  shown 
to  have  made  default  in  paying  its 
notes,  and  receive  therefor  either 
money  or  the  circulating  notes  of  the 
association.  But  no  such  bonds  shall 
be  sold  by  private  sale  for  less  tban 
par,  nor  for  less  than  the  market  value 
thereof  at  the  time  of  sale,  and  no 
sales  of  any  such  bonds,  either  public 
or  private-  shall  be  complete  until  the 


666  Pkivate  Corporations. 

dissolved,  ipso  facto,  by  the  loss  of  all  their  members  by  death. 
"A  corporation,"  observes  Mr.  Brice,  "  perishes  whether  the  whole 
of  its  nicinl)crs  have  died  out,  or  the  whole  of  those  wlio  consti- 
tute an  integral  essential  part,  provided  there  is  no  means  of  re- 
pairing' the  breach."  ^ 

The  doctrine  of  dissolution  in  case  of  a  destruction  of  an  in- 
tegral part  has  little,  if  any,  application  to  private  corporations 
for  pecuniary  gain  as  created  under  general  statutes  in  this  coun- 
try. It  has  been  justly  observed  in  reference  to  them,  that  "  the 
stockholders  compose  the  company,  and  the  managers,  or  direct- 
ors and  officers,  are  their  agents,  necessary  for  the  management 
of  the  affairs  of  the  company,  but  not  essential  to  its  existence  as 
such,  and  not  forming  an  integral  part.  The  corporation  exists 
jye?'  se  so  far  as  it  is  requisite  to  the  maintenance  of  perpetual  suc- 
cession and  the  holding  and  preserving  of  its  franchises.  The 
non-existence  of  the  managers  does  not  suppose  the  non-existence 
of  the  corporation.  The  latter  may  be  dormant ;  its  functions 
may  be  suspended  for  want  of  the  means  of  action,  but  the  capac- 
ity to  restore  its  functionaries  by  means  of  new  elections  remain. 
When,  therefore,  the  election  of  its  managers,  directors  or  other 
officers,  is  by  charter  to  be  conducted  solely  by  the  stockholders, 
the  charter  or  act  of  incorporation  not  requiring  the  managers, 
directors  or  other  officers  to  preside  at  or  do  any  act  in  rela- 
tion to  the  election,  a  failure  to  elect  such  officers  on  the  charter 
day  will  not  dissolve  the  corporation,  but  the  election  may  take 
place  on  the  next  charter  day  without  any  new  legislative  aid."  ^ 

transfer  of  the  bonds  shall  have  been  sixty-two,  fifty-one  hundred  and  sixty- 
made  with  the  formalities  prescribed  three,  and  fifty-one  hundred  and  sixty- 
by    sections    fifty -one     hundred    and     four."     Rev.  Stat.,  U.  S.,  1874. 

'  Brice's  Ultra  Vires,  655,  65G  ;  cit-  (Miss.)  478  ;    Phillips  v.  Wickham,  1 

ing  Rex  v.  Morris,  4   East,  17.     See,  Paige,    590;  Evarts    v.    Killing  worth 

also,  American  authorities;  Penobscot  Man.  Co. ,20  Conn.  447;  Commonwealth 

Boom  Co.  v.  Lamson,  16  Me.  224  ;  Bos-  v.  Culien,  13  Penu.  St.  133  ;  Lowber  v. 

toil  Glass    Man.  Co.  v.    Langdon,    24  New  York,  5  Abb.  Pr.  325  ;  Clarke  v. 

Pick.    52;    Phillips    v.    Wickham,    1  City  of  Rochester,  id.  107  ;  Russell  v. 

Paige,  596  ;  Canal  Co.  v.  Railroad  Co.,  McLellan,  14  Pick.  63  ;  Knowltou  v. 

4  G.  &  J.  1  ;  Mclntire  Poor  School  v.  Ackley,  8  Cush.  94;  Caliill  v.  Kalama- 

Zanesville  C.  Co.,  9  Ohio,  203.  zoo  Ins.  Co.,  2  Doug.  (Mich.)  140.     Mr. 

Mlose    V.   Turnpike  Co.,    3   Watts,  Dillon  observes  :"  In  tliis  respect  [the 

46  ;  Wier  v.  Bush,  4  Little,  433;  Nash-  failure  to  elect  officers]  municipal  cor- 

ville  Bank  v.  Patway,  3  Humph.  524  ;  porations    resemble    ordinary   private 

Smith  v.  Natchez  Samb.  Co.,  3  How.  corporations   which  exist  per  se,  and 


Dissolution.  fi6T 

The  death  of  all  the  nieiubers  can  hardly  be  possible  with  a 
joint-stock  corporation,  as  the  stock  would  on  the  decease  of  the 
owner  be  represented  by  and  vested  in  some  one  who  would 
become  a  member  of  the  corporation  by  virtue  of  such  stock,  and 
entitled  to  all  the  rights  and  privileges  of  such  former  member. 

Sec.  450.  Effect  of  dissolution  generally  at  common  law.  —  According 
to  the  common  law  a  corporation  of  any  kind  that  was  dissolved, 
or  ceased  as  such  to  exist  for  any  cause,  was  considered  as  civilly 
dead,  and  could  no  more  act  by  its  agents  or  otherwise  than  a 
natural  person  under  the  same  circumstances.  The  result,  too,  of 
such  civil  death  by  the  ancient  common  law  was  that  all  lands 
held  b}'  it  at  the  time  reverted  to  the  grantor  or  his  heirs,  as  it  was 
held  to  be  a  condition  implied  in  all  grants  to  corporations  that  if 
for  any  cause  the  grant  failed,  by  death  or  otherwise,  the  lands 
granted  should  revert ; '  and  debts  due  to  or  from  it  were  ex- 
tinguished, as  there  were  no  heirs  or  representatives  of  a  corpora- 
tion. Leases  were  rendered  void  because  of  the  reversion  of  the 
lands  ;  ^  lands  held  in  trust  for  charitable  purposes  were  lost ; 
suits  pending  by  or  against  it  were  abated  ;  and  the  personal 
property  became  vested  in  the  king,^  and,  in  this  country,  in  the 
people.* 

"  These  consequences  of  the  dissolution  of  a  corporation,"  ob- 
serves Mr.  Dillon,  "  attached  to  all  corporations,  eleemosynary, 
municipal  and  private  ;  and  since  this  doctrine  has,  in  this  coun- 
try, been  generall}'  rejected  as  to  private  corporations  organized 
for  pecuniary  profit,  and  rests  upon  no  foundation  in  reason  or 
justice,  it  may  perhaps  be  safely  affirmed  that  it  Avould  not,  on 
full  consideration,  be  applied  to  the  dissolution  of  a  municipal 

consist  of  the  stockholders  wlio  com-  may  suspend  the   functions,  but  will 

pose  the  company.      The   officers  are  not  dissolve    the  corporation."     Dill, 

their  agents  or    servants,  but    do    not  on  Mun.  Corp. ,§110;  People  v.  Fair 

constitute  an  integral  part  of  their  cor-  bury,  51  111.  149. 
poration,    the   failure  to  elect   whom 

1  Co.    Litt.  13   b,  103  b;   Knight  v.  Greeley  v.  Smith,  3   Story,  657  ;  Mer- 

Wells,  1  Sut.  519  ;  Rex  v.  Pasmore,  3  rill  v   Suffolk  Bank,  31  Me.  57  ;  Ingra- 

T.    R.    199;  White    v.     Campbell,   5  ham  v.  Terry,   11  Humph.  573;  Salt- 

Humph.  38  ;  Bingham  ■■".  Weiderwax,  marsh  v.  Planters'  Bank,  17  Ala.  761. 

1   N.  Y.  509;  2   Kyd  on  Corp.  516;  2  Contra,  Lindell  v.  Benton,  6  Mo.  361. 
Kent's  Com.  307;  4Blackst.  Com.  484.         3  jd. 

'^  Ang.  &  Am.  on  Corp.  ,§  779  ;  citing        ■*  3  Kent's  Com.  307. 


668 


Private  Corpokations. 


corporation  by  an  absolute  and  unconditional  repeal  of  its  charter, 
or  (if  that  may  be  done)  to  the  case  where  tlic  charter  of  such 
corporation  is  forfeited  by  judicial  sentence."  ^  If  in  the  case  of 
municipal  corporations,  a  court  of  chancery  will  treat  the  corpo- 
rate assets  as  a  trust  fund,  in  case  of  the  dissolution  of  a  corpora- 
tion by  legislative  action,  and  will  assume  the  execution  of  the 
trust,  or  see  that  it  is  properly  executed,  as  has  been  noticed,"  the 
same  rule  ought  to  prevail  in  cases  of  private  corporations  I'or 
pecuniary  gain.  And  the  tendency  of  recent  opinions  seems  to 
support  this  view ;  and  to  sustain  the  doctrine  that  the  sui-plus 
assets,  after  the  satisfaction  of  the  claims  of  creditors  and  the 
payment  of  expenses,  even  in  the  absence  of  statutory  provisions 
on  the  subject,  belong  to  the  stockholders  ;  that  lands  conveyed  to 
such  a  corporation  for  a  full  consideration  in  fee  do  not  revert  to 
the  o-rantor :  and  that  the  doctrine  of  the  old  common  law,  in 
such  cases  as  to  reversion  and  forfeiture  of  the  corporate  property, 
if  applicable  at  all,  is  not  apjDlicable  to  private  corporations  for 
pecuniary  emolument.^ 


1  Dill,  on  Mun.  Corp.,  §  113;  Bacon 
V.Robertson.  18  How.  (U.  S.)  480; 
Girard  v.  Philadelphia,  7  Wall  1  ; 
Mumma  v.  Potomac  Company,  8  Pet. 
281  ;  Curran  v.  Arkansas,  15  How.  (U. 
S.)  312  ;  2  Kent's  Com.  307,  note  ;  Coul- 
ter V.  Robertson,  24  Miss.  278  ;  County 
Commissioners  v.  Cox,  6  Ind.  403  ; 
State  V.  Trustees,  etc.,  5  id.  77  ;  Vin- 
cennes  University  v.  Indiana,  14  How. 
(U.S.)  268;  Owen' V.Smith,  31  Barb.  641; 
Commonwealth  v.  Roxbury,  9  Gray, 
510,  note. 

2  Girard  v.  Philadelphia.  7  Wall.  1  ; 
Moutpelier  v.  East  Montpelier,  29  Vt. 
12;  27  id.  74. 

^  Bacon  v.  Robertson,  18  How.  (U. 
S  )  480,  in  which  Mr.  Justice  Camp- 
BEi.L  observes  :  "The  common  law  of 
Great  Britain  was  deficient  in  supply- 
ing the  instrumentalities  for  a  speedy 
and  just  settlement  of  the  affairs  of  au 
insolvent  corporation,  whose  charter 
had  been  ibrfeited  by  judicial  sentence 
The  opinion  usually  expressed  as  to 
the  effect  of  such  a  sentence  was  un- 
satisfactory and  questioned.  There 
had  been  instances  in  (?reat  Britain  of 
the  dissolution  of  public  or  ecclesias- 
tical corporations  i)y  the  exertion  of 
public  authority,  or  as  a  consequence 
of  the  death  of  their  members,  and 
parliament,   and    the   courts   had   af 


firmed,  in  these  instances,  that  the 
endowments  they  had  received  from 
the  prince  of  pious  founders  would 
revert  in  such  a  case."  See,  also,  Stat. 
deterris  Templariorum,  17  Edw.  II.; 
Dean  and  Canons  of  Windsor,  Godb. 
211  ;  Johnson  v.  Norway,  Winch.  37; 
Owen,  73;  6  Vin.  Abr.  280.  Mr. 
Green,  in  his  note  to  Brice's  Ultra 
Vires,  p.  85,  observes  .  "Modern  leg- 
islation has  modified  the  odious  rule  of 
the  common  law,  that  upon  the  disso- 
lution of  a  corporation,  its  remaining 
real  estate  unsold  reverts  to  the  grantor 
and  his  heirs,  and  the  courts  in  simi- 
lar spirit  hold  that  where  a  corpora- 
tion is  authorized  to  acquire  a  fee- 
simple  to  lands  belonging  to  private 
persons,  for  public  use,  and  such  ac 
quisition  is  had  and  compensation  ac- 
cepted, no  reversionary  estate  remains, 
but  tbe  property  may  be  used  for  any 
purpose,  or  may  be  disposed  of  by  the 
corporation."  Heyward  v.  Mayor, 
7  N.  Y.  314  ;  Rexford  v.  Knight,'  11 
id.  308  ;  Brooklyn  Park  Com.  v.  Arm- 
strong, 3  Lans.'429  ;  S.  C,  45  N.  Y. 
234;  Dinirley  v.  City  of  Boston,  100 
Mass.  544  ;  DeVaraigne  v.  Fox,  2 
Blatchf.  95  ;  Commonwealth  v.  Fisher, 
1  P.  &  W.  463  ;  Plitt  V.  Cox,  43  Penu. 
St.  486  ;  Haldeman  v.  Peun.  li.  Co.,  50 
id.  425. 


Dissolution.  C69 

Sec.  451.  Effect  of  dissolution  upon  creditors.  —Can  the  locrisla- 
tiire,  by  a  repeal  of  tlic  charter  of  a  prix-ate  corporation,  nnder 
authority  so  to  do,  affect  the  rights  of  creditors  of  such  corpora- 
tion ? '  The  modern  doctrine  on  tliis  question  is,  tliat  the  disso- 
lution either  by  legislative  act  or  by  judicial  sentence  cannot  im- 
pair the  obligations  of  a  contract  between  the  corporation  and  its 
creditors,  any  more  than  the  death  of  a  private  and  natural  per- 
son can  affect  his  contracts  with  others.  "  This  doctrine,"  ob- 
serves Mr.  Dillon,  "  is  based  npon  two  grounds :  First.  Tlie 
obligation  survives,  and  the  creditors  may  enforce  their  claims 
against  the  property  belonging  to  the  corporation  which  has  not 
passed  into  the  hands  of  hona  fide  purchasers.  Second.  Every 
creditor  is  presumed  to  contract  with  refei-ence  to  a  possibility  of 
a  dissolution  of  the  corporate  body."  The  former  common-law 
doctrine  in  reference  to  the  disastrous  effects  of  a  dissolution,  and 
the  civil  death  of  ^  corporation,  has  been  the  subject  of  just  criti- 
cism ;  and  it  is  doubtful  if  it  would  now  be  applied  to  any  class  of 
corporations.''  The  doctrine  now,  as  we  have  frequently  observed, 
is,  that  the  property  and  assets  of  a  corporation  are  held  in 
trust.  First.  For  the  payment  of  creditors.  Secondly.  For  divis- 
ion among  the  stockholders.'  This  right  of  creditors  and  stock- 
holders is  based  not  only  upon  natural  justice  and  manifest  equity, 

1  Dill,  on  Mun.  Corp.,  §  115,  note  1  ;  Eq.    345  ;  Hopkins   v.    Whitesides,  1 

citing  Mumma  v.  Potomac    Company  Head  (Tenn.),  31  ;  Bank  v.  Lockwood, 

(holding   that  on  sci.  fa.  a   judgment  2    Harr.    (Del.)   8;  Robinson  v.  Laue^ 

could    not    be    revived,   or    costs    ad-  19  Ga.  337  ;  Muscatine  Turn  Verein  v. 

judged  against  a  corporation  legisla-  Funck,  18  Iowa,  4(59;  Owen  v.Smith,  31 

tively   annulled),  8  Pet.  (U.  S.)    281,  Barb.  641;  Welch  v.  Ste.  Genevieve,  1 

1834.     In  the  case  of  Port  Gibson  v.  Dill.  (C.  C.)  130. 

Moore,  13  Sm.  &  Marsh,  157  (1849),  it        '^  Id.     See,  also,  James  v.  Woodruflf, 

was  held,  indeed,  that  the  repeal  of  2    Den.   574;    Tinkham   v.   Borst,    31 

the  charter  of  an  indebted   municipal  Barb.  407  ;  Butterworth  v.  O'Brien,  24 

corporation   dissolved    it;    that    such  How.    Pr.   438;   Adler  v.  Milwaukee, 

dissolution  extinguished  debts  to  and  etc.,  Co.,  13  Wis.  57;  Lum  v.  Robert- 

from  the  corporation  ;  and  that  a  sub-  son,    6    Wall.    277  ;   New   Albany   v. 

sequent  act  reincorporating  the  place  Burke,  11  id.  96  ;  Burke  v.  Smith,  16 

did  not  make  it  liable  for  a  debt  exist-  id.  390  ;  Sawyer  v.    Hoag,  17  id.  610  ; 

ing  anterior  to  the  act   repealing  its  State  v.   Bailey,  15  Ind.  46  ;  Bacon  v. 

charter.     The    court    overlooked    the  Robertson,  18    How.   480;  Curran   v. 

constitutional  provision  protecting  con-  State  of  Arkansas,  15  id.  312. 
tracts,  and  the  case  as  to  the  effect  of         ^  See  ante,  chap.  19.     For  additional 

a  dissolution  upon  the  rights  of  credit-  authorities   see  Lum  v.   Robertson,  6 

ors  seems  to  conflict  with  those  above  Wall.  277  ;  New  Albany  v.  Burke,  11 

cited.     See,  further,  as  to  extinguish-  id.   96;  Burke  v.   Smith,  16  id.  390; 

ment  of   debts   by  dissolution  of   cor-  State  v.  Bailey,  16  Ind.    46  ;  Bank  of 

poration,  Malloy  v.  Mallett,  6    Jones  Salem  v.  Caldwell,  id.  469. 


670  Pkivatb  Coeporations. 

but  it  has  recently  lieen  held  that  it  is  protected  by  the  provisions 
of  the  constitution  of  the  United  States.'  And  it  may  be  ob- 
served generally,  that  in  case  of  a  lawful  contract  resting  upon 
authority  conferred  by  statute,  the  repeal  of  such  statute  in  a 
lawful  manner  could  not  affect  the  validity  of  such  contract.  If 
such  contracts  are  legal  when  made,  they  could  not  be  affected  by 
such  a  repeal.''  And  this  doctrine  has  application  to  contracts 
entered  into  by  private  corporations,  by  virtue  of  authority  vested 
in  them,  and  the  corporations  are  subsequently  dissolved  by  the 
legislature,  by  a  repeal  of  the  charter  or  other  revocation  of  the 
franchise  conferred,  where  authority  for  this  purpose  is  reserved 
in  such  legislature. 

Sec.  452.  Forfeiture  not  the  subject  of  collateral  inquiry. —  The 
general  doctrine  is,  that  grounds  of  forfeiture  or  for  dissolution  of 
a  corporation  cannot  be  shown  in  a  collateral  proceeding.  The 
question  as  to  the  right  to  exercise  corporate  functions,  or  to  con- 
tinue the  use  of  corporate  powers,  is  generally  held  to  be  one  jn 
which  the  state  only  is  interested,  and  that  she  may  waive  the 
right  of  forfeiture  ;  and  if  proceedings  are  had  to  determine  this 
particular  question,  they  must  be  instituted  by  the  legal  officer  of 
the  state ;  or,  if  l)y  another  person,  leave  of  court  is  usually  re- 
quired, as  we  have  seen  ;  and  that  this  is  granted  only  on  a  show- 
ing of  facts,  which  authorize  such  proceeding.  But  the  mode  of 
proceeding  in  such  cases  is  usually  a  matter  of  statutory  regula- 
tion. If  a  party  contracts  with  a  corporation,  in  the  absence  of 
fraud  or  bad  faith  in  the  matter,  he  is  usually  estopped  from  de- 
nying its  legal  existence.^ 

'  Curran  v.  State  of  Arkansas,lo  How.  Dill.  (C.  C.)  523;  Muscatine  v.  Railroad 
(U.  S  )  312 ;  2  Kent's  Com.  307,  note  a;  Co.,  id.  536;  Soutter  v.  Madison,  15 
Hightovver  v.  Thornton,  8  Ga.  486;  Wis.  30;  Western  Sav.  Bank  v.  Phil- 
Bacon  V.  Robertson,  18  id.  480;  Liim  adelphia,  31  Penn.  St.  175  :  Curran  v. 
V.  Robertson,  7  Wall.  277  ;  New  Al-  Arkansas,  15  How.  (TJ.  S.)  312  ;  Bacon 
bany  v.  Burke,  11  id.  96;  Burke  v.  v.  Robertson,  18  id.  480;  Coulter  v. 
Smith,  16  Ind.  390.  See,  also,  Salem  Robertson,  24  Miss.  278;  Gelpcke  v. 
V.  Caldwell,  17  id.  469,  where  it  was  Dubuque,  1  Wall.  175  ;  Welch  v.  Ste. 
held  that  a  subscriber  to  an  insurance  Genevieve,  1  Dill.  (C.  C.)  130  ;  Smith 
company  could  not,  in  a  suit  by  an  v.  Appleton,  19  Wis.  468  ;  Blake  v. 
assignee  on  his  subscription  note,  offset  Railroad  Co.,  39  N.  H.  435  ;  2  Kent's 
a  claim  against  the  company  purchased  Com.  307. 
by  him.                                    "  s  Wood  v.  Coosa,  etc.,  R.  Co.,  32  Ga. 

2  Van    Hoffman  v.  Quincy,  4    Wall.  273  ;  Bank  of  Mo.  v.  Snelling,  35  Mo. 

535 ;  Woodruff  v.   Trapnall,   10  How.  190  ;  State  v.  Fourth  New  Hampshire 

(U.  S.)  206  ;  Lansing  v.  County  Tr.,  1  Turnp.  Co.,  15  N.  H.  162  ;  S.  P.,  Peirce 


Dissolution.  671 

Sec.  453.    When  corporate  existence  maybe  inquired  into  collaterally. 

In  certain  cases,  liowever,  it  has  been  lield  tliat  the  corporate  ex- 
istence maybe  inquired  into  in  a  collateral  proceeding.  Thus,  in 
a  proceeding  in  cliancery  against  a  corporation,  to  set  aside  a  con- 
veyance of  real  estate  alleged  to  have  been  obtained  by  the  fraud 
and  misrepresentation  of  the  company  in  relation  to  its  existence 
as  a  corporation,  it  has  been  held  that  the  fact  whether  or  not  the 
company  ever  had  a  corporate  existence  so  as  to  enable  it  to  take 
and  hold  property  may  be  inquired  into ;  and  that  if  a  company 
professing  a  corporate  existence  which  it  does  not  possess  fraudu- 
lently acquires  for  a  particular  pur})0se  the  propert}^  of  another, 
and  conveys  the  same,  the  sufficiency  of  such  conveyance  or 
transfer  ma}^  be  inquired  into  collaterally.  And  that  if  a  corpo- 
ration by  its  own  acts  has  ceased  to  exist,  or  has  suffered  or  per- 
mitted acts  which  destroy  its  existence,  it  is  as  fully  and  entirely 
dissolved  as  if  declared  so  to  be  by  the  judgment  of  a  competent 
court ;  that  where  a  corporation  has  ceased  to  have  an  existence 
as  a  legal  and  necessary  consequence  of  certain  acts,  and  a  party 
claims  that  he  has  been  injured  thereby,  or  that  certain  benefits 
result  to  him  therefrom,  he  may  have  his  remedy  without  first 
instituting  direct  legal  proceedings  to  have  the  corporation  de- 
clared dissolved  by  the  court.' 

V.  Somersworth,  lOid.  369,  Mechanics'  v.  Bank  of  Alexandria,  10  G.  &  J.  346; 

Building   Assoc,  v,   Stevens,  5  Duer,  Hamilton  v.  Annapolis,  etc.,  K.  Co.,  1 

676;  Duke  v.  Caliawba  Nav.  Co.,  16  Md.    Ch.    107;    Cahill   v.    Kalamazoo 

Ala.  373;  Pearce  v.  Olney,  20  Conn.  Mut.  Ins.   Co.,  2  Doug.   121  ;  Sevvall's 

544;  Young   v.   Harrison.  6  Ga.  130;  Falls  Bridge  v.   Fisk,  23  N.   H.  .171  ; 

Baker  v.  Backus.  32  111.  79  ;  Williams  Towar  v.  Hale,  46  Barb.   361  ;  McCon- 

V.  Bank  of  111.,  6  id.  667;  Brookville,  aliy  v.  Centre  Turnp.  Co.,  1  Penn.  426; 

etc.,  Co.  V.  McCarty,  8  Ind.  392  ;  Stoops  16    S.   &  R.    140  ;  Dyer  v.  Walker,  40 

V.  Greensburgh  Plank.   R.  Co  ,  10  id.  Penn.  St.  157  ;  Crump  v.  U.  S.  Mining 

47;  Bank  of  Galliopolis  v,  Trimble,  6  Co.,  7  Gratt.  352;  Arthur  v.  Commer- 

B.    Monr.   599;  Bank  of  Mo.    v.  Mer-  cial  Bank,  17  Miss.  394;  Bohanuon  v. 

chants'  Bank,  10  Mo.  132  ;  Johnson  v.  Binns,  31  id.  355. 
Bentley,   16  Ohio,  97  ;  Planters'  Bank 

*  Carey  v.   The  Cincinnati,  etc.,   R.  cannot  thus  relieve  itself  (by  merger 

Co.,  5  Iowa,  357.     See,  also,  Phillips  in  a  new  organization),  or  perhaps  the 

V.  Wickham,  1  Paige,  595  ;  Briggs  v.  corporators  individually,  from  respon- 

Penniman,  8  Cow.   387;  Canal  Co.  v.  sibility   to  those  to  whom  it  or  they 

Railroad    Co..    4   G.    &  J.  1  ;  Slee  v.  may  be   indebted,  but  it  may  by  the 

Bloom,  19  Johns.  456 ;  2  Kyd  on  Corp.  act   become    so    situated    as  to  be  es- 

467;  King  v.  Passmore,  3  T.  R.  244;  topped  from  claiming  that  it  remains 

1    RoUe's  Abr.  514,  4  Com.  Dig.  273.  undissolved."     But    see    Anderson   v. 

In  the  case  first  above  cited  the  court  Newcastle  R.  Co.,  12  Ind.  376;  Barrett 

say  :  "It  is  true  that  it  may  not,  and  v.  Mead,  10  Allen,  337. 


672  Private  Corporations. 


CHAPTER  XXL 

MANDAMUS. 

Sec.  454.  The  writ,  and  its  functions. 

Sec.  455.  The  writ  in  this  country. 

Sec.  456.   When  issued,  discretion  of  the  court. 

Sec.  457.  Practice  and  proceedings. 

Sec.  458.  Office  of  the  writ  to  compel  the  performance  of  duty. 

Sec.  459.  Concurrence  necessary  to  authorize  the  issuing  of  the  writ. 

Sec.  460.   When  it  will  not  be  issued. 

Sec.  461.   Resemblance  and  distinction  between,  and  injunction. 

Sec.  462.  Against  private  corporations  or  its  officers. 

Sec.  463.  Corporations  may  invoke  its  aid.     , 

Sec.  464.  To  compel  inspection  or  delivery  of  corporate  books  and  papers. 

Sec.  465.  As  a  remedy  against  corporations. 

Sec.  466.  To  whom  the  writ  should  be  directed,  and  service. 

Sec.  454.  The  writ,  and  its  functions.  —  A  writ  oi mandamus  was,  at 
common  law,  a  prerogative  writ,  issuing  from  the  court  of  queen's 
bench,  in  which,  by  a  fiction  of  law,  the  sovereign  was  considered 
to  be  personally  present.  It  commanded  a  duty  to  be  performed, 
and  was  instituted  to  prevent  a  failure  of  justice,  as  where  the  law 
enjoined  a  duty  upon  a  corporation  or  a  corporate  officer,  in  the 
performance  of  which  the  party  claiming  the  writ  was  interested, 
and  by  the  non-performance  of  which  he  would  be  injured,  and 
where  the  law  furnished  no  other  specific  or  adequate  remedy  ;  in 
which  case  the  writ  might  be  obtained,  commanding  the  party, 
in  the  name  of  the  sovereign  authority,  to  perform  the  duty  re- 
quired by  law  and  particularly  pointed  out  in  the  writ.^ 

Sec.  455.  The  writ  in  this  country.  —  The  early  practice,  at  com- 
mon law,  relating  to  this  writ  and  its  return,  has  been  considera- 
bly changed  and  regulated  by  statutory  provisions ;  but  wliere  it 
is  regulated  by  statute  the  general  principles  of  the  common  law 

1  Add.  on  Torts  (Wood's  ed.),  ^  1505;  wich,  etc.,  1  Str.  55;  Reg.  v.  Powell.  1 

Reg.  V.  Chichester,  etc.,  29  L.  J.  Q.  B.  Q.  B.  360;  Rex  v.  Curghev,   2  Burr 

23;  Briggs,  ex  parte,  28  id.  272  ;  Rex  782  ;  Reg.  v.  Hereford,  3  Salk.  701. 
V.  Barker,  3  Burr,  1265;  Rex  v.  Nor- 


Mandamus.  673 

relating  to  it  are  usually  retained.  The  remedy  under  statutes 
can,  generally,  only  be  resorted  to,  as  at  common  law,  to  prevent 
a  failure  of  justice,  as  where  there  is  no  other  adequate  legal  rem- 
edy, to  enforce  the  performance  of  the  duty,  in  the  performance 
of  which  the  complaining  party  is  interested.^ 

The  writ  is  issued  in  the  name  of  the  sovereign  authority  and 
as  will  be  shown  more  particularly  hereafter,  on  an  application 
made  therefor,  under  oath,  by  petition  or  declaration,  setting  forth 
the  facts  that  entitle  the  party  to  the  writ.  All  the  original  ad- 
vantages and  benefits  of  the  writ,  as  a  remedy  at  common  law, 
are  usually  provided  for  by  statute ;  and  it  issues  as  a  command 
from  sovereign  authority.'' 

Sec.  45  6.  when  issued ;  discretion  of  the  court.— At  common  law 
the  writ  was  not  a  matter  of  absolute  right,  but  was  only  issued 
at  the  discretion  of  the  court.  Such  is  still  the  general  doctrine, 
or  at  least,  even  under  statutory  provisions,  the  issuing  of  it  rests, 
in  a  measure,  in  the  discretion  of  the  court.  In  order  to  entitle  a 
party  to  the  writ,  it  must  appear  that  there  is  a  right  to  demand 
it ;  and  especially  that  there  is  no  other  adequate  or  specific  rem- 
edy. But  if  a  party  shows  himself  entitled  to  it,  it  would  be  an 
error  for  the  court  to  refuse  it,  which  would  be  corrected  on  ap- 
peal. If,  however,  it  does  not  appear  that  the  claimant  has  a  legal 
right  to  the  remedy,  it  should  not  be  granted  ;  nor  should  it  be 
granted  by  consent,  if  there  is  reason  to  believe  that  there  has 
been  a  collusion  between  the  parties  to  secure  it.^ 

Sec.  457.  Practice  and  proceedings.  —  The  earlier  practice  to  secure 
the  benefit  of  this  remedy  was  by  motion  based  upon  affidavit, 
for  an  order  to  show  cause  why  the  writ  should  not  issue.     The 

'  Arrint^ton  v.  Van  Houton,  44  Ala.  Police,  26  N.  Y.  316  ;  School  Inspectors 

284;    Reading   v.    Commissioners,    11  v.  The  People,  20  111.  580  ;  The  People 

Penn.  St.  196;  People  v.  Thompson,  v.  Hatch,  83   id.  134;  City  of  Ottawa 

25  Barb.    75;     Fitch   v.   McDiarmid,  v.  The  People,  48  id.  240. 

26  Ark.  482  ;  State  v.  McCrillus,  4  *  State  v.  Burbank,  22  La.  Ann.  379  ; 
Kans.  2.30.  Parker  v.  Anderson,  2    P.  &  H.  (Va.) 

'^Commonwealth   v.    Dennison,    24  38;  People    v.    Supervisors,   12  Barb. 

How.  (U.  S.)66;  Ex  parte  Gonw&y , '^  217;  Trustees   v.    State,  11   Ind.   205. 

Ark.  802  ;  Arberry  v.  Beavers,  6  Tex.  See,  also,    Arrington    v.  Van    Houton, 

457;  Oilman  v.  Bassett,  33  Conn.  298  ;  44  Ala.  284  ;  Reading  v.  Commission, 

Kendall  V.  The  United  States,  12  Pet.  ers,    11    Penn.     St.    196;    People   v. 

527.     But  in  New  York  and  Illinois  it  Thompson,  25  Barb.  73  ;  Fitch  v.  Mc- 

has  been  held  to  retain  its  prerogative  Diarmid,  26  Ark.  482  ;  McBane  v.  The 

character.     People  v.  Board  of  Met.  People,  50  111.  503. 

85 


674  Private  Corpoeations. 

hearing  on  the  motion  was  usually  ex  parte,  and  without  any 
notice  to  the  party  against  whom  it  was  sought.  The  order,  if  al- 
lowed, was  served  upon  the  defendant  or  respondent,  and  required 
him  to  ajjpcal  at  a  certain  time  and  show  cause  against  the  issuing 
of  the  writ,  at  which  time  the  respondent  had  an  opportunity  to 
be  heard,  and  to  controvert  the  relator's  statements  by  counter 
affidavits. 

The  general  American  practice  is  to  file  a  petition  or  complaint, 
under  oath,  in  the  manner  of  commencing  a  common  suit,  asking 
for  the  writ,  and  in  which,  as  at  common  law,  the  plaintiff  must 
aver  facts  sufficient  to  entitle  him  to  the  writ.  These  may  be  con- 
troverted by  the  defendant. 

The  proceeding  is  in  many  states  like  an  ordinary  civil  action, 
the  process  only  issuing  after  a  hearing  of  the  case  and  a  judgment 
of  the  court  to  that  effect ;  but  it  is,  -perhaps,  usually  provided 
by  statute  that  the  court  or  judge  may  make  such  temporary 
orders  as  may  be  necessary  to  protect  the  rights  of  the  plaintiff 
until  the  case  is  finally  decided.  The  practice,  however,  varies 
under  the  statutes  of  the  different  states.  In  some,  the  practice  is 
to  grant  an  alternative  writ  on  an  ex  jparte  hearing,  if  a  prima 
facie  case  therefor  is  made  out,  in  which  case  the  alternative  writ 
stands  in  the  place  of  a  petition  or  declaration  under  the  other 
practice;  and  in  either  case  they  would  be  subject  to  a  motion 
to  quash,  or  a  demurrer,  according  to  the  practice  in  those  respects 
prevailing  in  the  different  states.' 

Sec.  4-58.  Office  of  the  writ,  to  compel  the  performance  of  duty. — 
It  may  be  affirmed  as  a  principle  universally  recognized,  that  the 
proper  office  and  function  of  the  writ  is  only  to  compel  the  per- 
formance of  duties  that  are  manifest.  Where  there  is  a  discretion 
vested  in  an  individual,  officer,  or  corporation,  as  to  the  mode  or 
manner  of  acting  in  the  performance  of  a  duty  imposed  b\'  law, 
the  writ  cannot  be  obtained  to  interfere  with  that  discretion, 
althongli  it  may  require  it  to  be  exercised." 

'  Moses  on  Mandamus,  203.  5  Ga.  522;  Weeden  v.  Town  Council.  9 

3  Appling- V.  Bailey,  44  Ala.  3B3;  Li V-  R.   I.    128  ;  Mayor   v.    Rainwater,  47 

insrstoa  V.  Dorg-enois,  7  Cranch  (U.  S.),  Miss.  547  ;  People   v.    Judge,  etc.,  24 

577  ;  Ek  parte  Crane,  5  Pet.  190  ;  Mat-  Mich.  408 ;  Ex  parte  Newman,  14  Wall. 

ter  of   Xabor,    7  Ala.   459  ;  Dixon  v.  152. 

Field,  10  Ark.  243  ;  Manor  v.  McCall, 


Mandamus.  G75 

And  in  some  cases  corporations  and  officers  liave  been  reqiiired 
by  mandamus  to  perform  their  duties  as  required  by  law,  even 
where  there  was  another  remedy.*  But  this,  as  will  hereafter 
be  noticed,  is  not  the  general  I'ulo. 

Nor  will  the  fact  that  proceedings  in  a  court  of  equity  have 
been  commenced  for  the  same  purpose,  or  that  relief  might  be 
obtained  in  that  court,  necessarily  defeat  the  right  of  a  party  to 
proceed  at  law,  or  furnish  a  reason  for  denying  the  writ.^  But  it 
will  not  be  issued  where  the  officer,  corporation,  or  tribunal, 
against  which  it  is  claimed,  has  not  the  means  to  do  the  act 
required;  or  to  compel  the  doing  of  an  act,  the  doing  or  not  doing 
of  which  rests  in  the  discretion  of  the  officer,  corporation,  or  tri- 
bunal, against  which  it  is  claimed  ;  or  where  they  have  not  the 
means  or  power  to  do  the  act  required ; '  or  where  the  doing  of 
the  act  is  physically  or  legally  impossible;  or  where  the  power  to 
perform  it  is  not  complete,  but  depends  upon  the  action  or 
approval  of  some  other  person  or  authority ;  *  or  where  it  will 
involve  the  party  in  litigation,  the  result  of  which  may  be  doubt- 
ful ;  ^  or  where  the  act  would  be  unlawful.^ 

But,  where  a  discretion  is  allowed  to  such  officer,  corporation, 
or  inferior  tribunal,  the  refusal  to  exercise  such  discretion  may 
constitute  a  proper  case  for  the  granting  of  the  writ,  which  will 
compel  action,  but  not  direct  the  mode  of  action  or  interfere  in 
any  manner  with  the  discretion  which  the  party  may  be  author- 
ized to  exercise."  It  may  issue  to  compel  a  municipal  cor- 
poration   to    levy   a   tax   to   pay   a    judgment   against   it;*   to 

'  Mansfield  v.    Fuller,  50  Mo.  338;  11  Pick.  189;  State  v.  Lynah,3  McCord 

State  V.  Bridgman,8  Kans.4o8;  Buck  v.  (S.  C),  170. 

Lockport,  6  Lans.  253.  ''  Ball  v.  Lappius,  3  Ore^.  55;  Silver- 

-  People  V. Chicago,  53111.424;  Hard-  thorne  v.  Railroad  Co.,  33  N.  J.  173  ; 

castle  V.  Maryland,  etc.,  R.  Co.,33Md.  Ackerman  v.  Desha  Co..  27  Ark.  457. 

y2.  *  State  V.  Perrine,  34  N.  J.  255. 

3  State  V.  Burbank,  33  La.  Ann.  318;  ^  joi^QgoQ     y.    Lucas,    11    Humph. 

Ex  parte  South,  etc.,  v.  Railroad  Co.,  (Tenn.)  306. 

44    Ala.  64;    Ex  parte   Farrington,  3  '  McDiarmid  v.  Fitch,  37  Ark.  106; 

Cow.  407  ;  Black  v.  Auditor,  36   Ark.  McMuUin  v.  State,  36  id.  613  ;  State  v. 

237;  State  v.  Warmoth,  33  La.  Ann.  Wannoth,  33  La.   Ann.  76;  East  Bos- 

76 ;  Swan  v.  Gray,  44  Miss.  393  ;  People  ton  Ferry  Co.  v.  Boston.  101  Mass.  488; 

V.  Easton,13  Abb.  Pr.  (X.  S.)  159  ;  Sey-  Commissioners      v.      Philadelphia,    3 

mour  V.  Ely,  37  Conn.  103;  Wells  v.  Brewst.    596;  Ex   parte   South,   etc., 

Stackhouse.    17   N.  J.  311  ;  Ex  parte  R.  Co.,  44  Ala.  654  ;  3  Add.  on  Torts 

Decker,6  Cow.  59  ;  People  v.  Jameson,  (Wood's  ed.),  731.  n.  1. 

40   111     93;  St    Louis  v.  Kean,  18  B.  «  U.    S.   v.    Keokuk,   6   Wall.  514; 

Monr.   9:    Glasscock   v.   Commission-  Walkley  v.  Muscatine,  id.  481. 
era,  etc.,  3   Tex.  51  ;   Gray    v.  Bridge, 


676  Pkivate  Corporations. 

compel  assessors  to  correct  an  erroneous  assessment ;  *  to  compel 
a  railroad  company  to  build  and  keep  in  repair  bridges  where  tlie 
railroad  crosses  a  highway;''  to  make  the  crossing  of  rivers  or 
other  water-courses,  or  perform  any  acts  in  the  construction  of 
their  road,  prescribed  by  the  charter,  and  affecting  public  or  indi- 
vidual rights  ;  ^  to  restore  an  officer  to  his  office  when  he  has  been 
removed  therefrom,  and  the  facts  do  not  justify  such  removal,  or 
are, not  clearly  established  ;  *  to  restore  a  member  of  any  society 
to  his  menibership,  from  which  he  has  been  wrongfully  expelled  ; 
to  compel  an  officer  to  keep  his  office  at  tlie  place  designated  by 
law ;  °  to  compel  an  officer  who  by  law  is  required  at  the  close 
of  his  duties  to  return  his  books  to  another  officer  to  discharge 
that  duty  ; '  to  compel  the  incumbent  of  an  office  to  deliver  up 
papers,  property  and  insignia  of  his  office  to  his  successor  when 
the  claim  of  the  successor  thereto  is  clear ;  *  to  compel  any  public 
officer  to  discharge  a  ministerial  duty  imposed  upon  him  by 
law  ;  *  to  compel  the  registrar  of  deeds  to  record  a  deed  required 
to  be  recorded  in  his  office  ;  ^^  to  compel  a  town  committee  to  pay 
the  land  damages  to  land-owners  whose  land  may  be  taken  for  a 
highway ;  ^^  to  compel  commissioners  appointed  to  assess  taxes  for 
a  specific  purpose  to  assess  such  tax  ;  '^  to  compel  a  city  council  to 
appropriate  money  to  pay  certain  expenses  authorized  by  the  legisla- 
ture ;  ^^  to  compel  the  mayor  and  aldermen,  or  other  board  clothed 
with  the  requisite  power,  to  carry  out  the  specified  purposes  and 
perform  the  specific  duties  imposed  upon  them  by  law;^*  to 
compel  trustees  to  admit  children,  entitled  so  to  do,  to  attend  the 
public    schools ;  '^    to    compel    a   board    of    canvassers   to  meet 

'People  V.  Olmsted,  45  Barb.  644.  «  Salter    v.   Belding,   24   Vt.    658; 

«  People    V.    Troy,   etc.,    R.  Co.,  37  Church  v.  Slack,?  Cush.  226  ;  Sudbury 

How.  Pr.  437.  v.  Stearns,  21  Pick.  148. 

3  State   V.  North   Eastern  R.  Co.,  9  »  Ney  v.  Richards,  15  La.  Ann.  603; 

Rich.  (S.  C.j  247.  Page    v.     Hardin,    8    B.   Monr.   648: 

*  Dew  V.  Judges,  3H.  &  M.  (Va.)  1  ;  United  States  v.  County  Co.,  1  Morris 
People  V.    Board   of  Police,   35   Barb.  (Iowa),  31. 

531  ;  State  v.  Common  Council,  9  Wis.         '"  Strong's  Case,  Kirby  (Conn.),  345. 
254.  11  Miuhiunah  v.  Haines,  29  N.  J.  L, 

*  Barrows    v.    Massachusetts    Med.     388. 

Soc,  12   Cush.   402  ;    Roehler    v.    Aid  i^  People  v.  Williams,  51  111.  57. 

Soc,    22  Mich.  86.      And   see  People  i^  Commissioners  v.  Philadelphia,  3 

V.    Medical  Society  of  Erie,  32  N.  Y.  Brewst.  (Penn.)  596. 

187.  1*  East  Boston  Ferry  Co.  v.  Boston, 

«  State  V.  Saxton.  4  Wis.  27.  101  Mass.  488. 

'  McDiarmid  v.  Fitch,  27  Ark.  106.  '^  State  v.  Duffy,  7  Nev.  342. 


Ma^^'daaius.  677 

and  make  complete  cauvass  of  all  the  returns  received  by  them  ; ' 
to  compel  a  judge  of  an  inferior  court  to  sign  a  bill  of  excei> 
tions  in  a  case  tried  before  him,^  or  to  make  up  a  record  and  give 
a  judgment  thereon,  so  that  a  writ  of  error  may  be  brought ; '  to 
compel  a  judge  to  sign  a  judgment  rendered  by  his  predecessor;* 
to  compel  a  judge  to  enter  a  judgment  on  the  report  of  a  referee  ;  * 
to  compel  a  clerk  to  issue  execution  on  a  judgment ;  °  and  to 
compel  all  officers,  corporations  and  inferior  tribunals,  to  perform 
all  ministerial  duties  and  specific  acts  imposed  upon  or  required 
of  them  by  law.' 

Sec,   459.    Concurrence  necessary  to  authorize  the  issuing  of  the  writ. — 

The  general  rule  in  reference  to  mandamus  is,  that  to  warrant 
the  nse  of  the  remedy  there  must  be  a  concurrence  of  the  follow- 
ing things,  namely,  that  there  is  no  otiier  adequate  legal  remedy 
by  which  the  specific  performance  of  the  duty,  imposed  npon  the 
officer,  corporation,  or  inferior  tribunal,  can  be  enforced ;  ^  that 
the  duty  can  be  enforced  in  a  manner  not  to  interfere  with  the 
discretion  of  the  party  against  whom  it  is  sought,  when  such  dis- 
cretion is  vested  in  such  j)arty  ; '  and  that  the  plaintiff  or  relator 
has  a  clear  legal  right  to  the  performance  of  the  duty  sought  to 
be  enforced.^" 

Sec.  460.  where  it  will  not  be  issued.  —  We  have  referred  to  the 
circmnstances  and  cases   where  it  would  be  proper  to  allow  the 

*  Florida  v.  Gibbs,  13  Fla.  55.  not  be  issued  wliere  the  claim  is  dis- 
2  Porter  v.  Harris,  4  Call.  (Va.)  485  ;     puted  and  its  validity  controverted. 

People  V.    Judges,  etc. ,  1    Caines  (N.  ''King  v.  Water- Works  Co.,  6  Ad. 

Y.),    511;  State    v.     Hull,    3  Coldw.  &  E.  355;  People  v.  Supervisors,  etc., 

(Tenn.)255;  People   v.  Pearson,  3  111.  13   Barb.  27  ;  Tarver   v.   Commission- 

189  ;  Ex  parte  Crane,  5  Pet.  190.  ers'  Court,  17  Ala.  527  ;  Commonwealth 

'^  Ex  parte  Bradstreet,  7  Pet.  634.  v.  Rosseter,  2  Binn.  360. 

*  Life   Ins.    Co.  v.    Wilson,  8  Pet.  ^  State   Nicholson  Pavement   Co.  v. 
291.  Mayor.  35  N.   J.   396;  People  v.  Eas- 

s  Russell  V.  Elliott,  2  Cal.  245.  ton,  13  Abb.     Pr.   (X.   S.)   159;    Peo- 

«  People  V.  Loucks,  28  Cal.  68.  pie  v.  Supervisors,  12  Barb.  217  ;  Rail- 

'  Nelson    v.  Justices,  etc.,  1   Coldw.  road  Co.  v.  Clinton  Co.,  1  Ohio  St.  77. 

(Tenn.)    207;     Chase     v.     Blackstone  '«  People  v.  Thompson,  25  Barb.  73. 

Canal  Co.,  10  Pick.   244  ;  Strong,  Peti-  See.  also.  People  v.  Head,  25  111.  325  ; 

tioner,   20   id.   484;  People  v.   Judge,  People  v.  Hilliard,  29  id.  418 ;  People 

etc.,  1  Mich.  359  ;  People  v.  Green,  64  v.  Corporation  of  Brooklyn,  1  Wend. 

N.  Y.  499  ;  People  v.  Supervisors,  id.  318  ;  People  v.  Supervisors,  64  N.  Y. 

600,  where  it  was  held  that  it  should  600. 


678  Private  Cokpobations. 

writ  ;  but  it  maybe  proper  to  notice  tliose  wliere  it  may  be  prop- 
erly refused.  Tlie  writ  sliould  not  be  issued  to  command  an  act 
which  is  physically  or  practically  impossible ;  ^  or  to  compel  the 
doing  of  an  act  which  is  prohibited  by  injunction  ; '"  or  where  the 
defei]dant  has  no  power  to  perform  the  act ;  ^  or  where  it  would 
be  fi'uitless  and  ineffectual ;  '^  or  where  the  act  is  not  required  to 
be  performed  as  incident  to  the  defendant's  duties  ;  ^  or  generally 
to  enforce  a  mere  contract,^  or  to  compel  the  doing  of  an  unlaw- 
ful act ;  ^  or  where  there  is  a  lawful  reason  for  not  doing  the  act, 
as  where  a  party  refuses  to  discharge  a  mortgage,  on  the  ground 
that  the  certificate  is  insufficient,  or  to  record  a  deed,  not  projjerly 
acknowledged  or  attested,  or  for  any  cause  not  entitled  to  go  upon 
the  records  ;  ^  or  to  admit  a  person  to  a  medical  society,  where  he 
would  be  immediately  liable  to  expulsion  ;  °  or  generally,  when 
the  right  claimed  depends  upon  holding  an  act  of  the  legislature 
unconstitutional  and  void  ;  ^^  or  to  try  the  title  to  an  office  ;  ^^  or 
to  compel  the  payment  of  liquidated  damages ;  ^^  or  to  prevent  an 
anticipated  error,  or  defect  of  duty." 

The  remedy  by  the  writ  of  inaiulamus  was  strictly  a  legal  rem- 
edy in  contra-distinction  from  an  equitable  one.  And  it  may  per- 
haps be  safely  affirmed  that  in  modern  practice  the  remedy  by 
nnandamnus  can  only  be  used  to  enforce  a  legal  duty  where  such 
duty  is  free  from  reasonable  doubt  and  where  the  rights  and  in- 

'  Silvertborne  v.  Warren  R.  Co.,  33  ^  State   v.    County   Judge,  1   Iowa, 

N.  J.  173  ;  State  v.  Perrine,  34  id.  254 ;  425  ;  Pickett  v.  White,  22  Tex.  559. 

State  V.  Police  Jury,  22  La.  Ann.  611  ;  ^  State   v.  Zanesville,   etc.,   Co.,  16 

Ackerman  v.  Desha  Co.,  27  Ark.  457  ;  Ohio  St.  278. 

Ball  V.  Lappins,  30reg.  55  ;  People  v.  '  Gillespie  v.  Wood,  4  Humpli.  437; 

Salomon,  54  111.  39  ;  Commissioners  v.  Johnson  v.  Lucas,  11  id.  306  ;  Ross  v. 

Baroux,  36  Penn.    St.    262  ;  People   v.  Lane,  11  Miss.  695. 

Supervisors,   15  Barb.    607;   Commis-  >*  People  v.  Minor,  32  Barb.  613. 

sioners    v.    Supervisors,   29   id.    129;  ^  £!c  ;;«?'<«  Paine,  1  Hill,  665. 

People   V.  Tremain,    id.    96;  People  '"Hall   v.  Supervisors,  20  Cal.  591; 

V.  Mayor   of  New    York,  10    Wend.  People  v.    Stephens,  2  Abb.   Pr.  (N. 

393.  S.)  348. 

2  Railroad    Co.   v.  Wyandot   Co.,   7  "People   v.  Stevens,   5   Hill,    615; 
Ohio   St.  278;    Ex  parte  Fleming,   4  People  v.  Detroit,  18  Mich.  338  ;  Bon- 
Hill,  581.     But  see  Briggs  v.  Johnson  ner  v.  State,  7  Ga.  473. 
Co.,  6  Wall.  166  ;  post,  %  505.     No.  '^ Haygood  v.  Justices,  etc.,  19 Ga. 97. 

^  People  v.  Supervisors,  15  Barb.  607.  "'State    v.    Carney,    3   Kans.    88; 

*  Commissioners  v.  Supervisors,  29  State  v.  Burbank,  22  La.   Ann.  298; 

Penn.  St.  121.  State  v.  Dubuclet,  24  id.  16. 


Mandamus.  679 

terests  of  the  party  seeking  it  are  clear,  and  where  tlie  remedy 
will  be  effectual,  and  not  of  trilling  consequence  or  importance.^ 

Sec.  461.  Resemblance  aud  distinction  between,  and  injunction. — 
This  extraordinary  process  in  some  respects  resembles  the  writ  of 
injunction.  Each  are  oidy  granted  in  extraordinary  emergencies, 
aud  in  each  tlie  right  depends  upon  the  discretion  of  the  court. 
But  while  the  former  is  the  right  arm  of  courts  of  law  to  com- 
mand a  duty  to  be  performed,  the  latter  niay  be  considered  the 
right  ann  of  courts  of  equity  to  prohibit  unlawful  and  inequi- 
table acts  and  things  from  being  done.  The  former  is  a  positive 
remedy  to  redress  an  existing  grievance,  while  the  latter  is  a  nega- 
tive one,  and  usually,  at  least,  is  only  invoked  to  restrain  a  future 
or  contemplated  injury.^ 

OEC.  462.  Mandamus  against  private  corporations  or  its  officers.  — 
We  have  considered  the  rules  and  practices  relating  to  inandamus^ 
generally,  but  it  may  be  proper  to  consider,  especially,  some  cases 
where  the  writ  may  be  used  against  a  private  corporation  for  pecun- 
iary gain,  and  its  officers.  In  such  cases  it  is  an  efficient  remedy 
to  enforce  the  performance  of  duty.  Thus,  where  the  charter  im- 
poses upon  the  corporation  or  some  officer  the  duty  of  keeping  a 
register  and  inserting  therein  the  names  of  the  sliareholders,  this 
duty  may  be  compelled  by  mandamus.^  It  would  also  be  an  ap- 
propriate function  of  the  writ  to  require  the  directors  of  a  corpo- 
ration to  admit  and  swear  in,  as  director,  one  who  has  been  duly 
elected  as  such ;  *  to  require  the  admission  of  members  to  all  the 
privileges  of  membership;^  to  compel  the  master  of  a  hospital, 
incorporated  for  charitable  purposes,  to  put  the  common  seal  to  an 

1  Hall   V.    Crossman,    27    Vt.    297;  ^  Board  of  Liquidation  v.  McComb,  2 

People  V.  Tremain,  ante.     A  manda-  Otto  (U.  S.),  581. 

mus  will  issue  to  an  inferior  court  to  ^  Norris  v.  Irish  Land  Co.,  8  El.   & 

compel  the  specific  performance  of  an  Bl.  52o ;  Swan  v.  North  British,  etc., 

official  duty  to  wliicli  a  party  is  clearly  Co.,  31  L.  J.  Ex.  425. 

entitled,  aud  which  is  refused  to  him,  *  2  Str.  696;  2  Add.  on  Torts  (Wood's 

when  no  other  effectual  remedy  exists,  ed.),  §  1496,  n. 

but  the  particular  mode  of  its  exercise  ^  Dacosta  v.  The  Russia  Co.,  2  Str. 

must  be  left  free  from  coercion  or  re-  783  ;   Rex  v.    March,    2    Burr.    1000  ; 

straint.  Seymour  v.  Ely,  37  Conn.  103  ;  Reg.  v.  Saddlers'  Co.,  Bail  Court  Cas. 

McMillen    v.    Smith,  26     Ark.     613;  183. 
People  v.  Judge,  etc.,  1  Mich.  359. 


680  Private  Corpokations. 

instriiinent  of  presentation  ;  '  to  place  a  minister  in  possession  of 
a  pul{)it  of  which  he  has  been  unjustly  deprived;^  to  compel  a 
railroad  or  canal  company,  to  build  or  repair  when  such  duty  is 
imposed  upon  them  by  law;  ^  and  to  so  grade  a  railroad  track  so  as  to 
make  the  streets,  alleys  and  crossings  convenient  of  access  and  prac- 
tically useful ;  *  to  complete  its  railroad  when  by  law  it  is  required 
60  to  do ;  ^  to  pursue  the  course  prescribed  by  its  charter  in 
crossing  streams  and  water-courses,  so  as  not  to  interfere  with 
navigation  ;  °  and  to  compel  a  cashier  of  a  bank  to  allow  a  director 
to  examine  the  books.'  And  it  may  be  afhrmed  as  a  general 
doctrine  of  the  law  that  a  mandamus  will  issue  in  all  cases  to  com- 
pel a  corpoi'ation,  or  any  particular  officer,  to  perform  any  plain 
duty  required  by  law,  in  favor  of  a  member  or  other  interested 
party,  whether  such  duty  is  imposed  either  by  statute,  charter, 
custom  or  contract/  The  general  doctrines  in  relation  to  the 
functions  of  this  process  and  the  practice  of  such  cases  are  eluci- 
dated and  illustrated  by  the  supreme  court  of  Massachusetts  in 
the  case  of  Strong,  Petitioner,^  although  the  proceeding  in  this 
case  related  to  a  municipal  corporation.  The  general  principles, 
relating  to  the  remedy,  are  applicable  to  either  class  of  corpora- 
tions. The  petitioner  in  this  case  was  duly  elected  count}^  com- 
missioner, but  the  board  of  examiners  refused  to  give  him  a  cer- 
tificate and  ordered  another  election  at  which  another  person  was 
chosen.  It  was  held,  that  inandatnus  would  lie  to  the  board  of 
examiners  to  compel  them  to  give  a  certificate,  notwithstanding 
he  might  be  compelled  to  proceed,  subsequently,  by  ^?^c> '?/J«rra;?,2!f>, 
to  remove  the  incumbent  of  the  office,  chosen  at  the  second  elec- 


'  Reg.  V,  Kendall,  1  Q.  B.  366.  People,  56  111.  365  ;  Indianapolis,  etc., 

2  Runkle  v.  Wiueuieler,  4  H.  &  J.  H.  Co.  v.  State,  37  lud.  489  ;  State  v. 
897  ;  People  v.  Steele,  2  Barb.  377.  Southern  Minn.   K.  Co.,  18  Minn.  40; 

3  People  V.  Troy,  etc.,  R.  Co.,  37  Burton,  In  re,  31  L.  J.  Q.  B.  6'3  ;  Rex  v. 
How.  Pr.  427  ;  Habersham  v.  Canal  Merchant  Tailors' Co.,  2  B.  &  Ad.  115; 
Co.,  26  Ga.  665.  Rex  v.  Hotsman  of  Newcastle,  2  Str. 

4  Chicago,  etc.,  R.  Co.  v.  People,  56  1223  ,  Reg.  v.  London,  etc.,  R.  Co.,  13 
111.  365.  Q.  B.  998;  Reg.  v.  Wing,   17  id.  645; 

5  State  V.  Southern  Minn.  R.  Co.,  18  Reg.  v.  Gen.  Cem.  Co.,  6  El.  &  Bl. 
Minn.  40.  415  ;  Norris  v.  Irish  L.  Co.,  8  id.  512 ; 

8  State  V.  Northern  R.  Co.,  9  Rich.  Reg.  v.  Midland,  etc.,  R.  Co.,  15  Ir.  Cr. 

(S.  C.)247.  L.  R.  525. 

'People  V.  Throop,  12  Wend.  183  ;  »  Strong,   Petitioner,    20   Pick.   494. 

People  V.  Mott,  1  How.  Pr.  247.  See,  also,  Curtis  v.  McCullough,  3  Nev. 

*  Insurance  Company  v.  Mayor,  23  302. 
Md.    296 ;    Chicago,    etc,    R.    Co.   v. 


Mandamus. 


G81 


tion.     The  opinion  of  tlie  court  may  be  found  in  the  annexed 
note.' 


'  In  this  case  the  court  say  : 

"  It  has  been  contended  for  the  re- 
spondents, that  the  petitioner  has  mis- 
taken his  remedy,  and  tliat  ma/id'iniiis 
will  not  lie.  It  was  said  that  his  ap- 
propriate remedy,  if  he  has  any,  is  by 
quo  icarranto  and  not  by  manddmnn, 
or,  at  any  rate,  that  a  quo  warranto 
should  precede  a  mandamus . 

"  In  every  well-constituted  govern- 
ment the  highest  judicial  authority 
must  necessarily  have  a  supervisory 
power  over  all  inferior  or  subordinate 
tribunals,  magistrates,  and  all  others 
exercising  public  authority.  If  they 
commit  errors,  it  will  correct  them. 
If  they  refuse  to  perform  their  duty, 
it  will  compel  them.  In  the  former 
case  by  writ  of  error,  in  the  latter,  by 
mandamus.  And  generally  in  all  cases 
of  omissions  or  mistakes,  where  there 
is  no  other  adequate  specific  remedy, 
resort  may  be  had  to  this  high  judicial 
writ.  It  not  only  lies  to  ministerial, 
but  to  judicial  officers.  In  the  former 
case  it  contains  a  mandate  to  do  a 
specific  act,  but  in  the  latter  only  to 
adjudicate,  to  exercise  a  discretion, 
upon  a  particular  subject.  Springfield 
V.  County  Commissioners,  etc.,  10 
Pick.  59. 

"  Mandamus  is  the  proper  process 
for  restoring  a  person  to  an  office  from 
which  he  has  been  unjustly  removed. 
White's  case,  2  Ld.  Rayni.  959, 
1004  ;  Regina  v.  Baines,  1265 ;  Res 
V.  Chancellor,  etc.,  of  Cambridge,  id. 
1334;  Rex  v.  London,  2  T.  R.  177; 
Rex  V.  Field,  4  id.  125.  So,  also,  it 
lies  to  admit  any  one  to  an  office,  a  ser- 
vice or  a  franchise  from  which  he  is 
unlawfully  excluded.  6  Dane's  Abr. 
323 ;  Rex  v.  Surgeons'  Company,  2 
Burr.  892;  Rex  v.  Barker,  3  id. 
12G5 ;  S.  C,  1  W.  Bl.  300 ;  Rex  v.  Bed- 
ford Level  Corp.,  6  East,  356;  Rex 
V.  York,  4  T.  R.  699,  and  5  id.  66.  But 
it  is  strongly  argued  by  the  respond- 
ents' counsel,  that  inasmuch  as  the 
office  claimed  by  the  petitioner  is  now 
filled  by  another,  who  can  be  removed 
only  by  a  quo  icarranto,  a  mandamus 
will  not  lie.  And,  certainly,  many  of 
the  authorities  cited  by  them  support 
the  position,  that  a  mandamus  will 
not  lie  to  place  one  in  an  office  actually 

86  - 


filled  by  another,  until  the  incumbent 
has  been  removed  by  a  quo  warranto. 
The  case  from  3  Jolins.  Cas.  79,  The 
People  V.  New  York,  is  directly  in 
point.  The  court  there  say,  that 
'  where  the  office  is  already  filled  by  a 
person  who  has  been  admitted  and 
sworn  and  is  in  by  color  of  right,  a 
mandamus  is  never  issued  to  admit  an- 
other person.' — '  The  proper  remedy,  in 
the  first  instance,  is  by  an  information  in 
the  nature  of  a  quo  icarranto  by  which 
the  rights  of  the  parties  may  be  tried.' 
"  But  notwithstanding  the  respecta- 
bility and  weight  of  this  and  the 
other  authorities  cited,  there  certainly 
are  very  many  the  other  way  ;  of 
which  the  case  of  Dew  v.  The  Judges 
of  the  Sweet  Springs  District  Court,  3 
Hen.  &  Munf.  1,  is  one.  Dew  applied 
for  a  mandamus  to  the  judges,  to  ad- 
mit him  to  the  office  of  clerk.  It  was 
objected  among  other  things,  that  the 
office  was  already  filled  and  the  only 
remedy  was  by  a  quo  warranto  against 
the  incumbent.  But  all  the  judges 
of  the  supreme  court  of  appeals  of 
Virginia  '  agreed  clearly  that  man- 
damus was  the  best  remedy.'  See, 
also,  6  Dane,  335,  and  the  cases  there 
cited.  Mr.  Dane,  with  whom  we  con- 
cur, says  ;  '  On  the  whole  the  authori- 
ties, English  and  American,  are  much 
in  favor  of  the  mandamus,  especially 
the  more  modern  cases.'  But  the 
cases  relied  upon  by  the  respondents, 
if  in  nowise  shaken  or  overruled, 
are  clearly  distinguishable  from  the 
one  before  us,  and  may  stand  as 
sound  law,  and  yet  form  no  obstacle 
to  the  petitioner's  application.  The 
cases  referred  to  were  applications  to 
be  admitted  to  an  office.  The  peti- 
ticmer  only  seeks  for  a  certificate  of  his 
election.  This,  if  he  obtains  it,  will 
not  necessarily  oust  the  incumbent  or 
give  the  petitioner  possession  of  the 
office.  For  these  purposes  he  may  still 
have  to  resort  to  a  quo  icarranto,  and 
possibly  before  he  can  get  qualified,  to 
another  mandamus.  Two  processes 
may  be  necessary  to  enable  the  peti- 
tioner to  get  possession  of  the  office, 
the  one  to  establish  the  legality  of  his 
own  election,  the  other  to  set  aside 
that  of  the  incumbent.     They  are  in- 


682 


Pjbitatk  Coepoeations. 


A  judgment  creditor  of  a  corporation  for  pecuniary  gain  may 
also  compel  the  corporation,  by  inandainus^  to  give  him  an  inspec- 


dependent  of  eacli  other.  Both  might 
have  been  applied  for  at  the  same  time 
and  proceeded  'pari  passu.  Had  the 
petitioner  first  caused  the  incumbent 
to  be  removed  by  a  quo  'loarrunto,  still, 
without  the  evidence  of  his  own  elec- 
tion, he  could  not  enter  into  the  office. 
So,  if  a  mandamus  be  now  issued  and 
complied  with,  he  may  still  be  obliged 
to  resort  to  other  legal  proceedings  be- 
fore he  can  get  regularly  inducted. 
The  King  v.  The  Mayor  etc.,  of  York, 
4  T.  11.  099,  and  5  id.  66,  is  analogous 
to  the  case  at  bar.  An  election  of  a 
recorder  of  the  city  of  York  was 
holden,  and  a  certificate  was  given  to 
Sinclair  that  he  was  duly  elected.  The 
certificate  was  to  be  presented  to  the 
king  for  the  purpose  of  obtaining  his 
approbation  of  the  election.  Whithers, 
the  other  candidate,  applied  for  a 
mandamus  to  the  corporation  to  give 
him  a  certificate,  he  having,  as  he 
alleged,  a  majority  of  the  legal  votes, 
and  his  opponent  having  gained  the 
election  only  by  the  votes  of  persons 
not  qualified  to  vote.  An  alternative 
mandamus  issued,  and  afterward,  the 
return  to  that  being  insufficient,  a  per- 
emptory one  was  ordered.  Many  other 
cases  to  the  same  effect  might  be  cited, 
but  without  a  further  reference  to 
authorities  we  are  clearly  of  opinion 
that  a  mandamus  is  the  proper  remedy 
in  this  case.  We  are  aware  that  this 
is  not  a  writ  of  right,  but  grantable  at 
the  discretion  of  the  court ;  Rex  v. 
Commissioners  of  Excise,  2  T.  R.  385  ; 
that  inasmuch  as  it  is  final  and  cannot 
be  revised,  on  error  or  otherwise,  the 
court  will  proceed  with  great  caution 
in  the  exercise  of  so  high  a  j  urisdiction ; 
Selwyn's  IS.  P.  (6th  ed.)  1063 ;  1  Chit. 
Gen.  Prac.  79 1;  and  that  they  will  not 
grant  it  where  there  is  any  other  ade- 
quate specific  remedy.  1  Chit.  Gen. 
Prac.  790;  Rex  v.  Bp.  of  Chester,  1  T.  R. 
896 ;  Rex  v.  Abp.  of  Canterbury,  8  East, 
219.  But  we  have  no  doubt  that  the 
present  is  the  proper  case  for  the  exer- 
cise of  our  discretion ;  and  that  td  refuse 
to  grant  the  writ  would  be  doing 
palpable  injustice  to  the  petitioner 
and  defeating  the  will  of  a  majority  of 
the  voters  of  the  county  clearly  mani- 
fested by  their  votes,  duly  and  legally 


evinced  before  the  proper  tribunal. 
No  other  remedy  can  reach  the  error. 
Although  a  quo  warranto  might  re- 
move the  illegal  occupant,  it  could  not 
put  the  legal  officer  in  his  place.  No 
civil  action  could  be  maintained  by  the 
petitioner,  because  tliere  is  no  reason 
to  doubt  that  the  examiners  acted  bona 
fide  and  with  a  sincere  desire  to  per- 
form their  duty  correctly  and  legally. 
And  if  it  could,  it  would  be  a  very 
imperfect  and  partial  remedy.  It 
cannot  be  maintained  that  the  decision 
of  the  examiners  was  an  act  within 
their  legal  discretion.  Whether  their 
determination  as  to  the  reception  or 
rejection  of  returns  would  be  deemed 
ajudicial  decision  may  well  be  doubted. 
But  nothing  can  be  clearer  than  that 
the  counting  of  the  votes,  and  ascer- 
taining the  majority,  and  giving  cer- 
tificates of  the  result,  are  mere  minis- 
terial acts.  They  have  no  discretion 
in  determining  which  of  the  candidates 
shall  be  elected.  It  must  be  the 
result  of  pure,  inflexible  mathematical 
calculation. 

"  We  are,  therefore,  all  of  opinion, 
that  the  practitioner,  in  first  seeking 
to  have  tlie  validity  of  his  own  election 
inquired  into,  pursued  a  wise  and  legal 
course,  that  tlie  proper  remedy  is  by 
mandamus,  and  that  justice  clearly  re- 
quires that  such  a  writ  be  issued.  But 
the  usual,  if  not  invariable  practice  is, 
in  the  first  instance,  to  grant  it  in  the 
alternative  form,  giving  the  examiners 
a  further  opportunity  either  to  give 
the  certificate  or  to  return  the  reasons 
for  refusing  it.  As  the  case  has  been 
fully  heard,  they  will  doubtless  adopt 
the  first  branch  of  the  alternative,  un- 
less facts  or  reasons  occur  to  them 
which  have  not  been  presented  to  the 
court."  In  Woodstock  v.  Gallup,  28 
Vt.  587,  the  proper  office  and  practice 
upon  writs  of  certiorari  and  man- 
damus, in  the  nature  of  a  procedendo, 
was  carefully  considered,  and  the 
court  (Redfield,  C.  J.)  say  :  "The 
statute,  chap.  28,  >5  5,  gives  this  court 
power  to  issue  writs  of  '  error,  certio- 
rari, mandamus,  prohibition,  and  quo 
warranto,  and  all  other  writs  and  pro- 
cesses to  courts  of  inferior  jurisdic- 
tion, to  corporations  and  individuals. 


Mandamus. 


G83 


tion  of  tlio  register  of  sliarcliolders ;  '  and  the  riglit  to  a  transfer  of 
shares  on  the  entry  of  the  probate  of  the  will  of  a  deceased  share- 


that  shall  be  necessary  to  the  further- 
ance of  justice,'  etc. 

"  The  authority  thus  conferred  hag 
been  rei^arded  as  co-exteusive  with  the 
authority,  in  this  respect,  exercised  by 
the  court  of  king's  bench  in  England, 
so  far  as  applicable  to  our  condition  and 
wants.  And  it  has  generally  been  the 
purpose  of  this  court  to  adopt  substan- 
tially, the  forms  used  in  the  king's 
bench.  But  the  organization  and  course 
of  proceeding  in  the  superior  courts,  in 
reference  to  actions  pending  in  the  in- 
ferior courts,  is  essentially  different  in 
England  from  what  it  is  in  this  state. 
As  this  court  is  now  constituted,  we 
have  no  general  original  jurisdiction, 
either  civil  or  criminal,  and  no  jury 
trials.  And  it  has  never  been  the 
practice  to  bring  cases  from  the  infe- 
rior courts  into  this  court  for  trial, 
which  is  the  principal  use  of  the  writ 
of  certiorari,  in  England,  where  it  is 
more  generally  confined  to  criminal 
proceedings  ;  4Blackst.  Com.  320-321  ; 
5  Petersdorffs  Abr.  lU  [149];  1  Bac. 
Abr..  tit.  Certiorari;  F.  N.  B.  245. 
But  the  cases  reported  under  the  title 
Certiorari  in  5  Pet.  Abr.  149  et  seq., 
shows  that  the  certiorari  is  the  sub- 
stitute for  a  writ  of  error,  in  cases 
where  the  proceedings  are  not  accord- 
ing to  the  course  of  the  common  law, 
and  where,  by  consequence,  no  writ  of 
error  lies  ;  and  it  extends  to  such 
proceedings  as  laying  highways,  and 
other  judicial  proceedings  and  mat- 
ters, in  the  sessions  and  other  inferior 
tribunals.  But  in  our  practice,  we 
never,  upon  writs  of  error,  remand  a 
case  which  is  brought  into  this  court 
and  judgment  reversed,  where  further 
proceedings  are  required,  unless  an 
issue  of  fact,  proper  to  be  tried  by  the 
jury,  arises,  but  the  case  in  all  other 
respects  is  finished  in  this  court.  In 
analogy  to  this,  we  have  never,  that  I 
am  aware  of,  brought  up  a  sessions 
matter  into  this  court,  until  it  was 
finished  in  the  inferior  court,  by  a  de- 
cision upon  its  merits.  Rand  v.  Towns- 
hend,  supra ;  Paine  v.  Leicester,  22 
Vt.  44.  It  seems  to  us  that  the  more 
appropriate  remedy  in  cases  like  the 
present,  where  the  inferior  court  dis- 


poses of  the  matters  upon  some  inci- 
dental question,  and  declines  to  hear 
the  case  upon  its  merits,  is  a  writ  of 
mandamus,  in  the  nature  of  a  procc- 
deudo,  as  was  held  by  the  supreme 
court  of  the  United  States,  in  Living- 
ston v.  Dorgenois,  7  Crauch,  577;  2 
Curtis,  G77 ;  and  as  was  virtually  done 
in  Er  parte  Crane,  5  Pet.  190,  where  a 
mamhnaas  was  issued  to  the  judge  of 
the  circuit  court,  in  thedistrict  of  New 
York,  requiring  him  to  sign  a  bill  of 
exceptions.  The  writof  ??/rt;((ZamMS  is 
the  supplementary  remedy,  so  to 
speak,  where  the  party  has  a  clear  right, 
and  no  otlier  appropriate  redress  to 
prevent  a  failure  of  justice.  3  Blackst. 
Com.  1 10  ;  12  Pet.  Abr.  438  (309).  It  is 
the  absence  of  a  specific  legal  remedy, 
which  gives  the  court  jurisdiction  ;  2 
Sel.  N.  P.,  title  Mandamus.  But  the 
party  must  have  a  specific  legal  right. 
Rex  V.  Barker,  3  Burrow,  12G5  ;  El- 
LENBonouon,  C.  J.,  8  East,  219.  The 
remedy  extends  to  the  control  of  all  in- 
ferior tribunals,  corporations,  public 
officers,  and  even  private  persons,  in 
some  cases  ;  but  more  generally  the 
English  court  of  king's  bench  de- 
clines to  interfere,  by  mandamus,  to 
require  a  specific  performance  of  a 
contract  where  no  public  right  is  con- 
cerned. Lord  Mansfield,  in  King  v. 
Barker,  3  Barrow,  1265-1270  ;  Angell 
&  Ames  on  Corp.  761  ;  The  King  v. 
The  Mayor  of  Colchester,  3  Term,  260 ; 
The  King  v.  Corporation  of  Bedford 
Level,  0  East,  oTtij.  There  is  almost 
no  end  to  the  cases  upon  this  subject. 
They  will  be  found  digested,  under  the 
title  of  Mandamus  in  PetersdorfiTs 
Abr.  and  Bacon's  Abr. 

"  The  case  of  Walker  v.  The  London 
&  Blackwall  Railway,  3  Q.  B.  744,  is  a 
case  almost  precisely  in  point.  The 
sheriff  was  required  to  hold  inquisi- 
tion upon  petitions  for  land  damages 
against  railways.  Upon  the  trial  of 
the  plaintiff's  case,  the  sheriff  directed 
the  jury  to  find  a  verdict  for  the  de- 
fendants, on  the  ground  that  the  plain- 
tiff" was  not  entitled  to  compel  the 
company  to  purchase  his  property. 
The  queen's  bench,  on  application  for 
a  peremporty  mandamus,  decided  that 


'  Reg.  V.  Derbyshire,  etc.,  R.  Co.,  3  Ell.  &  Bl.  784. 


684  Private  Corporations. 

lioldei',  on  tlie  i)roper  books  of  the  company,  may  be  enforced  by 
mandamus}  So,  in  England,  it  has  been  held  that  where  a  corporate 
body  is  clothed  M'ith  authority  to  make  contracts,  and  to  make  calls, 
from  time  to  time,  on  the  shareholders,  and  contracts  a)-e  made 
with  the  corporation  on  the  expectation  that  it  will  exercise  these 
powers,  and  it  is  clear  that  the  corporation  is  attempting  to  evade 
the  payment  of  its  debts  and  satisfaction  of  a  judgment  rendered 
against  it,  claiming  that  it  has  no  corporate  assets  wherewith  to 
satisfy  the  same,  the  court  will,  by  rnandainus,  compel  it  to 
exercise  its  powers  for  the  raising  of  funds  to  answer  the  de- 
mands of  the  creditor.^ 

Sec.  463.  Corporations  may  invoke  its  aid.  — The  Writ  may  also 
be  issued  in  favor  of  corporations,  in  all  those  cases  where  a  -pvi- 
vate  person  might,  under  the  same  circumstances,  invoke  the  aid 
of  the  same  to  secure  a  private  and  individual  right.  Thus,  a 
board  of  supervisors  may  be  compelled  by  mandamus  to  subscribe 
for  stock  in  a  railroad  company,  or  issue  county  bonds  to  such 
company  when,  by  the  provisions  of  the  statute,  it  is  their  duty 

tlie    writ   must   issue,    requiring    the  a  clear   lesral   right   in  the   relator,  a 

sheriff  to  proceed  aud  assess  the  dam-  corresponding  duty  in  the  defendants, 

ages,   disregarding   his    former  judg-  and  a  want  of  any  other  adequate  and 

meut  aud  the  verdict  of  the  jury.  The  specific  remedy,  presents  a  fit  case  for 

form,  of  the  writ  there  issued  was  a  a  wa^fZawiMS  ;  that  it  is  the  proper  and 

mandamus,  in  the  nature  of  a  proce-  appropriate  remedy  to  compel  a  muni- 

dendo,  as   in   the    present    case.     But  cipal  corporation  to  make  provision  for 

very  likely  the  same  thing  might  only  the    payment    of    interest,  due    upon 

be  done   by  mandamus,  in  regard  to  bonds  issued  by  it   in  payment   of  a 

those  tribunals  to  which  the  superior  subscription  to  the  stock  of  a  railway 

court  had  power  to  issue  the  writ  of  company,  but  the  assessment  and  col- 

certiorari.     For   if    that    were    taken  lection  of  the  necessary  taxes  —  that 

away,  by  st>atute,  it  would  be  regarded  the  writ  need  not  set  forth  when  the 

as  an  evasion  to  accomplish  the  same  principal  will  become  due,  nor  when 

thing,  more    directly,  \>y  mandamus,  or  where  the    interest   is   to  be  paid. 

Rex  V.  Justices  of  Yorkshire,  1  Adol.  The     averment     of    the     petitioner's 

&  El.  5G3.     See  In  re  Edmundson,  24  ownership  is  sufficient  without  setting 

Eng.  L.  &  Eq.  169.  forth  the  particulars  of  his  title,  and 

"In  Coram.,  ea;  rel.  Hamilton,  v.  Se-  that   the  defendants   have  refused  to 

lect   and  Common  Councils   of   Pitts-  make  provision  for  the  payment  of  the 

burg,  34  Peun.  St.  496,  it  is  held  that  interest  without  averring  a  demand." 

1  Reg.  V.  London,  etc. ,  R.  Co.,  1-3  Q.  »  Rex  v.  St.  Katharine  Dock  Co.,  4  B. 

B.  998 ;  Reg.  v.  Wing.  17  id.  645  ;  Reg.  &  Ad.  360.     But  a  mandainus  will  not 

V.   Gon.  Cem.   Co.,  6  Ell.  &  Bl.   415;  issue    merely  because    the   execution 

Rex  V.  Worcester  Can  Co.,  1  M.  &  Ry.  may  produce  no  fruits.     Reg.  v.  Vic- 

539.  toria  Park  Co.,  1  Q.  B.  293. 


Mandamus.  685 

so  to  do  ;  •  and  it  may  be  used  to  compel  a  state  treasurer  to  return 
municipal  bonds,  where  tliej  liave  been  illegally  voted  aud  issued 
in  aid  of  a  railway ; '  to  compel  the  commissioner  of  a  land  office 
to  issue  certificates  for  lauds  to*  which  a  railroad  corporation  is 
entitled,'  and  it  has  been  held  proper  to  compel  county  ufficers  to 
levy  tax  on  a  county  to  satisfy  a  judgment,  in  a  circuit  court  of  the 
United  States,  rendered  on  the  bonds  issued,  as  provided  by  law, 
to  a  railroad  corporation,  even  where,  previous  to  the  application 
to  the  circuit  court  for  the  writ,  but  subsequent  to  the  rendition 
of  the  judgment,  the  officers  have  been  enjoined  by  a  state  court 
from  making  such  levy.* 

The  decision  of  the  supreme  court  of  the  United  States,  in  this 
case,  rested  upon  the  ground  that  the  jurisdiction  of  the  circuit 
court  in  the  matter  was  prior  to  that  of  the  state  court ;  that  the 
jurisdiction  of  the  circuit  court  continued  after  the  judgment  ren- 
dered, for  the  purposes  of  the  mandamus,  and  that  it  could  not  be 
ousted  of  it,  as  the  powers  of  the  court  would  be  useless  if  its 
judgments  could  not  be  enforced  by  the  requisite  and  necessary 
process.*  Mandamus  is  also  a  proper  remedy  for  a  private  cor- 
poration, against  persons  wrongfully  claiming  to  hold  its  offices/ 

Sec.  464.  To  compel  inspection  or  delivery  of  corporate  books  and 
papers. —  The  remedy  by  mandamus  is  frequently  resorted  to,  to 
compel  the  production,  inspection,  or  surrender,  of  books  and 
records  of  private  corporations,  to  persons  entitled  thereto.  Thus, 
where  the  term  of  office  of  an  officer  of  a  private  corporation  has 
expired  by  lapse  of  time,  removal,  or  otherwise,  aud  his  successor, 
duly  appointed  and  qualified,  is  entitled  to  the  custody  of  such 
books  and  records,  which  right  is  refused  by  the  former  officer,  it 
is  a  proper  case  for  the  remedy  by  mandamus,  to  compel  the  per- 
formance of  the  duty.' 

'  Napa  Valley  R.  Co.  v.  Napa  Co.,  30  Lord,   9    Wall .   409  ;    Supervisors    v, 

Cal.  435;  California,    etc.,   R.   Co.   v.  Du rant,  id.  736. 

Butte  Co.,  18  id.  671.  *  See,  also,  Wayman  v.  Southard,  10 

'Bay    City   v.    State   Treasurer,   23  Wheat.  23  ;  Siiydam  v.  Willianisou,  20 

Mich.  499.  How.  437  ;  2  Tidd's  Pr.  1134. 

*  Houston,  etc.,  R.  Co.  v.   Commis-  ^American     Railway    Frog    Co.    v. 

Bioner,  36  Tex.  382.  Haven,  101  Mass.  398 ;  3  Am.  Rep.  377. 

4  Rio-o'S  V.  Johnson  County,  6  Wall.  'American    Railway    Frog    Co.    v. 

(U.  sTl66.     See,  also,  Weber  V.  Lee  Haven,  101  Mass.  398  ;"State  v.  Goll,  33 

County,    id.    210  ;    United    States    v.  N.  J.  L.  285  ;  St.  Luke's  Ch.  v.  Slack, 

Council  of  Keokuk,  id.  514  ;  Mayor  v.  7  Gush.  226. 


686  Pkivate  Corporations. 

And  where  a  stockholder  shows  a  right  to  the  inspection  of 
books  and  records  of  a  corporation,  which  right  is  refused, 
proceedings  bj  mandamus  is  an  appropriate  remedy  to  enforce 
the  right. ^  In  this  way  the  cashier  of  a  bank  may  be  compelled 
to  submit  the  books  of  the  bank  to  the  inspection  of  one  of  the 
directors.^ 

But  the  aid  of  this  extraordinary  remedy  will  not  be  granted 
except  some  laudable  or  beneficial  purpose  is  to  be  subserved. 
And  a  member  of  a  private  corporation  could  not  claim  the 
benefits  of  the  process  merely  to  gratify  malice,  or  caprice,  or  an 
idle  curiosit3\  "And,  unless,  observes  Mr.  High,  "there  is 
some  particular  matter  in  dispute  between  the  members  of  the 
corporation,  or  between  the  corporation  and  its  individual  mem- 
bers, or  some  specific  purpose  for  which  the  inspection  is  neces- 
sary, mandaTYius  will  not  lie,  since  the  courts  will  not  permit  the 
use  of  the  writ  upon  merely  speculative  grounds,  or  to  gratify  a 
spirit  of  curiosity."  ^ 

Nor  can  a  stockholder  claim  this  process  to  compel  the  company 
to  keep  its  books  of  account  at  the  principal  office  or  place  of 
business  of  the  corporation,  unless  he  shows  that  some  personal 
injury  will  res\ilt  to  him  by  the  keeping  of  the  books  elsewhere.* 

And  it  is  not  a  sufficient  answer  to  a  just  claim  for  the  in- 
spection of  books,  that  they  were  purchased  by  the  officer  having 
charge  of  them  with  his  own  private  funds,  and  that  the  corpora- 
tion has  not  refunded  the  money  thus  expended,  and  is  indebted 
to  the  officer  for  his  salary.^  Nor  is  it  good  ground  for 
refusing  a  m^andamus^  that  the  books  are  books  of  account 
between  the  corporation  and  its  stockholders,  and  that,  therefore, 
these  should  be  regarded  as  confidential  ;  or  that  they  might  be 
used  for  purposes  not  strictly  proper,  or  such  as  would  justify 
the  issuing  of  the  writ.*     A  judgment  creditor  is  entitled  to  the 

'  People  V.  Tliroop,  13  Wend.   183  ;  and  records  at  a  proper  time  and  place 

People  V.  Pacific  Mail  Steamship  Co.,  and  of  the  prov)er    party.      People    v. 

50  Barb.  380.  Walker,  9  Mich.  828  ;  King  v.  Wilts. 

2  People  V.  Throop,  supra.  Canal  Co.,  3  Ad.  &  E.  477. 

3  Hififh  on  Extra.  Leg.  Rem.,  §  310.  '•Pratt  v.  Meriden  Cutlery  Co.,  35 
See,  also,  People  v.  Walker,  9  Mich.  Conn.  36. 

o'iS  ;  Hatch  v.  City  Bank,  1  Rob.  (La.)  ^  State  v.  Goll,  32  N.  .T.  L.  285  . 

470;  King  V.  Merchant  Tailors'  Co.,  2  "People  v.  Pacific  Mail  Steamship 

B.  &   Ad'  115.     lu  such   a  case  there  Co.,  50  Barb.  280. 
should  also  be  a  demand  of  the  papers 


Mandamus.  687 

process  where  he  is  entitled  to  an  execution  against  stockholders 
who  have  not  paid  their  shares,  and  an  inspection  of  the  books 
of  the  corporation  becomes  necessary  in  order  to  ascertain  who 
are  the  shareholders  and  the  amount  of  the  subscription  remain- 
ing unpaid,  and  which  inspection  is  refused.^  And  it  is  also  an 
appropriate  remedy,  where  it  is  the  duty  of  an  officer  of  a 
corporation,  on  the  presentation  of  a  certificate  of  sale  of  shares 
of  capital  stock  under  execution,  to  give  the  purchaser  evidence 
of  title  to  tlie  stock  thus  purchased,  \vliich  he  refuses  to  do;' 
or,  where  it  is  the  duty  of  the  corporation  to  enter  npon  the 
proper  books  of  the  company,  a  record  of  the  probate  of  the 
will  of  a  deceased  stockholder,  showing  the  disposition  of  his 
stock,  and  the  corporation  refuses  so  to  do;'  and,  especially, 
where  it  is  the  duty  of  a  corporation  to  record  all  the  names  of 
the  owners  of  the  stock,  and  it  refuses  so  to  do/ 

Sec.  465.  As  a  remedy  against  railroad  corporations.  —  The  remedy, 
by  mandamus^  agaiust  railroad  corporations  is  frequently  appro- 
priate ;  and  it  may  be  invoked  to  compel  a  railroad  corporation  to 
carry  out  or  execute  the  objects  and  purposes  for  which  it  was 
created. 

Thus,  it  has  been  held  proper  to  compel  a  railroad  company  to 
transport  passengers  to  a  particular  terminus,  in  accordance  with 
the  requirements  of  its  charter  ;  ^  to  compel  the  replacement  of 
certain  portions  of  its  track,  taken  up,  where  its  charter  provided 
that  the  public  should  have  the  right  to  use  the  railway  upon  the 
payment  of  certain  rates  of  fare  and  freight ;  *  to  compel  the  com- 
pany to  have  damages  for  the  taking  of  lands  under  the  right  of 
eminent  domain,  assessed  in  the  manner  provided  by  law,  and  in 
the  absence  of  other  specific  remedy,  to  compel  payment  of  the 
amount  of  damages  awarded  ; '  to  construct  and  keep  in  repair 

1  Queen   v.  Derbysliire,  etc. ,  R.  Co.,  =  State  v.  TUe  Hartford,  etc     R  Co 

3  El.  &  Bl.  784.  29  Conn.  538. 

-  Bailey  v.  Strohecker,  38  Ga.  259.  *  Kiuff  v.   Swem,  etc.,  R.    Co.,  2  B. 

"  Rex   V.  Worcester,  etc.,  Co.,  1  M.  &  A.  644. 

&  R.  53.  '  Queen  v.  Eastern  Counties  R.  Co., 

•*Norri3  V.  The  Irish  LandCo.,  8  El.  2  Q.  B.  347;  Kinjr  v.  Water- Works 
&  Bl.  512.  But  see  where  it  will  not  be  Co.  ,  6  Ad.  &  E.  355  ;  Queen  v.  Trust- 
issued  for  this  purpose,  State  v.  War-  ees.etc,  8  id.  439  ;  Queen  v.  Deptford 
ren,  etc.,  Co.,  82  N.  J.  L.  439.  Pier  Co.,  id.  910. 


688  Peivate  Corporations. 

bridges  as  required  by  tlieir  charters,  and  so  as  not  to  obstruet  the 
navigation  of  streams  ; '  to  maintain  all  necessary  crossings  and  cul- 
verts at  the  crossing  of  streets  and  alleys  of  a  city,  and  make  them 
safe  and  convenient  for  passage  as  provided  by  the  conditions  of 
the  right  of  way,  granted  by  the  city  to  the  company  ;  ^  and  in 
general  to  compel  them  to  construct  and  maintain  suitable  cross- 
ings and  .approaches  where  the  railroad  crosses  public  streets  and 
highways.^ 

Sec.  466.  To  whom  the  writ  should  be  directed  —  service. —  It  is 
not  within  the  scope  of  this  treatise  to  consider  the  practice  and 
proceedings,  in  mandamus,  generally.  Special  treatises  are  de- 
voted to  the  treatment  and  elucidation  of  the  law  in  general  re- 
lating to  it.  We  will,  however,  observe  that  the  writ  should 
be  directed  to  and  served  upon  the  person  who  is  shown  to  be 
delinquent.  If  the  proceeding  is  to  obtain  the  books  and  records 
of  the  corporation  or  their  inspection,  the  proper  course  would 
seem  to  be,  to  direct  the  process  to  the  person  in  whose  custody 
they  are,  even  though  they  may  be  held  by  the  party  as  the  otticer 
or  agent  of  the  corporation,  as  cashier,  treasurer  or  secretary.* 
The  common-law  mode  of  service  was  by  delivering  a  copy  of 
the  writ,  and  showing  the  respondent  the  original ; '"  but  the  mode 
of  service  in  this  country  is  generally  regulated  by  statutes  in  the 
various  states. 

1  State  V.  Wilmington  Bridge  Co.,  3        ^  People  v.  Chicago,  etc.,  R.  Co.,  57 

Harr.  (Del.)  313;  State  v.  North-east-  111.  436  (1873);   Indianapolis,  etc.,   R. 

ern  R.  Co.,  9    Rich.    247;  Habersham  Co.  v.  State,  37  Ind.  489. 
V.   Savannah,  etc.,    Canal  Co.,  26  Ga.         •'People  v.  Throop,  12  Wend.  183. 
665.  ^  Reg.  V.  Birmingham,  etc.,  R.  Co  ,  1 

^  Indianapolia,  etc.,  R.  Co.  v.  State,  El.  &  Bl.   293;  23  L.  J.  Q.  B.  195; 

37  Ind.  489.  Corner's  Crown  Pr.  227. 


Taxation.  689 


CHAPTER  XXII. 

TAXATION. 

Sec.  467.  Taxation  defined  and  necessity  of. 
Sec.  468.   Should  be  equitably  imposed. 
Sec.  469.  Difficulty  attending  taxation  of  railroad  property. 
Sec.  470.  Statutes  regulating  taxes  on  corporate  property. 
Sec.  471.  Id. 

Sec.  472.  What  corporate  property  is  taxable  —  double  taxation. 
Sec.  473.  Corporate  property  subject  to  and  exempt  from  taxation. 
Sec.  474.  Exemption  statutes  sustained. 
Sec.  475.  Indications  that  the  doctrine  will  not  be  extended. 
Sec.  476.  Where  corporate  property  is  used  in  dififerent  states. 
Sec.  477.  Exemption  of  United  States  stocks. 

Sec.  478.  Exemption  from  taxation  under  the  national  banking  law. 
Sec.  479.  Municipal  subscriptions  in  aid  of   corporate  enterprises,  and  taxa- 
tion therefor. 

Sec.  467.  Taxation  defined — necessity  of.  —  Taxation  is  defined  as 
"  the  act  of  laying  a  tax,  or  imposing  taxes,  on  the  subjects  of  a 
state  by  government,  or  on  the  members  of  a  corporation  or  com- 
pany by  the  proper  authority."  '  Tax  is  any  contribution  im- 
posed by  the  government  upon  individuals  or  corporations  for 
the  use  of  the  state,  and  embraces  tolls,  tribute,  impost,  duty,  cus- 
tom, excise,  aid  or  supply.  But  in  a  stricter  or  more  limited  sense, 
it  is  a  levy  or  sum  imposed  by  the  state  upon  persons,  or  real  or 
personal  property  and  occupations,  as  distinguished  from  customs, 
duties  and  excises,^  Taxation  is  one  of  the  fiscal  prerogatives  and 
inherent  powers  of  sovereignty,  and  essential  to  the  maintenance 
of  government  and  the  security  of  the  rights  of  the  citizen.^ 

Sec.  468.  Should  be  equally  imposed.  —  The  wisdom  of  legisla- 
tors is  taxed  in  adopting  means  to  levy  and  collect  taxes  in  such 

^  Webst.  Die.  order  and  proportion."     Burr.  L.  Die, 

'  2  Bouv.  L.  Die,  tit.  Taxes;  2 Burr.  tit.  Tax. 

L.  Die,   tit.  Tax  ;  Story  on  the  Const.  Mr.  Cooler  defines  taxes  as  "  the  en- 

14.     Mr.  Burrill  observes  in  reference  forced    proportional    contribution    of 

to  the  word  "  tax  "  as  follows:  "  Liter-  persons   and  property,  levied  by  the 

ally,  or  according  to  its  derivation,  an  authority  of  the  state  for  the  support 

imposition  laid  by  government  upon  of  the  government,  and  for  all  public 

individuals,    according    to   a   certain  needs."     Cooley  on  Taxation,  1. 

'  1  Bl.  Com.  307  et  seq. 


690 


Private  Coepokations. 


a  manner  as  that  the  burden  shall  be  borne  equally  and  equitably 
by  all  citizens.'  The  usual  method  of  imposing  this  burden  is  to 
require  the  assessment  of  taxes  according  to  the  value  of  prop- 
erty, and  to  levy  and  collect  for  governmental  purposes  annually 
a  certain  per  centum  of  the  valuation  of  all  property,  real  and 
personal,  owned  by  individuals,  partnerships  or  corporations.^ 
It  will  be  manifest  that  corporations  should  contribute  to  this 
public  demand  as  well  as  individuals,  as  they,  equally  with  natu- 
ral persons,  enjoy  the  benefits  of  civil  government  and  the  pro- 
tection thus  afforded  to  its  pecuniary  interests,  and  they  should 
be  subject  to  the  same  burdens,  unless  they  are  exempted  there- 
from by  the  provisions  of  their  charter.^  The  legislature  of  the 
state,  as  the  representative  of  the  people,  is  supreme,  unless  re- 
strained by  provisions  of  its  constitution,  and  may  exempt  corpo- 
rations or  individuals,  or  their  property,  from  taxation ;  but 
where  there  is  no  such  exemption,  all  owners  of  property  should 
equally  contribute,  according  to  its  value,  to  the  necessities  of  the 
government.^ 


1  2  Kent's  Com.  250.  Perfect  equal- 
ity and  uniformity  is  practically  im- 
possible. Kirby  v.  Shaw,  19  Penn. 
St.  258  :  Mill.  Pol.  Econ.,  B.  5,  chap.  2, 
§  2  ;  Lowell  v.  Oliver,  8  Allen,  247  ; 
buld  V.  Richmond,  23  Gratt.  464; 
Allen  V.  Drew,  44  Vt.  174. 

"^  The  constitution  of  Massachusetts 
provided  that  the  legislature  might 
"impose  and  levy  reasonable  duties 
and  excises  upon  any  produce,  goods, 
wares,  merchandise  and  commodities 
whatsoever,  brought  into,  produced, 
manufactured  or  being  within  the 
same."  Under  this  constitutional  pro- 
vision the  supreme  court  of  that  state 
held  that  the  legislature  might  impose 
a  specific  tax  on  the  stock  of  an  in- 
corporated bank.  Portland  Bank  v. 
Apthorp,  13  Mass.  252.  See,  also, 
Commonwealth  v.  Lowell  Gas  Co.,  12 
Allen,  75  ;  Commonwealth  v.  Hamil- 
ton Man.  Co.,  id.  298;  Same  v.  New 
England  Slate  Co.,  13  id.  391;  Same  v. 
Carey  Improvement  Co.,  98  Mass,  19  ; 
Attorney-Gen.  v.  Bay  State  Min.  Co., 
99  id.  148  ;  Oliver  v.  Liverpool  Ins. 
Co.,  100  id.  531 ;  10  Wall.  566  ;  Boston 
R.  Co.  V.  Commonwealth,  100  Mass. 
399  ;     Dudley  v.    Jamaica    Aqueduct 


Pond  Co.,  id.  183.  And  in  Massachu- 
setts domestic  corporations  cannot  be 
required  to  pay  a  portion  of  all  divi- 
dends of  the  non-resident  owners  into 
the  treasury  of  the  state  where  there 
is  no  such  tax  on  the  dividends  of 
resident  owners.  Oliver  v.  Washing- 
ton Mills,  11  Allen,  268. 

3  Harvard  College  v.  Aldermen  of 
Boston,  104  Mass.  470  ;  Troy  v.  Mutual 
Bank,  20  N.  Y.  387 ;  People  v.  Brook- 
lyn, 4  Comst.  419  ;  Bulowe  v.  Charles- 
ton, 1  N.  &  McC.  527  ;  Shitz  v.  Berks 
Co.,  6  Penn.  St.  80  ;  Duunell  Man.  Co. 
v.  Pawtucket,  7  Gray,  277.  But  the 
right  to  exempt  corporate  property 
from  taxation  has  been  questioned  on 
the  ground  of  public  policy,  and  that 
it  is  inimical  to  the  security  of  govern- 
ment. The  reasons  would  be  equally 
applicable  to  all  exemptions.  Thorpe 
V.  The  Rutland,  etc.,  R.  Co.,  27  Vt. 
140  ;  Brewster  v.  Hough,  ION.  H.  138. 
■.■»  See  West  River  Co.  v.  Dix,  6  How.  (U. 
S.)  507;  Bank  of  Commerce  v.  New  York, 
2  Black ,  720 ;  Duer  v.  Small,  4  Blatchf. 
263,  where  it  is  held  that  the  power 
extends  to  all  the  property  and  busi- 
ness within  the  state.  People  v. 
Pacheco,  27  Cal.  175  ;  De  Pauw  v.  New 


Taxation.  691 

Seo.  469.  Difficulty  attending  taxation  of  railroad  property  and  inter- 
ests. —  Some  difficulty  has  been  experienced,  relating  to  the  taxa- 
tion of  corporate  property,  and  especially  the  property  of  railroad 
corporations.  The  operation  of  railroads  usually  requires  the  use 
and  ownership  of  property  in  v^arious  localities,  not  only  within 
the  territory  of  the  sovereignty  of  its  creation,  but  frequently  in 
different  states.  Besides,  the  capital  stock  of  such  corporations 
may  be  held  not  only  by  the  corporation  itself,  but  by  its  numer- 
ous members,  having  a  residence  and  domicile  in  various  locali- 
ties, not  only  within  the  state  where  the  corporation  is  created, 
but  in  other  states.  Where  shall  such  property  and  interests  be 
taxed  ?  If  it  may  be  assessed  and  taxed  according  to  value  in 
more  than  one  place  for  the  same  purpose,  the  burdens  of  taxa- 
tion would  fall  unequally.  And  in  the  case  of  specific  taxation 
of  property  or  business,  the  tax  should  be  imposed  so  as  to  fall 
equally  upon  all  persons,  whether  natural  or  artificial.* 

Seo.  470.  statutes  regulating  taxes.  —  The  difficulty  attending  the 
imposition  of  taxes  for  various  municipal  and  state  purposes  upon 
railroads,  on  account  of  the  various  kinds  of  property  and  interests 
held  by  them  in  various  localities  and  states,  has  secured  statutory 
regulation  on  the  subject  in  most,  if  not  all,  the  states  and  terri- 
tories of  the  Union  ;  and  the  constitutions  of  various  states  guard 
the  rights  of  citizens  against  legislative  abuse,  in  this  respect. - 

But  in  the  absence  of  statutory  regulations,  how  and  where 
shall  corporate  property  of  a  railroad  company  be  valued    and 

Albany,   22   Ind.   204  ;  Union    Co.    v.     Bank    v.   Debolt,  1    Ohio  St.   591  ;   2 
Eordelon,  7  La.  Ann.   193;  Williams     Kent's  Com.  331  andjjotes. 
V.    Detroit,   2   Mich.  560;  Mechanics' 

'  The  tax  levied  by  a  city  must  not  v.  Mathis,21  Ark.40.  See,  also,  State  v. 

be  oppressive  or  unequal.     Columbia  Lalhrop,  10  La.   Aun.  398  ;  State  v.  Og- 

V.  Beasly,    1    Humph.    (Tenn.)   232;  den,id.  402;  Yeatman  v.  Crandall.ll  id. 

Hamilton  v.  St.  Louis   County  Court,  220  ;  Jamison  v.  New  Orleans,  12  id. 

15  Mo.  3.     But  in  Arkansas,  where  the  346;  Selby  v.  Levee  Coms.,  14  id.  434  ; 

constitution  provided  for  equal  taxa-  Lowell  v.  Oliver,  8   Allen,  247  ;  State 

tion  according  to  the  value  of  prop-  v.  Warren  County,  19  Penn.  St.  258  ; 

erty,  it  was  held  that  this  provision  re-  Slaughter  v.  Commonwealth,  13  Gratt. 

lated  to  ordinary  state  and  county  tax-  767;  Kneeland  v.  Milwaukee,  15  Wis. 

ation,    and    did   not  affect   a  statute  454  ;  Fire  Department  v.  Helfenstein, 

authorizing  a  special  tax  on  alluvial  16  id.  136. 
lands  for  building  a  levee.    McQehee        *  See  2  Kent's  Com.  331  et  seq. 


692  Private  Corporations. 

taxed  ?  Shall  the  land  and  improvements  thereon,  including  the 
erections  and  fixtures,  and  rolling  stock,  be  assessed  and  taxed  as 
an  entirety  or  separately  ?  Should  they  be  taxed  at  the  location 
of  the  general  office  or  place  of  business  of  the  corporation,  or 
in  the  various  places  where  they  may  be  located  or  used  ? 

As  to  the  mode  of  taxing  the  property  of  railroad  companies, 
it  has  been  ably  maintained,  that  the  only  just  and  equitable  way 
is  that  based  upon  profits.  In  the  case  of  Paine  v.  Wright  and 
The  Indianapolis  cfc  Bellefontaine  R.  Go.^^  the  court  say: 

"  Railroads  have  contributed  more  to  the  facilities  of  inter- 
course, the  interest  of  agricultm-e,  to  build  up  towns  and  extend 
our  inland  commerce,  than  all  other  improvements.  But  in  the 
construction  of  these  works,  heavy  expenditures  have  been  incur- 
red, and  large  debts  contracted  by  way  of  loans  of  money  and 
otherwise,  so  that  the  companies  are  ill  able  to  bear  the  pressure 
of  a  heavy  taxation.  The  expense  of  running  the  cars,  making 
repairs  and  meeting  contingencies  is  very  great ;  and  when  to  this 
shall  be  added  the  interest  on  debts  incurred,  little  or  no  profit 
can  be  realized  to  the  stockholders  for  some  years  after  the  road 
is  in  operation.  Lands,  of  necessity,  are  often  received  in  pay- 
ment of  stock.  These  lands  are  taxed  the  same  as  lands  held  by 
an  individual,  on  the  plausible  ground  that  the  lands  of  a  corpora- 
tion should  be  taxed  the  same  as  the  lands  of  an  individual.  But 
these  lands  are  never  held  by  the  corporation  for  the  purposes  of 
culture,  but  to  be  converted  into  money,  or  for  the  occupancy  of 
the  road.  They  do  not,  in  general,  as  the  lands  of  an  agricul- 
turist, afford  a  profit  by  an  increase  of  value.  But  the  cor- 
poration is  taxed  for  the  lands,  and  also  for  the  structures  made 
by  borrowed  capital.  This,  in  effect,  is  a  taxation  on  borrowed 
money,  and  is  an  addition  to  the  interest.  In  all  enterprises 
intimately  connected  with  the  public  interest,  such  as  railroads, 
banks,  etc.,  which  require  a  large  investment  of  capital,  there  is 
no  mode  of  taxation  so  equal  or  just  as  a  tax  upon  the  profits. 
Such  investments  are  subject  to  many  contingencies  which  do  not 
affect  real  estate.  No  estimate  can  show  the  expenditure  required 
on  a  railroad,  nor  the  losses  of  a  bank.  As  common  carriers,  the 
railroad  is  responsible  for  injuries  done  to  persons  and  property, 

'  6  McLean,  395.     See,  also,  People  v.  Mayor  of  Brooklyn,  6  Barb.  209. 


Taxation.  693 

through  the  neglect  or  want  of  skill  in  its  agents  ;  and  experience 
has  shown  that  juries  are  incUned  most  liberally  to  compensate 
all  who  suffer  by  finding  liberal  if  not  extravagant  damages. 
Banks  are  liable  to  imposition  and  losses,  through  the  failures  of 
borrowers,  and  counterfeit  notes  and  drafts,  which  no  one  can  fore- 
tell. These  casualties  place  at  greater  hazard  the  moneys  invested 
in  railroads  and  banks  than  in  real  estate  ;  and  although  these  estab- 
lishments may  be  owned  by  individuals,  yet  they  are  so  intimately 
connected  with  the  ])ublic  interest  and  welfare,  that  stockholders 
are  distinguishable  from  the  owners  of  other  property." 

Sec.  471.  The  statutes  of  the  various  states  usually  provide 
for  the  levy  of  general  taxes  on  personalty  at  the  place  of  resi- 
dence of  the  owner,  and  of  real  estate  in  the  city  or  county  where 
located.  In  the  case  of  ownership  of  railroad  corporations,  the 
place  of  residence  of  the  corporation  within  the  state  sometimes 
becomes  an  important  question  for  the  purposes  of  taxation.  For 
such  purposes  what  is  the  situs  of  the  company  ?  The  same 
question  is  frequently  presented  in  relation  to  the  jurisdiction  of 
the  courts,  based  upon  the  residence  of  the  corporate  person.  In 
the  case  of  the  Connecticut  and  Passumpsic  Rivers  Railroad 
Company  v.  Cooper,^  the  supreme  court  of  Vermont,  by  Red- 
field,  J,,  in  discussing  the  question  of  the  situs  of  the  company, 
observe :  "  We  think  it  safe,  as  a  general  rule,  to  say  that  a  rail- 
way company,  if  it  have  any  place  of  residence,  inust  be  limited 
to  the  range  of  its  legally  defined  route.  This  is  certainly  in 
analogy  to  all  other  corporate  companies.  They  are  held  to  have 
their  situs  or  residence  where  their  principal  business  is  trans- 
acted. This  is  so  in  the  case  of  banks,  manufacturing  companies, 
and  many  others ;  and,  although  these  companies  may,  for  some 
purposes,  transact  business  out  of  the  range  of  their  ordinary 
locality,  as  they  sometimes  do  even  in  other  states  and  countries, 
they  are  still  regarded  as  having  a  fixed  situs  at  the  place  where 
their  principal  business  is  done." 

'30Vt.  476.     See,  also.  The  People  also,  Sangamon  &  Morg.  R.   Co.    v. 

V.  Peirce,  31  Barb.  138  ;  South-western  County  of  Morgan,  14  111.  163  ;  State 

R.  Co.  V.  Paulk,  24  Ga.  356  ;  and  the  v.    Illinois   Cent.    R.   Co.,  27  id.    64; 

English   doctrine   in  Garton  v.   Great  Mohawk  &  Hud.   R.   Co.   v.   Clute,  4 

Western  R.  Co.,  E.  B.  &  E.  837.     See,  Paige,  384. 


694  Pbivate  Corpobations. 

And  in  New  Hampshire  it  has  been  held  that  if  a  railroad  cor- 
poration is  located  in  another  state,  and  all  its  property  is  taxed 
in  such  state,  the  same  as  the  property  of  natural  persons,  a  stock- 
holder in  New  Hampshire  would  not  be  liable  to  be  taxed  for  his 
stock  in  the  company.  ^ 

Sec.  472.  What  corporate  property  is  taxable  ;  double  taxation.— 
The  real  estate  of  a  corporation  is,  as  we  have  seen,  generally 
taxable  in  the  localities  where  it  is  located,  but  the  personal 
property  at  the  place  of  the  location  of  its  principal  place  of 
business.''  This  is  in  accordance  with  the  doctrine  of  general 
application  to  natural  persons.  Natural  persons  are  generally 
subject  to  taxation  on  personalty,  at  the  place  of  their  domicile. 
But  it  has  been  maintained  that  the  capital  stock  of  a  corporation 
cannot  be  assessed  and  taxed,  and  also  the  real  and  personal 
property  in  which  the  capital  or  its  proceeds  have  been  invested, 
unless  expressly  so  provided  by  statute,  as  this  would  be  a  double 
taxation.     Mr.  Cooley,  on  this  subject,  observes: 

"But  the  general  principle  would  undoubtedly  be  that  all 
the  property  of  a  corporation,  like  that  of  a  natural  person,  would 
be  liable  to  an  ad  valore7n  tax,  imposed  upon  property,  and  that 
where  the  term  'citizen'  or  'inhabitant,'  is  used  in  the  revenue 
laws  of  the  various  states,  it  includes  private  corporations  for 
pecuniary  gain."  ^ 

Sec.  473.  Corporate  property  and  interests  subject  to,  and  exempt  from, 
tax.  —  It  is  perhaps  a  general  rule,  that  the  capital  stock  of  a  corpo- 
ration, if  taxable  at  all,  is  taxable  at  the  place  where  the  principal 
office  or  place  of  business  is  located ;  *  and  its  real  estate,  where  it 

'  Smith  V.  Exeter,  37    N.    H.    556.  where   the  jurisdiction   of   the   court 

Rails,     sleepers,   bridges,    etc.,    of   a  over   the    person    depends    upon    the 

railroad    corporation,    together    with  question   of   residence.     See   Andros- 

the  easement  in  the  lands,  within  the  coggiu,  etc.,  R.  Co.  v.  Stevens,  28  Me. 

limits  of   a   railroad,  are  real  estate.  434  ;  Bristol  v.  Chicago,   etc.,  R.  Co., 

Providence,  etc.,  R.  Co.  v.  Wright,  3  15  111.  436  ;  Rhodes  v.  Salem  T.,  etc., 

R.   I.  459.     See,  also,  Louisville,  etc.,  R.  Co.,  98  Mass.  95. 

R.  Co.  v.  Commonwealth,  7  B.  Monr.  ^  Coo\ej  on  Tax.  :  Bangor, etc.  R.  Co. 

160.  V.  Harris,  21  Me.  533.     But  see  Cum- 

'^  Sangamon,  etc.,  R.  Co.  v.  County,  berland,  etc ,   R.  Co.   v.   Portland,  37 

14  111.  163 ;  State  v.  111.  Cent.  R.  Co.,  id.  444. 

27id.  64;  Mohawk, etc., R.  Co.  v.Clute,  ■•Mohawk,  etc.,   R.  Co.   v.  Clute,  4 

4Paige,384.  The  principle  is  the  same  Paige,  384  ;  ante,  §       ,  and  note  3. 


Taxation.  695 

is  located.'  In  Conwell  v.  Town  of  Connersville^  the  supreme 
court  of  Indiana  held  that  a  corporation  can  be  taxed  in  the  place 
where  the  corporation  is  located,  only  upon  the  corporate  property 
as  distinguished  from  the  interests  of  the  individual  stockholders 
therein ;  and  that,  as  to  these  interests,  they  were  taxable  in  the 
places  where  the  stockholders  respectively  resided.'  And  it  has 
been  held  in  New  Hampshire,  that  wood,  timber,  logs  and  lum- 
ber, and  other  articles  or  materials,  distributed  along  the  line  of  a 
railway,  for  use  in  the  construction  and  operation  of  the  road, 
should  be  treated  as  a  part  of  the  road,  and  taxed  in  the  same 
manner.* 

But,  as  before  observed,  corporate  taxation,  and  the  place  and 
parties  to  be  taxed,  are  now  usually  matters  of  statutory  reg- 
ulation subject  to  constitutional  provisions,  and  the  decisions 
in  reference  to  these  questions  in  the  various  states  are  gene- 
rally on  the  construction  of  these  statutes  and  constitutional  pro- 
visions. 

Thus,  it  has  been  held  that  a  general  statutory  provision, 
exempting  corporate  property  from  taxation,  embraced  only  such 
property  as  was  essential  in  the  execution  of  its  purposes,  and 
did  not  cover  property  held  by  the  corporation,  as  a  mere  conven- 
ience ; "  that  the  statute  or  charter  of  a  railway  corporation, 
exempting  its  stock  from  taxation,  covers  gross  income ;  *  that 
where  a  specific  mode  of  taxation  is  provided  in  the  charter,  this 
is  exclusive  of  all  other  modes ; '  that  where  there  is  a  provision 
for  the  payment  of  a  tax  on  condition,  as  that  the  corporation 
shall  pay  a  certain  tax  when  their  net  profits  shall  reach  a  certain 
amount,  it  is  exclusive  of  liability  for  taxes  under  other  circum- 

'  Carbon  Iron  Co.  v.  Carbon  County,  '"  In  Pennsylvania,  see  Lehigli  Co.  v. 

39  Penn.  St.  351.     In  this  case  it  was  Northampton,  8  W.  &  S.  334;  Railway 

held   that  the  tax  for  state  purposes  v.  Berks   Co.,  6  Penn.  St.  70;  Carbon 

required  to   be   paid   at    the  auditor-  Iron  Co.  v.  Carbon  County,  39  id.  231  ; 

general's  office  was  a  tax   on  the  cor-  Lackawanna     Iron    Co.     v.    I.iuzerne 

porate  franchise,  and  not  intended  as  County,    43   id.    434.     Massachusetts, 

an  exemption  from  ordinary  taxation.  Worcester  v.  Western  R.  Co.,  4  Mete. 

-  15  Ind.  150.  (Mass.)  564;  Meeting  House  v.  Lowell, 

^  See,   also,   McKeen   v.   Countv   of  lid.  588.     New  Jersey,  State  v.  Mans- 

Northampton,  49  Penn.St.519;  White-  field,  3  N.  J.  L.  510;  Gardner  v.  State, 

sell  V.  Same,    id.    526;  Bridgeport   v.  1  id.  557. 

Bishop,  33  Conn.  187 ;  Union  Bank  v.  «  State  v.  Hood,  15  Rich.  L.  177. 

State,  9  Yerg.  490.  "^  New   York   and   Erie   R.    Co.    v. 

4  Fitchburg   R.    Co.  v.   Prescott,  47  Sabin,  26  Penn.  St.  243;  Iron  Bank  v. 

N.  H.  63.  Pittsburgh,  37  id.  340. 


696  Private  Cokpoeations. 

stances,  and  that  taxes  can  only  be  imposed  when  the  condition  is 
fulfilled ; '  that  a  general  exemption  of  property  of  the  corporation, 
but  subjecting  the  stock  in  the  hands  of  stockholders  to  taxa- 
tion exempts  the  surplus  funds  and  lands  of  the  corporation ; " 
that  exemption  of  capital  stock  exempts  property  of  the  com- 
pany, necessary  to  carry  on  business  ; '  that  where  the  charter  of 
a  railroad  corporation  subjects  it  to  certain  specified  taxation,  but 
exempts  it  from  all  further  or  other  taxes  or  imposts,  this  exempts 
the  company  perpetually  from  all  taxation  except  that  specified  ;  * 
that  where  a  railroad  corporation,  exempt  from  taxation,  consoli- 
dates with  another  not  enjoying  that  immunity,  such  property  of 
the  consolidated  corporation  is  subject  to  taxation ; "  and  that, 
where  statute  provided  that  a  railroad  corporation  should  be 
exempt  from  taxation,  except  that  portion  of  the  permanent  and 
fixed  works  of  the  company  as  is  within  the  state,  and  that  as 
regards  such  works  no  greater  tax  should  be  levied  than  in  pro- 
portion to  the  general  taxes  throughout  the  state  at  the  same 
time,  it  was  held  that  such  portion  of  the  fixed  works  of  the 
company  as  was  within  the  state  was  still  subject  to  general 
taxation  for  state  and  county  taxes."  But  in  all  such  cases  the 
exemption  may  be  repealed  by  the  legislature,  under  a  special 
reservation  of  the  right  so  to  do,  or  under  a  general  statutory  right, 
to  alter  or  amend  charters.' 

Under  the  statute  of  New  York,  of  1855,  which  provided  that 
all  persons  and  associations  doing  business  in  the  state  and  non- 
resident thereof  should  be  assessed  and  taxed  on  all  sums  invested 
in  any  manner  in  said  business,  the  same  as  if  they  were  residents, 
it  was  held  that  the  statute  applied  to  corporations,  and  that  a 
foreign  insurance  company  was  liable  on  securities,  deposited  un- 
der the  requirements  of  a  statute  with  the  comptroller  of  the  state, 
for  the  security  of  the  policy-holders  of  the  insurance  company.* 

1  State  V.  Minton,  23  N.  J.  L.  529.  Delaware    Railroad     Tax,    18     Wall. 

2State  V.  Tunis,  23N.  J.  L.  546.  206. 

3  The  Rome  R.  Co.  v.  Rome,  14  Ga.  «  Philadelphia,  etc.,   R.  Co.  v.   Bay- 

275.  less,  2  Gill,  355. 

*  State   Bank   v.    Knoop,    16   How.  '  Morris,  etc.,  R.    Co.  v.   Miller,  81 

386;  Woolsey  v.  Dodge,  6  McLean  (C.  N.  J.  L.  521  ;  Jersey  City,  etc.,  R.  Co. 

C),  142.  V.   Jersey    City,   id.    575  ;     Common- 

"  Philadelphia    &    Wilmington    R.  wealth  v.  Fayette  County  R.  Co.,  55 

Co.  V.  State  of  Md.,  10  How.  (U.    S.)  Penn.  St.  452. 

876  ;  Baltimore   v.  Baltimore  &  O.  R.  ^  International  Life  Ins.  Co.  v.  Corn- 
Co.  ,  6  Gill,   288 .     See,   also,    In  the  missioners  of  Taxes,  10  Penn.  St.  442. 


Taxation.  6H7 

And  under  a  statute  of  Massachusetts  it  was  lield  that  a  manu- 
facturing corporation  was  taxable  for  its  real  estate  in  the  place 
where  it  was  located,  but  that  its  personal  property  about  its 
manufactory  should  be  assessed  to  the  several  individual  mem- 
bers, they  being  liable  to  be  taxed  for  their  several  shares  in  such 
property.^ 

The  decisions  in  these  cases  are  perhaps  important  only  as  re- 
cognizing the  general  doctrine  that  parties  should  not  be  twice 
taxed  on  the  same  property ;  that  it  cannot  bo  assessed  lirst  as  the 
property  of  the  corporation,  and,  secondly,  as  the  property  of  the 
member." 

On  the  subject  of  taxes  on  corporations  Mr.  Cooley  observes : 
"  These  are  imposed  in  so  many  forms  that  an  enumeration  is 
difficult.  The  following  may  be  mentioned  :  1.  A  specific  tax 
on  the  franchise.  2.  A  tax  on  the  property  by  valuation.  3.  A 
tax  on  the  capital  stock.  4.  A  tax  on  the  business  done.  5.  A 
tax  on  dividends  or  on  profits.  Sometimes  the  franchise  is  taxed 
and  also  the  capital  stock  or  the  property,  but  to  tax  tlie  capital 
stock  and  also  the  property  in  which  tlie  capital  is  invested  would 
be  imposing  the  burden  twice  on  the  same  property,  and,  conse- 
quently, unjust,  if  not  illegal."  ' 

Sec.  474.  Exemption  statutes  sustained.— Notwithstanding  pub- 
lic policy  would  seem  to  disfavor  exemption  from  taxation,  stat- 
utes providing  therefor  are,  perhaps,  generally,  held  to  be  legal 
by  the  courts. 

And  if  a  compensation  has  been  paid  to  the  state  for  the  fran- 
chise of  a  corporation  and  in  lieu  of  taxes  on  the  franchise,  this 
exempts  the  franchise  from  future  taxation  by  the  state,  but  it 
would  not  exempt  the  corporate  property  from  taxation. 

On  this  question  the  supreme  court  of  the  United  States  say : 
*'A  franchise  for  banking  is  in  every  state  of  the  Union  recognized 

1  Salem  Iron  Factory  v.  Danvers,  10  308,  ~^  SX  it  was  held  that  a  corporation 
Mass.  514  ;  Amesbury  Woolen  Man.  for  making  and  supplying  gas  may  be 
Co.  V.  Inhabitants  of  Amesbury,  17  taxed  in  tlae  town  or  city  where  it  car- 
id.  461.  ries  on  its  business,  for  all  excess  of 

"^  See.  also.  Smith  v.  Burley,  9  N.  H.  the  value  of  its  stock   over  the  value 

423 ;  Bank  of  Cape  Fear  v.  Edwards,  5  of  its  real  estate  and  machinery  other- 

Ired.  516  ;  Gordon  V.  Baltimore,  5  Gill,  wise    taxable.       Commonwealth      v. 

231  ;  Cases  of  Taxation,  12  G.&  J.  117.  Lowell    Gas-light    Co.,    12    Allen,    75. 

3  Cooley  on  Taxation,  392.     Under  a  See,  also,  Same  v,  Hamilton  Man.  Co., 

statute  of  Massachusetts  (1864,  chap.  id.  298. 
88 


698  Private  Corpokations. 

as  property.  The  banking  capital  attached  to  the  franchise  is 
another  property,  owned  in  its  parts  by  persons,  corporate  or 
natural,  for  which  they  are  liable  to  be  taxed  as  they  are  for  all 
other  property,  f  cr  the  support  of  the  government."  ^ 

The  general  rule  is,  that  a  legislative  body  cannot  limit  the  legis- 
lative powers  of  its  successors,  and  that  all  laws  passed  by  the  one 
may  be  changed  or  abolished  by  another ;  and  it  is  only  when  the 
revenue  acts  of  such  a  body  rise  to  the  character  of  a  contract, 
as  where  stipulations  are  made  in  the  charter  of  a  corporation,  in 
relation  to  taxation  of  the  corporate  franchise  or  property,  and 
which  charter  is  accepted,  that  the  state  can  be  bound  thereby. 
In  such  cases  the  provision  would  constitute  a  part  of  the  contract, 
and  the  corporation  would  be  protected  against  the  imposition  of 
more  taxes,  under  the  provision  of  the  constitution  of  the  United 
States,  inhibiting  the  states  from  passing  any  law  impairing  the 
obligation  of  contracts. 

Thus,  where  the  incorporating  act  of  a  bank  required  the  pay- 
ment of  a  tax  of  twenty-five  cents  annually,  on  each  share  of 
stock,  in  lieu  of  all  tax  and  bonus,  this  was  held  to  be  a  contract 
between  the  state  and  the  stockholders,  and  that  such  stock  in 
the  hands  of  a  stockholder  was  exempt  from  other  taxation." 

Taxation,  being  essential  to  the  maintenance  of  a  government, 
the  right  of  the  legislature  as  its  representative  to  levy  taxes,  it 
has  been  held  by  some  of  the  state  courts,  cannot  with  safety  be 
abridged  or  taken  away  by  any  stipulation  or  contract  on  its 
part.' 

But  the  general  doctrine  we  have  stated  is  supported  by  the 
current   of  judicial  decisions  in  the  states,  and  by  the  uniform 

'  1  Gordon  v.  Appeal  Tax   Court,  3  same  doctrine  in  Bank  of  111.  v.  The 

How.  ( a.  S.)  133      But  see,  qualifica-  People,    6    111.    304;     Home    of     the 

tion    or    limitation  of    the    doctrine,  Friendless   v.    Rouse,    8   Wall.    430; 

Baltimore  v.  Baltimore  K.  Co.,  6  Gill,  McGee   v.   Mathis,  4  id.   143;  Gordon 

288;  Cases   of  Taxation,  13  Gill  &  J.  v.  The  Appeal  Tax  Court.  3  How.  (U. 

117  ;  State   v.   Powers,  4   N.  J.   400;  S  )  133;  Pacific  R.  Co.  v.  Maguire,  20 

Gordon  v.  The  Appeal  Tax  Court,  and  id.  36.     Bnt  see  Trask  v.  Maguire,  18 

Cheston  v.  Same,  3  How.  (U.  S.)  133  ;  id.  391. 

Branch  State  Bank  v.  Knoop,   16  id.  ^  Brewster  v.  Hough,  10  N.  H.  138  ; 

386  ;  Jefferson,  etc..  Bank  v.  Skelly,  1  Mott  v.  Penn.  R.  Co. .  30  Penn.  St.  9 ; 

Black,     436  ;  Hardy    v.    Waltham,    7  Sandusky  Bank  v     Wilbor,  7  Ohio  St. 

Pick.  108.  481  ;  Skelly  v.  Jefferson  Branch  Bank, 

^  Johnson  v.  Commonwealth  of  Ky.,  9  id.  606.     But  see  Iron  City  Bank  v. 

7    Dana,    338 ;  Central    R.,    etc.,    v.  Plattsburg,37  Penn.  St.  340. 
Georgia,  2  Otto  (U.  S.),  665.  See,  also, 


Taxation.  699 

decisions  of  the  federal  courts.'  lu  Home  of  the  Friendless  v. 
Roiise^^  the  question  presented  to  the  supreme  court  of  the 
United  States  was,  whether  a  statute  to  incorporate  a  charitable 
institution,  and  declaring  that  the  property  of  the  corporation 
should  be  exempt  from  taxation,  and  that  a  statutory  provision 
existing  at  the  time,  that  every  charter  of  incorporation  should 
be  subject  to  alteration,  suspension  or  repeal,  at  the  discretion  of 
the  legislature,  should  not  apply  to  such  corporation,  became, 
after  the  corporation  had  organized  under  such  act,  sucli  a  con- 
tract as  prevented  the  state  from  subsequently  imposing  taxes 
upon  it,  and  whether  a  statute,  afterward  passed  by  the  legislature 
taxing  its  corporate  property,  was  a  violation  of  the  contract,  and, 
therefore,  void. 

The  court  say  :  — 

"  The  validity  of  this  contract  is  questioned  at  the  bar,  on  the 
ground  that  the  legislature  had  no  authority  to  grant  away  the 
power  of  taxation.  The  answer  to  this  position  is,  that  the  ques- 
tion is  no  longer  open  for  argument  here,  for  it  is  settled  by  the 
repeated  adjudications  of  this  court  that  a  state  may,  by  contract 
based  upon  a  consideration,  exempt  the  property  of  an  individual 
or  corporation  from  taxation  either  for  a  specified  period  or  per- 
manently. And  it  is  equally  well  settled  that  the  exemption  is 
presumed  to  be  on  sufficient  consideration,  and  binds  the  state  if 
the  charter  containing  it  is  accepted."  ' 

The  doctrine  of  exemption  by  virtue  of  provisions  contained  in 
a  charter  was  extended  by  the  supreme  court  of  the  United  States 
in   Washington  University  v.  Rouse*     In  this  case,  a  charter  was 

^  But  in  McCulloch  v.  State  of  Mary-  '^  8  Wall.  430. 
land,  4  Wheat.  316,  Marshall,  C.  J.,  ^  gee,  also,  New  Jersey  v.  Wilson,  7 
in  bis  opinion,  maintains  that  the  Cranch,  1G4  ;  Gordon  v.  Appeal  Tax 
general  doctrine  of  exemption  did  not  Court,  3  How.  (U.  S.)  133;  Piqua 
prohibit  states  from  taxing  the  real  Bank  v.  Knoop,  16  id.  369;  Ohio  L. 
property  of  the  Bank  of  the  United  &  T.  Co.  v.  Debolt,  id.  416;  Dodge  v. 
States,  in  common  with  other  real  Woolsey,  18  id.  831  ;  Mechanics  and 
property  within  the  state,  nor  the  in-  Traders'  Bank  v.  Thomas,  id.  384  ; 
terests  which  a  citizen  of  the  state  Mechanics  and  Traders'  Bank  v.  De- 
may  hold  in  the  bank,  in  common  bolt,  id.  380;  McGee  v.  Mathis,  4  Wall, 
with  other  property  of  the  same  char-  143. 

acter   throughout   the   state.     But    it  •»  8   Wall.  439.   See,  also,  JeflFerson 

was   subsequently  held  in  W^eston  v.  v.    Skelly,  1  Black,  436  ;  Illinois  Cent. 

The  City  of  Charleston,  2  Pet.  (U.  8.)  R.  Co.  v.  County,  17   111.  291  ;  O'Don- 

449,  that  owners  of  government  stock  uell    v.    Bailey,  24    Miss.    386;  Sey- 

of  the  United  States  were  not  liable  to  niour     v.    Hartford,    21     Conn.     481. 

state  taxation  upon  the  stock.  But      exemptions      are      temporary. 


700  Private  Corporations. 

granted  bj  the  legislature  of  Missouri  to  the  Washington  Uni- 
versity, as  an  institution  of  learning.  The  court  was  divided  in 
this  case  as  well  as  the  case  from  which  we  have  just  quoted  from 
the  opinion.  Mr.  Justice  Davis,  in  delivering  the  opinion,  refers 
to  the  two  cases,  and  says :  "  The  object  of  the  cliarter  in  the  one 
case  was  to  promote  a  charity,  in  the  other,  to  encourage  learning. 
Both  were  public  objects  of  advantage  to  the  country,  and  which 
every  government  is  desirous  of  promoting.  Whether  the  en- 
dowment of  a  charity  is  of  more  concern  to  the  state  than  the 
endowment  of  a  university  for  learning,  is  within  the  power  of  the 
legislature  to  determine.  If  the  legislature  has  acted  in  a  man- 
ner to  show  that  it  considered  the  objects  equally  worthy  of  favor, 
it  is  not  the  province  of  this  court  to  pass  on  the  wisdom  of  the 
measure . " 

But  these  cases  were  decided  by  a  divi'ded  court,  Chase,  C.  J., 
and  Miller  and  Field,  JJ.,  dissenting  '  The  dissenting  opinion 
by  Mr.  Justice  Miller  maintains  the  general  doctrine  of  the 
inviolability  of  contracts  made  between  a  state  and  its  citizens, 
where  it  is  within  the  scope  of  the  power  of  the  state  to  act  in 
the  matter,  and  the  contract  is  not  against  general  public  policy. 
But  he  held  that  a  legislative  body,  sitting  under  a  state  constitu- 
tion of  the  usual  character,  had  no  right  to  sell,  give,  or  bargain 
away  forever,  the  taxing  power  of  the  state ;  that  this  power  is 
absolutely  essential  to  the  perpetuity  of  the  government ;  that  no 
civilized  government  has  ever  existed  that  did  not  depend  upon 
taxation  in  some  form  for  the  continuance  of  its  existence  ;  and 
that  to  allow  legislators  to  deprive  the  state  forever,  of  the  power 
of  taxation,  would  render  it  possible  for  them  to  destroy  the 
government  they  were  appointed  to  serve.* 

unless  contained  in  the  charter.  South-  of     stockholders    is     exempt.     Gor- 

ern  R.  Co.  v.  City  of  Jackson.  38  Miss,  don  v.  Appeal  Tax  Court,  3  How.  (U. 

334  ;  Ohio  Trust  Co. v.  Debolt,  16  How.  S.)  133.     So  is  the  franchise.  Wilming- 

(U.  S.)  416  ;  Christ's  Church  v.  Phila-  ton  R.  Co.  v.  Reid,  13  Wall.  264.     And 

delphia,  24  id.  300.     Under  a  general  an  exemption  for  a  term  of  years  is 

exemption  of  corporate  property  from  valid.     Raleigh,  etc.,   R.  Co.  v.  Reid, 

taxation,  corporate  stock  in  the  hands  id.  269. 

'  And  in  the  Delaware  Railroad  tax,  to  a  contract  so  as  to  prevent  a  subse- 

18  Wall.  206,  it  was  held  that  an  act  quent   legislature    from    imposing    a 

of  the   legislature,   consolidating  two  further  and  a  diflFerent  tax. 

railroads,  which  provided  that  the  new  ^  The  argument  against  the  power  of 

corporation  should   pay  a  certain  tax  the    legislatures  to   exempt   property 

annually  to  the  state,  did  not  amount  perpetually  from  taxation,  in  any  case. 


Taxation. 


701 


If  the  question  was  an  open  one,  there  would  be  little  doubt 
that  the  enlightened  judicial  mind,  seeing  the  danger  to  the 
permanency  of  governments,  by  contracts,  which  take  from 
them  the  right  of  taxation,  would  declare  such  contracts  void  as 


IB  so  well  presented  by  the  learned 
judge  that  I  insert  it  in  this  note. 
He  says  :  "  It  is  the  settled  doctrine 
of  this  court  that  it  will,  in  every 
case  atfectiug  personal  rights,  where, 
by  the  course  of  judicial  proceedings, 
the  matter  is  properly  presented, decide 
whetlier  a  state  law  impairs  the  obli- 
gation of  contracts;  and  if  it  does,  will 
declare  such  law  ineffectual  for  that 
purpose.  And  it  is  also  settled  beyond 
controversy  that  the  state  legislatures 
may,  by  the  enactment  of  statutes, 
make  contracts  which  they  cannot 
impair  by  any  subsequent  statutes. 
It  may  be  conceded  that  such  contracts 
are  so  far  protected  by  the  provis- 
ions of  the  federal  constitution  that 
even  a  change  in  the  fundamental  law 
of  the  state,  by  the  adoption  of  a  new 
constitution,  cannot  impair  them, 
though  provisions  to  that  effect  are 
incorporated  in  the  new  constitution. 
We  are  also  free  to  admit  that  one  of 
the  most  beneficial  provisions  of  the 
federal  constitution,  intended  to  secure 
private  rights,  is  the  one  which  pro- 
tects contracts  from  the  invasion  of 
state  legislation.  And  that  the  manner 
in  which  this  court  has  sustained  the 
contracts  of  individuals  has  done 
much  to  restrain  the  state  legislatures, 
when  urged  by  the  pressure  of  popu- 
lar discontent,  under  the  sufferings  of 
great  financial  disturbances,  from 
unwise  as  well  as  unjust  legislation. 
In  this  class  of  cases,  when  the  va- 
lidity of  the  contract  is  clear,  and  the 
infringement  of  it  by  the  legislature 
of  a  state  is  also  clear,  the  duty  of 
this  court  is  equally  plain  But  we 
must  be  permitted  to  say  that  in  de- 
ciding the  first  of  these  propositions, 
namely,  the  validity  of  the  contract, 
this  court  has  in  our  judgment  been 
at  times  quick  to  discover  a  contract 
that  might  be  protected,  and  slow  to 
perceive  that  what  are  claimed  to  be 
contracts  were  not  so,  by  reason  of 
the  want  of  authority  in  those  who 
profess  to  bind  others.  This  has  been 
especially  apparent  in  regard  to  con- 
tracts made   by   the    legislatures    of 


states,  and  by  those  municipal  bodies 
to  whom,  in  a  limited  measure,  some 
of  the  legislative  function  has  been 
confided.  In  all  such  cases,  where 
the  validity  of  the  contract  has  been 
denied,  the  question  of  the  power  of 
the  legislative  body  to  make  it  neces- 
sarily arises  ;  for  such  bodies  are  but 
the  agents  and  representatives  of  the 
greater  political  body  —  the  people, 
who  are  benefited  or  injured  by  such 
contracts,  and  who  must  pay,  when 
any  thing  is  to  be  paid,  in  such  cases. 
That  every  contract  fairly  made  ought 
to  be  performed  is  a  proposition  which 
lies  at  the  basis  of  judicial  education, 
and  is  one  of  the  strong  desires  of 
every  well-organized  judicial  mind. 
That,  under  the  intiuence  of  this  feel- 
ing, this  court  may  have  failed  in  some 
instances  to  examine,  with  a  judgment 
fully  open  to  the  question,  into  the 
power  of  such  agents,  is  to  be  re- 
gretted, but  the  error  must  be  at- 
tributed to  one  of  those  failings  which 
leans  to  virtue's  side.  In  our  judg- 
ment, the  decisions  of  this  court,  re- 
lied upon  as  conclusive  of  these  cases, 
belong  to  the  class  of  errors  which  we 
have  described. 

"  We  do  not  believe  that  any  legis- 
lative body,  sitting  under  a  state  con- 
stitution of  the  usual  character,  has  a 
right  to  sell,  to  give,  or  to  bargain 
away  forever,  the  taxing  power  of  the 
state.  This  is  a  power  which,  in 
modern  and  political  societies,  is  abso- 
lutely necessary  to  the  continued  ex- 
istence of  every  such  society.  While 
under  such  forms  of  government  the 
ancient  chiefs  or  heads  of  the  govern- 
ment might  carry  it  on  by  revenues 
owned  by  them  personally,  and  by  the 
exaction  of  personal  services  from 
their  subjects,  no  civilized  govern- 
ment has  ever  existed  that  did  not  de- 
pend upon  taxation  in  some  form  for 
the  continuance  of  that  existence.  To 
hold,  then,  that  any  one  of  the  an- 
nual legislatures  can,  by  contract,  de- 
prive the  state  forever  of  the  power  of 
taxation,  is  to  hold  that  they  can  de- 
stroy the  government  which  they  are 


702  Private  Cokpoeations. 

against  public  policy,  and  the  security  and  existence  of  the  gov- 
ernment, which  is  paramount  to  every  other  political  or  social 
object.  No  agent  or  representative  of  the  sovereign  authority 
should  be  permitted,  in  any  manner,  to  contract  or  stipulate  to 
suspend  perpetually  so  important  a  function  of  government.  If 
the  power  is  recognized  in  any  case,  it  may  be  extended  to  divest 
the  government  of  all  power  in  this  respect  ;  and  this  possibility 
is  a  sufficient  reason  for  denying  the  power  in  any  case. 

Sec.   4Y5.   indications    that    the    doctrine    will    not    be    extended 

After  the  many  protests  against  the  doctrine  of  exemption 
of  corporations  for  pecuniary  gain  from  taxation,  based 
upon  the  stipulations  contained  in  charters,  or  general  statutes 
providing  for  their  incorporation,  there  seems  to  be  a  disposition 
of  some  of  the  courts  to  limit  rather  than  extend  it.  In  a  re- 
cent case  in  the  supreme  court  of  the  United  States  the  facts 
were  as  follows :  The  act  of  incorporation  of  a  railroad  company 
exempted  the  capital  stock  of  the  company,  and  further  provided 
that  the  works,  fixtures,  workshops,  warehouses,  vehicles  of  trans- 
portation and  other  appurtenances  of  the  company,  should  be  ex- 
empt from  taxation  for  ten  years  after  the  completion  of  the  road 

appointed  to  serve,  and  that  their  taxation,  and  cast  all  the  burden  of 
action  in  that  regard  is  strictly  lawful,  the  support  of  the  government,  and  the 
"  It  cannot  be  maintained  that  this  payment  of  its  debts,  on  those  who  are 
power  to  bargain  away  for  an  un-  too  poor  or  too  honest  to  purchase  such 
limited  time  the  right  of  taxation,  if  immunity.  With  as  full  respect  for 
it  exists  at  all,  is  limited  in  reference  the  authority  of  former  decisions,  as 
to  the  subjects  of  taxation.  In  all  the  belongs  from  teaching  and  habit  to 
discussions  of  this  question,  in  this  judges  trained  in  the  common-law 
court  and  elsewhere,  no  such  limita-  system  of  jurisprudence,  we  think 
tion  has  been  claimed.  If  the  legisla-  that  there  may  be  questions  touching 
ture  can  exempt  in  perpetuity  one  the  powers  of  legislative  bodies, 
piece  of  land,  it  can  exempt  all  land,  which  can  never  be  finally  closed 
If  it  can  exempt  all  land,  it  can  exempt  by  the  decisions  of  a  court,  and 
all  other  property.  It  can  as  well  ex-  that  the  one  we  have  here  considered 
empt  persons  as  corporations.  And  is  of  this  character.  We  are  strength- 
no  hindrance  can  be  seen,  in  the  prin-  ened  in  this  view  of  the  subject,  by 
ciple  adopted  by  the  court,  to  rich  cor-  the  fact  that  a  series  of  dissents  from 
porations,  as  railroads  and  express  this  doctrine,  by  some  of  our  prede- 
companies,  or  rich  men,  making  con-  cessors,  shows  that  it  has  never  re- 
tracts with  legislatures,  as  they  best  ceived  the  full  assent  of  this  court ; 
may,  and  with  such  appliances  as  it  is  and  referring  to  those  dissents  for 
known  they  do  use,  for  perpetual  ex-  more  elaborate  defense  of  our  views, 
emption  from  the  burdens  of  support-  we  content  ourselves  with  thus  re- 
ing  the  government.  The  result  of  newing  the  protest  against  a  doctrine 
such  a  principle,  under  the  growing  which  we  think  must  finally  be  aban- 
tendencyto  special  and  partial  legisla-  doned.'' 
tion,  would  be  to  exempt  the  rich  from 


Taxation.  703 

within  the  limits  of  the  state.  The  company  was  also  authorized 
to  borrow,  from  time  to  time,  such  sums  of  money  as  might  be 
required  to  construct  the  road,  and  to  execute  bonds  and  mort- 
gages therefor  on  the  property  and  franchise  of  the  road.  By 
virtue  of  such  authority  money  was  borrowed  and  mortgage 
bonds  given  therefor ;  and  the  company  having  failed  to  pay  its 
bonds,  held  by  the  plaintiff,  judgment  was  obtained  thereon,  and 
a  foreclosure  of  the  mortgage  was  had,  and  the  property  and 
franchise  were  sold  to  satisfy  the  same,  and  purchased  by  the 
plaintiff  in  error.  This  action  was  brought  by  the  state  of 
Louisiana  against  the  purchaser  to  recover  certain  taxes. 

The  question  presented  was,  whether,  imder  the  circumstances, 
the  property  and  franchise  was  exempt  from  taxation.  The 
court  held,  that  immunity  from  taxation  did  not  accompany 
the  property  in  its  transfer  to  the  purchaser ;  that  exemption  in 
such  cases  was  a  personal  privilege  ;  that  the  franchises  of  a  rail- 
road corporation  are  rights  or  privileges  which  are  essential  to  the 
operations  of  the  corporation,  such  as  to  run  cars,  to  take  tolls,  to 
appropriate  earth  and  gravel  for  the  bed  of  its  road,  or  water  for 
its  engines,  and  without  which  its  roads  and  works  would  be  of 
little  value  ;  but,  that  immunity  from  taxation  was  not  itself  a 
franchise  of  a  railroad  corporation  which  passes  as  such  to  a  pur- 
chaser of  its  property.^  Mr.  Justice  Field,  in  delivering  the 
opinion  of  the  court,  observes :  "  The  question  presented  is, 
whether,  under  the  designation  of  franchise,  the  immunity  from 
taxation  upon  its  property  possessed  by  the  railroad  company  ac- 
companied the  property,  in  its  transfer  to  the  defendant,  and 
whether  that  immunity  was  a  mere  personal  privilege  of  the  com- 
pany, and,  therefore,  not  transferable  to  others  ?  The  supreme 
court  of  the  state  took  the  latter  view,  and  held  that  the  exemp- 
tion did  not  attach  to  the  property  of  the  corporation  so  as  to  fol- 
low it  into  the  hands  of  third  parties.  In  this  view  M'e  agree 
with  the  state  court.  The  greater  part  of  the  property  outside  of  the 
capital  stock  was  liable  to  constant  waste,  deterioration  and  destruc- 
tion, and,  according  to  the  ordinary  course  of  business,  would  be 
disposed  of  by  the  company  as  new  works  were  required.     It  can 

I  Morgan  v.  Louisiana,  3  Otto,  217. 


704  Private  Corporations. 

hardly  be  supposed  that  the  legislature  intended  that  the  exemp- 
tion should  follow  the  fixtures  and  vehicles  of  the  company  after 
they  had  passed  out  of  its  control,  so  that,  wherever  found,  the 
power  of  taxation  could  not  touch  them ;  or  that  workshops  and 
warehouses,  ceasing  to  be  the  property  of  the  company,  should 
carry  to  its  subsequent  possessors  a  privilege  intended  only  for  the 
benefit  of  the  corporation.  The  language  of  the  statute  requires 
no  such  construction,  and  intendments  will  not  be  indulged  to 
enlarge  the  operation  of  a  clause  restraining  the  exercise  of  a  sov- 
ereign attribute  of  a  state."  '  In  Illinois,  where  it  was  provided, 
in  a  general  act  for  the  incorporation  of  banks,  for  the  assessment 
of  taxes  in  a  certain  way,  this  was  held  not  to  be  a  contract  on 
the  part  of  the  government  with  the  corporations  organized  under 
it,  so  as  to  prevent  the  mode  of  assessment  from  being  changed 
by  subsequent  legislation.^  So,  where  the  legislature  of  South 
Carolina,  in  1851,  chartered  a  railroad  company,  but  did  not  ex- 
empt its  property  from  taxation,  but  in  1855  amended  the  charter, 
in  which  it  exempted  its  property  from  taxation,  and  in  1863  it 
passed  an  act,  conferring  all  the  powers,  rights,  and  privileges 
formerly  granted  to  such  company,  to  another  corporation,  which 
had  been  incorporated  in  1849  to  build  a  railroad,  it  was  held  by 
the  supreme  court  of  the  United  States,  that  the  act  of  1863  ex- 
empted the  last-named  road  from  taxation,  and  that  the  legislature 
could  not  repeal  such  act  so  as  to  subject  it  to  taxation.^  In  this 
case  the  court  observed  :  "  It  is  said  that  the.  power  of  taxation 
is  among  the  highest  powers  of  a  sovereign  state  ;  that  its  exercise 
is  a  political  necessity,  without  which  the  state  must  cease  to 

'  See,  also,  The  Delaware  Railroad  premium  of    ten   cents  a  bushel   on 

Tax,  18  Wall.  206.  every    bushel    of     salt,   made     from 

'^  Bank  of  the  Republic  v.  County  of  water  obtained  by  boring   within  the 

Hamilton,  21  111.  5.3.  state,   and  exemption   from   taxation 

2  Humphrey  V.  Pegues,  16  Wall.  244.  of  the  land  used  for   such   purposes, 

But  where  an  act  of  the  legislature  it   was   held  that   it   was   not   an   ir- 

provided  that  the  real  property  of  an  revocable     contract,    but   a   mere   act 

existing  hospital  should  be  thereafter  of    general    legislation,     and   that   it 

exempt  from  taxes,  and  this   was  re-  could  be  repealed  at  the  will  of 'the 

pealed  by  a  subsequent  act,  the  last  legislature,  even  after  parties  relying 

act   was   held    to    be    constitutional,  upon   the   provisions  of   the  act   had 

Christ's   Church   v.   Philadelphia,   24  entered   upon  the  business,  which  it 

How.   300;    24    Penn.   St.    229.     And  was  the  purpose  of  the  act  to  encourage, 

where  the  statute  of  a  state  offered  a  Salt  Co.  v.  East  Saginaw,  13  Wall.  373. 


Taxation.  705 

exist;  and  that  it  is  not  competent  for  one  legislature,  by  binding 
its  successors,  to  compass  the  death  of  the  state.  It  is  too  late  to 
raise  this  question  in  this  court.  It  has  been  held  that  the  legis- 
lature has  power  to  bind  the  state  in  relinquishing  its  power  to 
tax  a  corporation.  It  has  been  held  that  such  a  provision  in  the 
charter  of  an  incorporation  constitutes  a  contract,  which  the  state 
may  not  subsequently  impair."  ' 

Sec.  476.  Where  corporate  property  is  used  in  different  states. —  It  IS 
common  for  corporate  property  to  be  used  for  corporate  purposes, 
in  two  or  more  states,  and  the  question  has  arisen  in  such  cases  as 
to  the  place  where  it  should  be  assessed  and  taxes  be  levied  and 
collected.  If  it  is  subject  to  taxation  for  general  purposes  in  more 
than  one  place,  the  corporation  owning  it  "would  be  subject  to  an 
unequal  and  unjust  burden,  which  the  law  should  not  allow.  This 
question  was  recently  presented  to  the  supreme  court  of  the 
United  States,  in  the  case  of  St.  Louis  v.  The  Ferry  Co.'' 

The  defendants  were  a  corporation  organized  under  the  laws  of 
Illinois,  and  their  ferry  boats  ran  from  that  state  across  the  Mis- 
sissippi river  to  St.  Louis,  remaining  there  only  a  short  time  each 
trip  ;  and  the  question  was  whether  the  city  of  St.  Louis,  by  vir- 
tue of  a  statute  of  the  state,  authorizing  the  city  to  tax  all  property 
within  it,  could  tax  such  property.  The  supreme  court  of  the 
United  States  held  that  the  defendants  were  notliable  to  taxation 
in  St.  Louis,  although  the  boats  were  enrolled  in  that  city  in  pur- 
suance of  the  navigation  acts,  and  the  company  had  an  office  there, 
and  the  principal  officers  lived  there,  and  the  directors  held  their 
meetings  there,  and  the  corporate  seal  was  kept  there.  The  court 
say :  "  In  the  jurisprudence  of  the  United  States,  a  corporation  is  re- 
garded as  in  effect  a  citizen  of  the  state  which  created  it.  It  has 
no  faculty  to  migrate.  It  can  exercise  its  franchises  extra-terri- 
torially,  only,  so  far  as  ma}^  be  permitted  by  the  policy  or  comity 
of  other  states.     *     *     *     When  there  is  jurisdiction  of  neither 


•  See,  also,  Providence  Bank  v.  Bil-     v.    Woodward,    4    Wheat.    518  ;    The 
lings,  4  Pet.  514  ;  Dartmouth  College     Binghamton  Bridge,  3  Wall.  51. 

-'  il  Wall.  433. 

89 


706  Private  Cokporations. 

the  person  nor  property,  the  imposition  of  a  tax  wonld  be  ultra 
vires  and  void.  If  the  legislature  of  a  state  should  enact  that 
the  citizens  or  the  property  of  another  state  or  country  should  be 
taxed  in  the  same  manner  as  the  persons  and  property  within  its 
own  limits,  and  subject  to  its  authority,  or  in  any  other  manner 
whatsoever,  such  a  law  would  be  as  much  a  nullity,  as  if  in  con- 
flict with  the  most  explicit  constitutional  inhibition.  Jurisdiction 
is  as  necessary  to  valid  legislation  as  to  valid  judicial  action." 

Sec.  477.  Exemption  of  United  States  stocks,  etc.— Within  the  SCOpe 
of  the  powers  conferred  upon  congress,  by  the  provisions  of  the 
federal  constitution,  the  acts  of  congress  are  the  supreme  law 
of  the  land,  and  with  the  exercise  of  such  express  powers  as 
are  conferred  upon  that  body,  or  such  as  are  incidental  to  the 
proper  execution  of  such  powers,  the  legislatures  of  the  several 
states  have  no  right  to  interfere.  Under  the  powers  thus  con- 
ferred upon  congress  they  possess  the  exclusive  right  of  legisla- 
tion in  relation  to  various  matters  within  even  the  territorial 
limits  of  the  states. 

In  McCulloch  V.  State  of  Maryland,^  it  was  observed  by  Chief 
Justice  Marshall,  in  relation  to  this  subject,  as  follows : 

"  If  any  one  proposition  could  command  the  universal  assent 
of  mankind,  we  might  expect  it  would  be  this,  that  the  govern- 
ment of  the  Union,  though  limited  in  its  powers,  is  supreme  within 
its  sphere  of  action.  This  would  seem  to  result  necessarily  from 
its  nature.  It  is  the  government  of  all ;  its  powers  are  delegated 
by  all ;  it  represents  all,  and  acts  for  all.  Though  any  one  state 
may  be  willing  to  control  its  operations,  no  state  is  willing  to 
allow  others  to  do  so. 

"  But  the  question  is  not  left  to  mere  reason  ;  the  people  have 
in  express  terms  decided  it,  by  saying :  '  the  constitution  and  laws 
of  the  United  States  made  in  pursuance  thereof  shall  be  the  su- 
preme law  of  the  land,'  and  by  requiring  that  the  members  of  the 
state  legislatures  and  the  officers  of  the  executive  and  legislative  de- 
partments of  the  states  shall  take  the  oath  of  fidelity  to  it.  The 
government  of  the  United  States,  then,  though  limited  in  its  pow- 
ers, is  supreme,  and  its  laws  when  made  in  pursuance  of  the  con- 

'  4  Wheat.  316. 


Taxation.  Y07 

stitution  form  the  supreme  law  of  the  land,  '  any  thing  in  the 
constitutions  or  laws  of  the  states  to  the  contrary  notwith- 
standing.' 

"  Among  the  enumerated  powers  we  do  not  find  that  of  estab- 
lishing a  bank  or  creating  a  corporation.  But  there  is  no  phrase  in 
the  instrument,  which,  like  tlic  articles  of  confederation,  excludes 
incidental  or  implied  })owers,  and  which  requires  that  every  thing 
granted  shall  be  expressly  and  minutely  described.  *  *  *  It 
cannot  be  denied  that  the  powers  given  to  the  government  imply 
ordinary  means  of  execution.  That,  for  example,  the  power  of 
raising  revenue,  and  applying  it  to  national  purposes,  is  admitted 
to  imply  the  power  of  conveying  money  from  place  to  place,  as 
the  exigencies  of  the  nation  may  require,  and  of  employing  the 
usual  means  of  conveyance.  *  *  *  The  government  which 
has  a  right  to  do  an  act  and  has  had  imposed  on  it  the  duty  of 
performing  that  act,  must,  according  to  the  dictates  of  reason,  be 
allowed  to  select  the  means ;  and  those  who  contend  that  it  may 
not  select  any  appropriate  means,  that  one  particular  mode  of  ef- 
fecting the  object  is  excepted,  take  upon  themselves  the  burden  of 
establishing  that  exception.     *     *     * 

"After  the  most  deliberate  consideration  it  is  the  unanimous 
and  decided  opinion  of  the  court  that  the  act  to  incorporate  the 
Bank  of  the  United  States  is  a  law  made  in  pursuance  of  the  con- 
stitution and  is  a  part  of  the  supreme  law  of  the  land.  The 
branches,  proceeding  from  the  same  stock,  and  being  conducive 
to  the  complete  accomplishment  of  the  object  are  equally  consti- 
tutional. *  *  *  That  the  power  of  taxation  is  one  of  vital 
importance  ;  that  it  is  retained  by  the  states ;  that  it  is  not 
abridged  by  the  grant  of  a  similar  power  to  the  government  of 
the  Union;  that  it  is  to  be  concurrently  exercised  by  the  two 
governments,  are  truths  which  have  never  been  denied.  But 
such  is  the  paramount  character  of  the  constitution,  that  its  capac- 
ity to  withdraw  any  subject  from  the  action  of  even  this  power 
is  admitted.  The  states  are  expressly  forbidden  to  lay  any  duty 
on  imports  or  exports,  except  what  may  be  absolutely  necessary 
for  executing  their  inspection  laws.  If  the  obligation  of  this 
prohibition  must  be  conceded  —  if  it  may  restrain  a  state  from  the 
exercise  of  its  taxing  power  on  imports  and  exports,  the  same  par- 


708  Private  Corporations. 

amount  character  wonld  seem  to  restrain,  as  it  certainly  may  re- 
strain, a  state  from  such  other  exercise  of  this  power,  as  in  its 
nature  incompatible  with,  and  repugnant  to,  the  constitutional  laws 
of  the  Union.     *     *     * 

"  That  the  power  of  taxing  it  [the  bank]  by  the  states  may  be 
so  exercised  as  to  destroy  it  is  too  obvious  to  be  denied.  But 
taxation  is  said  to  be  an  absolute  power,  which  acknowledges  no 
other  limits  than  those  expressly  prescribed  in  the  constitution, 
and,  like  sovereign  power  of  every  other  description,  is  trusted  to 
the  discretion  of  those  who  use  it. 

"  But  the  very  terms  of  this  argument  admit  that  the  sover- 
eignty of  the  state,  in  the  article  of  taxation  itself,  is  subordinate 
to,  and  may  be  controlled  by,  the  constitution  of  the  United  States. 
How  far  it  has  been  controlled  by  that  instrument  is  a  question 
of  construction.  In  making  this  construction  no  principle,  not 
declared,  can  be  admissible,  which  would  defeat  the  legitimate 
operations  of  the  supreme  government.  It  is  of  the  very  essence 
of  supremacy,  to  remove  all  obstacles  to  its  action  within  its  own 
sphere,  and  so  to  modify  every  power  vested  in  subordinate  gov- 
ernments, as  to  exempt  its  own  operations  from  their  own  in- 
fluence.    *     *     * 

"  The  people  of  a  state  give  to  their  government  a  right  of  tax- 
ing themselves  and  their  property,  and  as  the  exigencies  of  govern- 
ment cannot  be  limited,  they  prescribe  no  limits  to  the  exercise  of 
this  right,  resting  confidently  on  the  interest  of  the  legislator 
and  on  the  influence  of  the  constituents  over  their  representatives 
to  ffuard  them  ao-ainst  its  abuse. 

"But  the  means  employed  by  the  government  of  the  Union 
have  no  such  security,  nor  is  the  right  of  a  state  to  tax  them  sus- 
tained by  the  same  theory.  Those  means  are  not  given  by  the 
people  of  a  particular  state,  not  given  by  the  constituents  of  the 
legislature,  which  claim  the  right  to  tax  them,  but  by  the  people 
of  all  the  states.  They  are  given  by  all  for  the  benefit  of  all,  and 
upon  theory,  shonld  be  subjected  to  that  government  only,  which 
belongs  to  all." ' 

1  See,  also,Westonv.  City  of  Charles-  Bank,  9  Wheat.  732;  Bank  of  Corn- 
ton,  3  Pet.  449  ;  Osborn  v.  United  States     merce  v.  New  York  City,  2  Black,  620. 


Taxation.  709 

In  the  case  of  Bank  of  Commerce  v.  New  York  Citij^  the 
question  involved  was  whether  the  stock  of  the  United  States, 
constituting  most  of  the  capital  stock  of  the  bank,  incorporated 
under  the  laws  of  New  York,  was  subject  to  a  tax  according  to 
its  value,  under  the  revenue  laws  of  that  state.  On  this  question 
Mr.  Justice  Nelson,  after  referring  to  various  authorities  bear- 
ing upon  the  question  and  sustaining  exemption  in  such  cases, 
observes : 

"  The  conclusive  answer  to  the  attempted  exercise  of  state 
authority  in  all  these  cases  is,  that  the  exercise  is  in  derogation 
of  the  powers  granted  to  the  general  government,  within  which, 
it  is  admitted,  it  is  supreme.  That  government  whose  powers, 
executive,  legislative  or  judicial,  wliether  it  is  a  government  of 
enumerated  powers  like  this  one  or  not,  are  subject  to  another 
distinct  government,  cannot  be  sovereign  or  supreme,  but  subor- 
dinate and  inferior  to  the  other.  This  is  so  palpable  a  truth  that 
argument  would  be  superfluous.  Its  functions  and  means  essen- 
tial to  the  administration  of  the  government,  and  the  employment 
of  them,  are  liable  to  constant  interruption  and  possible  annihi- 
lation. The  case  in  hand  is  an  illustration.  The  power  to  borrow 
money  on  the  credit  of  the  United  States  is  admitted.  It  is  one 
of  the  most  important  and  vital  functions  of  the  general  gov- 
ernment, and  its  exercise  a  means  of  supplying  the  necessary 
resources  to  meet  exigencies  in  times  of  peace  or  war.  But  what 
avail  is  the  function  or  the  means,  if  another  government  may  tax 
it  at  discretion.  It  is  apparent  that  the  power,  function,  or  means, 
however  important  and  vital,  are  at  the  mercy  of  that  govern- 
ment. And  it  must  be  always  remembered,  if  theright  to  im- 
pose a  t;ix  at  all  exists  on  the  part  of  the  other  government,  '  it 
is  a  right  which  in  its  nature  acknowledges  no  limits.'  And  the 
principle  is  equally  true  of  every  power  or  function  of  a  gov- 
ernment subject  to  the  power  or  control  of  another." 

It  will  be  apparent  that  it  is  difficult,  in  the  somewhat  com- 
plicated structure  of  our  state  and  national  governments,  to  fix 
the  exact  boundary  line  between  the  two ;  and  this  question  of 
taxation  lias  been  one  of  the  prolific  sources  of  embarrassment 
in  tliis  respect.     Their   powers    are   so   closely    and    intimately 

'  2  Black  (U.  S.),  630. 


710  Private  Coepoeations. 

related,  that  where  tlie  limits  of  the  one  is  fixed  the  other  ends, 
and  the  whole  coniplicated  structure  may  become  harmonious, 
only,  by  application  of  the  fundamental  principle  that  each  is 
sovereign  and  independent  within  the  proper  sphere  and  scope  of 
its  powers,  and  may  exercise  the  functions  of  sovereignty  as 
provided  by  the  federal  constitution,  in  the  one  case,  and  subject 
only  to  the  limitations  of  the  constitutions  of  the  respective  states, 
and  of  the  federal  constitution,  in  the  other. 


Sec.  478.   EKemption  from  taxation  under  the  national  banking  lavr. — 

The  national  banking  law,  on   the  subject  of  taxation,  provides 
as  follows  :  — 

"  Sec.  5214.  In  lieu  of  all  existing  taxes,  every  association  shall 
pay  to  the  treasurer  of  the  United  States,  in  the  months  of 
January  and  July,  a  duty  of  one-half  of  one  per  centum  each 
half-year  upon  the  average  amount  of  notes  in  circulation,  and  a 
duty  of  one-quarter  of  one  per  centum,  each  half-year,  upon  the 
average  amount  of  its  deposits,  and  a  duty  of  one-quarter  of  one 
per  centum,  each  half-year,  on  the  average  amount  of  its  capital 
stock,  beyond  the  amount  invested  in  United  States  bonds.    *    * 

"Sec.  5219.  Nothing  herein  shall  prevent  all  the  shares  in  any 
association  from  being  included  in  the  valuation  of  the  personal 
property  of  the  owner  or  holder  of  such  shares,  in  assessing  taxes 
imposed  by  authority  of  the  state  within  which  the  association  is 
located ;  but  the  legislature  of  each  state  may  determine  and  direct 
the  manner  and  place  of  taxing  all  the  shares  of  national  banking 
associations  located  within  the  state,  subject  only  to  the  two 
restrictions,  that  the  taxation  shall  not  jbe  at  a  greater  rate  than 
is  assessed  upon  other  moneyed  capital  in  the  hands  of  individual 
citizens  of  such  state,  and  that  the  shares  of  any  national  banking 
associations  owned  by  non-residents  of  any  state  shall  be  taxed 
in  the  city  or  town  where  the  bank  is  located,  and  not  elsewhere. 
Nothing  herein  contained  shall  be  construed  to  exempt  the 
real  property  of  associations  from  either  state,  county,  or  muni- 


Taxation.  711 

cipal  taxes,  to  tlie  same  extent,  according  to  its  value,  as  other 
real  property  is  taxed."  ^ 

Uuder  the  foregoing  provisions  it  was  held,  in  Van  Allen  v. 
The  Assessors,''  that  the  shares  of  banking  associations,  organized 
under  said  act  and  in  the  liands  of  the  sliareholdcrs,  were  subject 
to  taxation  by  the  state  in  which  the  association  is  formed,  sub- 
ject to  the  restrictions  mentioned,  although  the  wliole  capital  of 
such  association  may  be  invested  in  national  securities,  which  are 
declared  by  an  act  of  congress  to  be  "  exempt  from  taxation  by 
or  under  state  authority."  ' 

Sec.  522.  Municipal  subscriptions  in  aid  of  corporate  enterprises  and 
taxation  therefor. —  According  to  many  authorities,  the  public  inter- 
est is  so  much  identified  with  railroad  and  other  corporate  enter- 
prises, as  to  authorize  a  subscription  of  towns,  cities  or  counties, 
to  the  corporate  stock,  by  virtue  of  a  power  conferred  upon  tliem 
by  statute,  especially  where  such  roads  are  constructed  tlu'ough, 
or  such  enterprises  are  organized  and  carried  on  within,  such  towns, 
cities  or  counties.*  Subscriptions  made  by  the  proper  agents  of 
such  towns,  cities  or  counties,  duly  authorized  therefor,  have, 
perhaps,  usually  been  held  binding  upon  tlie  municipal  corpora- 
tions whom  they  represent;  and  if  the  authority  to  make  such 
subscriptions  on  the  part  of  such  corporations  exists,  it  would  be 
the  manifest  duty  of  the  proper  authorities,  in  the  absence  of 
other  provisions,  to  levy  and  collect  a  special  tax  for  the  purpose 

1  Rev.  Stat.  U.  S.  1874  ;  Act  June  3,  *  Sharpless  v.  The  Mayor  of  Pliila- 

1864.  delpliia,21  Penn.  St.  147  ;  Moers  v.  The 

'■'3  Wall.  573.  City  of   Reading,  id.   188;  Cincinnat-i, 

'See,    also,   the    same    doctrine   in  etc.,  R.  Co.  v.  Commissiouers,  1  Ohio 

Lionberirer  v.  Rouse,  9  Wall.  408  ;  Na-  (N.  S.),  77  ;  Case  v.  Dillou,  3  id.  607  ; 

tioaal    Bauk    v.    Commonwealth,    id.  New  Orleans,  etc.,  R.  Co.  v.  Succession, 

353;  Minizerv.  County  of  Montgomery,  etc.,  8  La.  Ann.  341,  Slack  v.  Mays- 

54   I'enn.   St.    139  ;   Monroe   Co.  Sav.  ville,  etc.,  R.  Co  ,  13  B.  Monr.  1  ;  Cov- 

Bank  v.  Rochester,  37  N.  Y.  365  ;  So-  ington,  etc.,  R.  Co.  v.  Kenton  Co.  Ct., 

ciety,  etc.,  v.  Coite,  6  Wall.  594  ;  Prov-  13  id.  144  ;  Talbot  v.  Dent,  9  id.  526  ; 

ident  Inst.  v.  Massachusetts,  id.  611.  Justices,  etc.,  v.  Turupike  Co.,  11  id. 

But  see  Bank    Tax  Case,   2   id.  200.  145;    Shaw    v.    Deunis,   10    111.    405; 

United  States  certificates  of  indebted-  People  v.  Mayor,  etc.,  4  N.  ¥.   419; 

ness,  under  the  act  of  March  1,  1863,  Bridgeport  v.  Housatonic  R.  Co.,  15 

are  not  exempt  from  taxation.    People  Conn.  475  ;  Stein  v.  City  of  Mobile,  24 

V.  Hoffman,  37  N.  H.  9.      And  under  Ala.     591  ;    Nichol    v."    Nashville,    9 

the   act   of   February   25,  1863.  legal  Humph.  252;   Augusta   Bank    v.   Au- 

teuder  notes  are  not  exempt.     People  gusta,  49  Me.  507;  Parker  v.  Scogin, 

V.  Board  of  Supervisors,  37  N.  Y.  21.  11  La.  Ann.  639. 


712  Pkivate  Corporations. 

of  meeting  sucli  obligations.  But,  on  this  subject,  there  has  been 
a  great  diversity  of  views  and  decisions,  and  in  the  same  states, 
the  decisions  have  fluctuated.* 

Mr.  Redfield,  on  this  subject,  observes  :  "  It  is  not  now  import- 
ant to  discuss  the  principle  of  these  conflicting  decisions,  since  the 
tide  of  judicial  opinion  is  almost  all  in  one  direction  and  not  in 
concurrence  with  the  latter  determinations.  For  ourselves,  we 
are  free  to  confess  that  we  could  never  comprehend tlie  basis  upon 
which  so  many  able  jurists  in  this  country  have  professed  to  per- 
ceive, clearly,  the  reason  for  giving  municipal  corporations  the 
power  to  become  stockholders  in  railway  companies.  We  have 
always  felt  that  it  was  one  of  those  cases  in  jurisprudence  where 
the  wish  was  father  to  the  thought."  ^ 

And  Mr.  Dillon  says :  "  The  most  noted  of  extraordinary 
powers  conferred  upon  municipal  corporations  is  the  authority  to 
aid  in  the  construction  of  railways  by  subscription  to  their  stock, 
and  taxing  the  inhabitants  or  the  property  within  their  limits  to 
pay  the  indebtedness  thereby  incurred.  Legislation  of  this  kind 
had  its  origin  within  a  period  comparatively  recent,  and  has  been 
more  or  less  resorted  to,  at  times,  by  almost  every  state  in  the 
Union.  As  it  is  the  author's  duty,  in  a  work  of  this  character,  to 
state  what  the  law  is,  rather  than  what,  in  his  judgment,  it  ought 
to  be,  he  feels  constrained  to  admit  that  a  long  and  almost  un- 
broken line  of  judicial  decisions  in  the  courts  of  most  of  the 
states,  has  established  the  principle  that,  in  the  absence  of  special 
restrictive  constitutional  provisions,  it  is  competent  for  the  legis- 
lature to  authorize  a  municij)al  or  public  corporation  to  aid,  in  the 
manner  above  indicated,  the  construction  of  railways  running 
near,  or  to,  or  through  them.  *  *  *  Notwithstanding  the 
opinion  of  so  many  learned  and  eminent  judges,  there  remain  seri- 
ous doubts  as  to  the  soundness  of  the  principle,  viewed  simply  as 
one  of  constitutional  law.  Eegarded  in  the  light  of  its  effects, 
however,  there  is  little  hesitation  in  affirming  that  this  invention 

'  See,  against  tliis  doctrine,  Stokea  St.  Louis   v.    Alexander,  23   Mo.   483  ; 

V.  County  of  Scott,  lOTowa,  166  ;  State  Thorpe  v.  Rutland,  etc.,  R.  Co.,  27  Vt. 

of  Iowa  y .  County  of   Wapello,  13  id.  140  ;  Thompson  v.  Lee  County,  3  Wall. 

3^8  ;  (xi-iffith   v.  Commissioners,    etc.,  327.     The  contrary  authorities  will  be 

20  Ohio,  609;  Pennsylvania  R.  Co.  v.  cited  hereafter. 

City  of  Philadelphia,  47  Penu.  St.  189;  ^  j  Redf.  on  Rail.,  §  280,  note  1. 
Taylor  v.  Newberne,  2  Jones'  Eq.  141 ; 


Taxation.  T13 

to  aid  the  enterprises  of  private  corporations,  has  proved  itself 
baneful  in  the  last  degree."  ' 

Notwithstanding  the  reasons  adduced  against  the  doctrine,  based 
upon  fundamental  principles  of  the  law,  the  authorities  have 
constantly  been  multiplying  in  support  of  the  right  of  municipal 
corporations  to  subscribe  for  the  stock,  and  thereby  aid  in  the 
construction  of  railroads  and  other  corporate  enterprises. 

"  The  tide  rolls  on  with  tlie  general  approbation,  and  the  only 
hope  now  is  to  be  able  to  fix  such  limits  to  railway  extension,  by 
means  of  municipal  aid,  that  the  entire  property  of  the  country 
may  not  be  thrown  into  public  and  official  administration  by 
means  of  the  unlimited  power  of  extension  of  taxation."  ' 

Where  there  is  no  special  constitutional  limitation  on  the  sub- 
ject, and  authority  is  conferred  for  this  purpose,  on  the  town,  city, 
or  county,  it  seems  settled  by  at  least  the  greatest  number  of 
authorities,  that  they  may  subscribe  for  railroad  or  other  corporate 
stock,  borrow  money  to  pay  for  the  same,  and  levy  a  tax  to  pay 
the  subscription  or  repay  the  loan ;  and  that  this  authority  may 
be  exercised  without  a  submission  of  tlie  matter  to  the  citizens,  or 
an  approval  of  the  same  by  a  popular  vote.^ 

The  consideration  of  this  question,  in  this  connection,  is  pertinent 
and  important  only  as  it  involves  the  question  of  taxation.  It  is 
evident  that  if  a  municipal  corporation  may  subscribe  for,  or  bor- 
row money  to  pay  a  subscription  to,  a  railroad  or  other  private 

'  Dill,  on  Man.  Corp.,  t$  104.  acquiescence  in  the  validity  of  bonds 
'■'I  Redf.  on  Raihv.,  ^  3o0.  See,  issued  by  a  municipal  corporation 
however,  recent  decisions  against  the  would  raise  a  presumption  that  tliere 
legality  of  municipal  aid  in  sucli  cases,  was  a  compliance  with  the  requisite 
Fisk  V  City  of  Kenosha,  26  Wis.  33  ;  formalities  in  issuing  them.  See.  also, 
English  V.  Chicot  Co. ,  2(5  Ark.  454;  the  same  general  doctrine  in  New 
Hanson  v.  Vernon,  27  Iowa.  28  ;  Whit-  York.  People  v.  Mitchell,  35  N.  Y. 
ing  V.  Sheboygan  R.  Co.,  25  Wis.  l')7 ;  551  ;  Wiiite  v.  Syracuse  &  U.  Q.  Co.,  14 
People  V.  Saiem,  20  Midi.  452;  Thorpe  B:irb  55y  ;  Copes  v.  Charlestown,  10 
V.  Rutland,  etc.,  R.  Co.,  27  Vt.  U  )  ;  Hicix.  (S.  C.)  491  ;  Clark  v.  City  of  Ro- 
State  V.  ('onlin,  id.  318  ;  Lincoln  v.  Chester,  24  Barb.  440  ;  Grant  v.  Court- 
Smith,  id.  328  ;  State  v.  Parker,  26  id.  er,  id.  232  ;  Benson  v.  Mayor  of  Al- 
357;  Walker  V.  City  of  Cincinnati,  21  banv,  id.  248;  Starin  v.  Genoa.  23 
Jhio  St.  14;  Beckel  v.  Uniim  Tp.,  15  N.  Y.  439;  Winn  v.  Macon,  21  Ga. 
id.  437.  275,  where  it  was  held  that  the  legis- 
^  la  addition  to  the  authorities  al-  lature  might  ratify  a  subscription 
ready  cited  in  support  of  this  view,  made  without  authority.  And  the 
see,  also,  Thomson  v.  Lee  County,  3  same  doctrine  was  held  in  Butler  v. 
Wall.  ;127  ;  Bnty  v.  City  of  Muscatine,  Dunham,  27  111.  474.  and  Common- 
8  id.  575  ;  Pendleton  v.  Army,  13  id.  wealth  v.  Perkins,  43  Penn.  St.  400. 
297,  where  it  was  also  held  that  long 

90 


714  Private  Corporations. 

corporation,  the  money  requisite  to  liquidate  such  indebtedness 
imist  be  raised  in  the  usual  way,  by  a  levy  and  collection  of  taxes 
therefor.  And  such  levy  and  collection  would  not  only  be  a  duty 
imposed  upon  the  proper  officers  of  the  corporation,  but  the  obli- 
gation in  .this  respect  could  be  enforced  by  mandamus} 

'  State  V.  City  of  Davenport,  12  Iowa,  5  id.  705  ;  Butz  v.  City  of  Muscatine,  8 

335  ;  Von  Hoffman  v.  City  of  Quincy,  id.  575  ;  Mayor  v.  Lord,  9  id.  409.     See 

4  Wall.  535;    Supervisors  v.    United  Mandamus. 
States,  id.  435  ;  City  of  Galena  v.  Amy, 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      715 
CHAPTER  XXIII. 

NEGLIGENCE   AND   WKONGFUL    ACTS  OF   AGENTS   OR   8EUVANT8. 

Sec.  480.     Corporate  liability  for  negligence   and  wrongful  acts  of  agents 

and  servants. 
Sec.  481.     Illustration  of  the  rule. 
Sec.  483.     Tlie  maxim  quifdcit  per  alium  facit  per  se,  especially  applicable 

to  corporations. 
Sec.  483.     Cases  illustrating  the  maxim. 
Sec.  484.     Id. 
Sec.  485.     Id. 
Sec.  486.    Id. 

Sec.  487.     Real  test  of  liability. 
Sec.  488.     Implied  powers  of  agents. 
Sec.  489,     Matters   to  be   considered   in   determining  whether  the   act  is 

within  the  scope  of  the  agent's  authority. 
Sec.  490.     Contractor's  and  contractee's  liability. 
Sec.  491.     Liability  in  case  of   a  nuisance  attaches  only  when  a  nuisance 

necessarily  results. 
Sec.  492.     Corporations  bound  to  the  same  degree  of  care  as  natural  per- 
sons—  degree  of  care. 
Sec.  493.     Not  insurers  against  all  casualties. 
Sec.  494.     Care   required   of  railroad  corporations  in  relation  to   engines, 

cars,  track,  etc. 
Sec.  495.     Id. 

Sec.  496.     Instances  of  negligence  where  the  corporation  was    eld  liable. 
Sec.  497.     Duty  of  railroad  corporations. 
Sec.  498.     Id. 

Sec.  499.     Injuries  received  in  getting  upon  a  train. 
Sec.  500.     Accommodations  —  contributory  negligence. 
Sec.  501.     Duty  to  passengers. 
Sec.  502.    Id. 

Sec.  503.     Liability  for  willful  wrongs  of  agents. 

Sec.  504.     Liability  of  railroad  corporations  for  delay  in  running  trains. 
Sec.  505.     Liability  for  negligence  in  constructing   or  repairing  railroads, 

or  for  nuisances. 
Sec.  506.     Engines  and  machinery. 

Sec.  507.     Application  of  the  maxim  sic  utere  tuo  ut  alienum  non  Imdas. 
Sec.  508.     Contributory  negligence. 
Sec.  509.     Consequential  damages. 

Sec.  510.     Injury  to  persons  and  property  by  running  of  trains. 
Sec.  511.     Trespassers  on  the  tracks. 
Sec.  512.    Different  rule  as  to  children. 
Sec.  518.     Injuries  to  animals. 
Sec.  514.    Id. 


716 


Private  Corporations. 


Sec.   515.     Inatances  of  liability  for  other  torts  of  servants. 
Sec.  51G.     Liability  to  indictment. 

Sec.  480.  Corporate  liability  for  negligence  and  wrrongful  acts  of  agents 
or  servants.— A  corporation  being  an  artificial  person  must  neces- 
sarily discharge  its  functions  through  agents  and  servants,  and  as 
a  result,  is  necessarily  and  justly  held  chargeable  for  the  manner 
in  which  their  duties  are  discharged.  It  is  liable  for  the  negligent 
or  tortious  acts  of  its  servants  or  agents  w^ithin  the  scope  of  their 
authority,  upon  the  same  grounds,  in  the  same  manner  and  to  the 
same  extent  as  an  individual,  and  that,  too,  without  any  reference 
to  the  objects  or  purposes  for  which  it  was  established  or  the 
powers  conferred  or  restrictions  imposed  upon  it  by  law.  The 
defense  of  xdtra  vires  does  not  generally  apply  in  cases  of  tort.^ 
Tlie  law  never  authorizes  an  unlawful  act.  A  corporation  has  no 
authority  from   its  charter  or   from  the  general   law  to  publish 


'  "  Corporations,"  says  the  court  in 
Bissell  V.  Southern,  etc.,  R.  R.  Co.,  23 
N.  Y.  258,  "  like  natural  persons  have 
the  capacity  to  do  wrong  ;  and  toheii, 
ih  their  dealings,  they  break  over  the  re- 
straint imposed  upon  them,  an  exemp- 
tion from  liability  cannot  he  claimed  on 
the  mere  ground  that  they  have  no 
power  to  aety  Green  v.  London,  etc.. 
Omnibus  Co,,  7  C.  B.  (N.  S.)  290  ;  Lim- 
pus  V.  General  Omnibus  Co.,  1  H.  & 
C.  528.  Where  a  corporati'^n  intrusts 
an  agent  with  a  duty  that  does  or  tnay 
involve  the  use  of  force  and  personal 
violence  to  others,  if  the  servant,  in 
the  discharge  of  such  duty,  goes 
beyond  the  proper  limits  in  its  use, 
the  corporation  is  answerable  for  the 
consequences.  Hewett  v.  Swift,  3 
Allen  (Mass.),  420  ;  Moore  v.  Fitch- 
burgh  R.  Co.,  ante.  So  where  the 
act  may  result  in  a  nuisance.  Rex  v. 
Medlev,  ante;  Ellis  v.  Sheffield  Gas 
Co.,  18  Jur.  146.  The  liability  of  a 
corporation  for  the  wrongful  acts  of  its 
agents  stands  upon  the  same  ground 
as  that  of  a  natural  person,  and  it  is 
liable  for  the  consequences  of  wrong- 
ful acts  committed  by  them,  within 
the  scope  of  their  authority,  however 
foreign  to  its  nature,  or  however  much 
the  same  may  be  in  excess  of  its 
irranted  powers.  N.  Y.  &  New  Haven 
R.  Co.  V.  Schuyler,  34  N.  Y.  30; 
Kaeass  v.  Schuylkill  Bank,  4  Wash. 


(U.  S.  C.  C.)  9;  Goodspeed  v.  East 
Haddam  Bank,  22  Conn.  530.  The 
ground  upon  which  this  liability  is 
predicated  is,  that,  as  a  corporation 
necessarily  acts  by  agents,  by  com- 
mitting «n?/ authority  to  them,  it  must 
be  made  chargeable  for  any  abuse  of 
the  power  so  intrusted  to  them, 
rather  than  an  innocent  party,  nowise 
in  fault.  Thus,  where  tbe  officers 
of  a  corporation  issue  fraudulent 
stock  and  permit  its  transfer,  it  is 
liable  to  the  party  receiving  such 
stock,  precisely  the  same  as  it  would 
be  if  the  stock  was  genuine.  The 
transaction  is  fraudulent  and  is  the 
cause  of  the  injury  and  the  basis  of 
recovery.  The  court,  under  such  cir- 
cumstances, will  not  hear  the  party 
upon  its  assertion  that  the  act  is  ^dtra 
vires.  N.  Y.  &  N.  H.  R.  Co.  v. 
Schuyler,  ante;  Aldrich  v.  Press  Print- 
ing Co..  9  Minn.  133;  Whitfield  v.  S. 
E.^R.  Co.,  31  L.  T.  113  ;  Terre  Haute 
Gas  Co.  v.  Teel,  20  Ind.  131  ;  Taylor 
V.  Boston  Water  Power  Co.,  12  Gray 
(Mass.),  415  ;  Moore  v.  Fitchburgh  R. 
Co.,  4  id.  465;  St.  Louis,  etc.,  R. 
Co.  v.  Dalby,  19  111.  353;  Foote  v. 
Cincinnati,  9  Ohio,  31  ;  Duncan  v.  Sur- 
rey Canal,  3  Starkie,  50;  Stevens  v. 
Boston,  etc.,  R.  Co.,  1  Gray,  277  ;  Rex 
v.  Medlev,  6  C.  &  P.  292;  State  v.  Vt. 
Cent.  R.  Co.,  27  Vt.  103  ;  Hewett  v. 
Swift,  3  Allen,  420  ;  Thayer  v.  Boston 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      717 

a  libel^  to  commit  an  assault,  or  to  erect  or  maintain  a  nuisance, 
yet  it  may,  through  its  servants  or  agents,  commit  these,  as 
well  as  other  offenses,  and  be  answerable  therefor,  either  civilly 
or  criminally,  the  same  as  an  individual  would  be.'  They 
are  liable  for  the  torts  of  their  agents  as  well  as  for  their  con- 
tracts,"'' but  in  order  to  establish  a  ground  of  recovery  the  act 
must  be  one  that  was  within  the  scope  of  the  authority  of  such 
agent  or  servant.' 

Sec.  481-  illustration  of  the  r\Ue.  —  Thus,  if  an  agent  of  the 
corporation  commits  an  assault,  unless  it  was  fairly  within  the 
scope  of  his  duty,  the  corporation  cannot  be  held  chargeable 
therefor,  as  where  an  officer  of  a  bank  assaults  a  person  who 
goes  there  upon  business ;  *  but  if  the  duty  committed  to  the 
agent  was  such  that  the  assault  was  an  incident  thereof,  that  is,  if 
it  was  committed  in  the  discharge  of  such  duty  and  in  further- 
ance thereof,  the  corporation  is  liable  therefor  tlie  same  as  an 
individual  would  be.  Thus,  a  railroad  company,  by  placing  a 
conductor  in  charge  of  a  train  of  cars  to  collect  fares,  is  liable 
for  an  assault  committed  by  him  or  by  his  direction  in  discharg 
ing  that  duty,  even  though  the  act  is  ill-advised,  unnecessary 
and  entirely  unlawful.' 

19  Pick.  (Mass.)  511  ;  Thatcher  v.  Lvman  ■».  White  River  Bridge  Co.,  2 
Bank,  5  Sandf.  (N.  Y.)  121 ;  Beach  v.  Aiken  (Vt.),  255  ;  Whiteman  v.  R.  Co., 
Fulton  Bank,  7  Cow.  (N.  Y.)  485;  2  Harr.  (Del.)  514;  Underwood  o.  New- 
Edwards  V.  Union  Bank,  1  Fla.   136  ;  port  Lyceum,  5  B.  Monr.  (Ky.)  129. 

'  First   Baptist  Church  v.    Schenec-  *  Wood's  Law  of  Master  and  Serv- 

tady,  etc.,  R.  R.  Co.,5  Barb.  (N.  Y.)  ant,  548-580.     In  Ramsden  v.  Boston 

79  ;"  Rhodes  v.  Cleveland,  10  Ohio,  159  ;  &  Albany  R.  Co.,  104  Mass.  117;  6  Am. 

Thompson  ■«.  New  Orleans  &  Carrolton  Rep.  117,  the  female    plaiutiflf  was   a 

Co.,  10   La.    Ann.   403;    Little    Miami  pa.ssenger  upon  the  defendants'  rail- 

R.  R.  Co.  V.  Stevens,  20  Ohio,  415.  road,  and  upon  being  called  upon  for 

^  Beach  v.  Fulton  Bank,  7  Cow.  (N.  her   fare    paid    it   to    the   conductor. 

Y.)   485  ;    Hawkins   v.  Dutchess,  etc..  Soon  after  he  called   upon  her   again 

Steamboat  Co.,  2  Wend.  (N.  Y.)   452;  for  her  fare,  and  she  declined  to  pay 

Lyman  v.  White  River  Bridge  Co.,  2  him,  informing  him  that  slie  had    al- 

Aik.  (Vt.)  255  ;  Moore  v.  Fitchburgh  R.  ready  paid  it  to  him.     This   the   con- 

R.  Co.,  5  Gray  (Mass.),  465.  ductor  denied,  and  used  very  abusive 

^Orr  V.  Bank  of  United  States,  1  and  ins  alting  language  to  her,  and  de- 
Ohio,  36.  manded  that  she  should  give  him  her 

*  Orr  13.  Bank,  ante  parasol   to   keep   as  security  for  hel 


718 


Private  Cokpokations. 


Sec.  482.  The  maxim,  qui  facit  per  alium  facit  per  se,  specially  appli- 
cable to  corporations.  —  The  rule  IS,  that  "  when  a  person  puts 
another  in  his  phice  to  do  certain  acts  in  his  absence,  he  necessarily 
leaves  him  to  determine  for  himself,  according  to  his  judgment 
and  discretion,  according  to  circumstances  and  exigencies  that  may 
arise,  when  and  how  the  act  is  to  be  done,  and  trusts  him 
for  its  proper  execution ;  consequently  he  is  liable  for  the 
wrongful  execution  of  the  act,  both  in  the  manner  and  occasion  of 
doing  it,  provided  it  is  done  hona  fide  in  the  prosecution  of  his 
business  and  within  the  scope  of  the  servant's  express  or  implied 
authority,  and  not  from  mere  caprice  and  wantonness,  and  wholly 


fare,  which  she  refused  to  do,  and  the 
conductor  thereupon  took  hold  of  the 
parasol  and  forcibly  wrenched  it  from 
her  possession.  The  lower  court  held, 
as  a  matter  of  law,  that  no  recovery- 
could  be  had,  because  no  authority, 
express  or  implied,  existed  on  the  part 
of  the  conductor  to  seize  the  property 
of  a  passenger  for  the  payment  of 
fare.  But,  upon  appeal,  this  ruling 
was  reversed.  Gray,  J.,  remarking: 
"  The  use  of  unwarrantable  violence 
in  attempting  to  collect  fare  of  the 
plaintiff  was  as  much  within  the  scope 
of  the  conductor's  employment  as  the 
exercise  or  threat  of  unjustifiable 
force  in  ejecting  a  passenger  from  the 
cars.  Neither  the  corporation  nor  the 
conductor  has  any  more  lawful  au- 
thority to  needlessly  kick  a  passenger 
or  make  him  jump  from  the  cars  when 
in  motion  than  to  wrest  from  the 
hands  of  a  passenger  an  article  of 
apparel  or  personal  use,  for  the  pur- 
pose of  compelling  payment  of  fare. 
Either  is  an  unlawful  assault ;  bat,  if 
committed  in  the  exercise  of  the  gen- 
eral power  vested  by  the  corporation 
in  the  conductor,  the  corporation  as 
well  as  the  conductor  is  liable  to  the 
party  injured." 

In  another  case.  Holmes  v.  Wake- 
Qeld  ei  al.,  12  Allen  (Mass.),  580,  it 
was  held  that  even  though  the  plain- 
tiff was  a  trespasser  at  the  time  when 
the  injury  was  inflicted,  yet,  if  in 
ejecting  him  from  the  train  the  con- 
ductor uses  more  force  than  is  reasona- 
ble or  necessary  to  accomplish  his  re- 
moval, or  removes  him  under  improper 
circumstances,  the  company  would  be 
liable  for  the  injury.  Thus,  in  this 
case,  the  plaintiff  got  upon  a  f  reighv 


train,  and,  after  it  had  started,  the 
conductor  told  him  to  get  off.  The 
plaintiff  offered  to  pay  his  fare,  but 
the  conductor  declined  to  receive  it, 
and,  while  the  train  was  in  motion, 
gave  him  a  push,  so  that  to  save  him- 
self he  had  to  jump,  and  thus  was  seri- 
ously injured.  It  appeared  that  the 
company  had  issued  printed  instruc- 
tions as  follows  :  "  The  conductor  will 
not  allow  any  person  to  ride  in  any 
freight  car  attached  to  their  train."  of 
which  instruction  the  conductor  was 
aware  ;  and  this  was  the  only  authori- 
ty or  instruction  under  which  the  con- 
ductor acted.  The  court  held  that  the 
company  were  liable  for  the  injury. 

In  an  Indiana  case  (Jeffersonville  R. 
Co.  V.  Rogers,  38  Ind.  Il6)  it  appeared 
that,  by  a  regulation  of  the  defend- 
ant—  a  railroad  company  —  an  addi- 
tional sum  was  charged  of  passengers 
who  had  not  procured  tickets  before 
entering  the  cars.  The  plaintiff  ap- 
plied at  the  ticket  office  of  defendant 
for  a  ticket  to  C,  but,  without  fault 
on  his  part,  failed  to  procure  it.  On 
the  cars  he  informed  the  conductor  of 
his  attempt  to  procure  a  ticket,  and 
tendered  the  sum  required  to  purchase 
a  ticket.  The  conductor  demanded 
an  additional  sum,  which  the  plaintiff 
refused  to  pay.  The  conductor  there- 
upon ejected  him  from  the  car,  and 
the  court  held  that  the  defendants 
were  not  only  liable  for  the  injury, 
hut  that,  if  the  jury  found  that  the 
act  was  done  through  "  oppressive 
malice  or  wantonness,"  exemplary 
damages  might  be  given,  and  a  ver 
diet  for  $1,000,  under  the  circum 
stances,  was  held  not  excessive. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      719 

outside  the  duties  imposed  upon  him  by  the  master."  '  And  tliis 
rule  applies  with  equal,  even  more  force,  to  corporations  that  in 
the  very  nature  of  things  must  act  through  employees,  and  ex- 
tends to  every  agent  employed,  from  the  highest  to  the  lowest, 
the  simple  test  of  liability  being,  whether  the  act  was  done  in  the 
discharge  of  a  duty  committed  to  such  agent  by  the  corporation 
and  within  the  scope  of  his  authority,  express  or  implied." 

Sec.  483.  Oases  illustrating  the  maxim.  —  In  Limpus  V.  General 
Omnihus  CornjMny,  it  was  held,  that  the  driver  of  an  onmibus, 
employed  to  pick  up  passengers  for  a  corporation,  who  drove  his 
horses  against  a  rival  coach  in  order  to  obtain  passengers,  was 
treated  as  doing  an  act  within  the  scope  of  his  authority,  although 
he  had  been  expressly  directed  not  to  do  such  an  act^  The 
defendants  had  given  instructions  to  their  driver  not  to  ob- 
struct any  omnibus.  It  was  contended  upon  the  hearing  in 
the  Exchequer  Chamber  that  no  recovery  could  be  had,  because 
the  act  was  willfully  and jpurposely  done  by  the  servant  in  di- 
rect disobedience  of  the  master's  orders,  and  Mellish,  in  his  argu- 
ment for  the  defendants,  contended,  upon  the  authority  of  Croft 
V.  Alison  (4  B.  &  Aid.  590),  that  no  recovery  could  be  had  be- 
cause the  driver  was  pursuing  a  purpose  of  his  own,  and  not  his 
master's  business,  when  he  did  the  act  complained  of,  and  cited 
the  rule  laid  down  in  the  case  last  referred  to,  viz. :  "  If  a  servant 
driving  a  carriage,  in  order  to  effect  some  purpose  of  his  own, 
wantonly  strikes  the  horses  of  another  and  produces  the  accident, 
the  master  will  not  be  liable.  But  if,  in  order  to  perform  his 
master's  orders,  he  strikes,  but  injudiciously,  and  in  order  to  ex- 
tricate himself  from  a  difficulty,  that  will  be  negligent  and  care- 
less conduct,  for  which  the  master  will  be  liable,  being  an  act 
done  in  pursuance  of  the  servant's  employment."  Williams,  J., 
interrupting  the  counsel,  said :  "  If  a  driver,  in  a  moment  of  pas- 
sion, vindictively  strikes  a  horse  with  a  whip,  that  would  not  be 
an  act  done  in  the  course  of  his  employment ;    but  in  this  case 

1  Wood's  Law  of  Master  and  Serv-  H.  &  C.  538.    See,  also,  S    P.  Green  v. 

ant,  562 ;  Weed  v.  Panama  R.  Co.  London  Omnibus  Co.,   7  C.  B.   (N.  S.) 

«  Wood's   Law   of  Master  and  Ser-  290;Goffu.  Great   Northern  R.  Co.,  3 

vant,  5()3  ei  seq.  EL  &  EL  673. 

^  Limpus  V.  General  Omnibus  Co.,  1 


T20  Pkivate  Coeporations. 

the  servant  was  pursuing  the  purpose  for  which  he  was  employed, 
viz.,  to  drive  the  master's  omnibus.  Suppose  a  master  told  his 
coachman  not  to  drive  when  he  was  drunk,  but  he  nevertheless 
did  so,  would  not  the  master  be  responsible  ?  "  To  which  Mr. 
Mellish  responded:  "  Here  tbe  defendants'  driver  recklesdy  and 
furposcly  obstructed  the  plaintiff's  omnibus.  That  was  not  an 
act  within  the  scope  of  his  employment,  and  was  contrary  to  the 
orders  given  to  him  by  his  master."  Crompton,  J.,  said  :  "  Was 
not  the  driver  carrying  out  his  master's  purposes  in  attempting  to 
get  before  the  other  omnibus  and  pick  up  passengers  %  "  Wil- 
liams, J.,  said :  "  Suppose  the  driver  of  an  omnibus  saw  a  passen- 
ger waiting  at  a  distance,  and,  in  order  to  reach  him  before  an- 
other omnibus,  drove  at  full  speed  and  thereby  drove  over  a  per- 
son, would  not  the  master  be  liable  ? "  It  was  held  by  the  court 
(WictHtman,  J.,  dissenting)  that  the  defendants  were  liable,  and 
the  doctrine  of  Lyons  v.  Martin  (8  Ad.  &  El.  515),  that,  in 
order  to  render  the  master  liable,  the  act  done  by  the  servant 
must  be  lawful,  was  directly  impugned  by  Crompton,  J.,  in  the 
course  of  his  opinion,  and  it  may  be  regarded  as  settled,  beyond 
question,  that  the  question  of  the  lawfulness  or  unlawfulness  of 
the  servant's  act  does  not  affect  the  question  of  the  master's  lia- 
bility ;  but  if  the  act  was  done  in  the  course  of  his  employment, 
and  in  furtherance  of  the  master's  business,  and  is  within  the 
authority  of  the  servant,  express  or  implied,  the  master  is  liable, 
even  though  the  act  is  unlawful,  willful,  wanton  or  malicious.  * 
On  the  trial  of  the  action  Martin,  B.,  instructed  the  jury  that,  if 
the  defendants'  driver,  being  irritated,  acted  carelessly,  recklessly^ 
wantonly,  or  improperly,  hut  in  the  course  of  his  employment, 
and  in  doing  that  which  he  believed  to  be  for  the  interest  of  the 
defendants,  then  the  defendants  were  responsible,  and  that  the 
instructions  given  by  them  to  the  driver  not  to  obstruct  other 
omnibuses,  if  he  did  not  observe  them,  were  immaterial  as  to  the 

1  Howe    v.    Newmarch,      13     Allen  Bush  (Ky.),   147 ;    8   Am.   Rep.    451  ; 

(Mfiss.),  49  ;    Ramsden  o.  Boston   and  Goddard  v.  Grand  Trunk  R.  R.  Co.,  57 

Albany  R.   R.   Co.,  ante ;    Holmes   v.  Me.  202 ;   2  Am.  Rep.  39  ;    Jackson  o. 

Wakefield,  an^e ;    Rounds  ®.  Del.   and  The  Second  Av.  R.  R.  Co.,   47   N.  Y. 

Lackawanna  R.  R.  Co.,  aftjJe  ;    Moore  274;    7    Am.    Rep.    448;    Hicrgins   v. 

V.  Fitcliburg  R.  R.  Co.,  4  Gray  (Mass.),  Watervliet  Turnpike  Co.,  46  N.' Y.  23  : 

465  ;  Hewett  v.  Swift,  3  Allen  (Mass.),  7  Am.  Rep.  293  ;    Duggins  v.  Watson, 

420 ;  Br.yant  71.  Rich,  106  Mass.  180  ;  8  15  Ark.  118. 
Am.  Rep.  311 ;    Sherley  v.  Billings,   8 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      '^^21 

question  of  the  master  s  liability,  but  that  if  the  true  character  of 
the  driver's  act  was,  that  it  was  an  act  of  his  own,  and  in  order 
to  effect  a  purpose  of  his  own,  then  the  defendants  were  not  re- 
sponsible. Upon  this  direction  being  excepted  to,  the  Exchequer 
Chamber  held  that  it  was  correct.  In  the  course  of  his  judgment, 
Willes,  J.,  said  :  "  It  appears  clearly  to  me  that  this  was  (and  it 
was  treated  by  my  brother  Maetin  as)  a  case  of  improper  driving, 
and  not  a  case  in  which  the  servant  did  any  thing  altogether  in- 
consistent with  the  discharge  of  his  duty  to  his  master,  and  out 
of  the  course  of  his  employment,  a  fact  upon  which  it  appears  to 
me  that  the  case  turns.  This  omnibus  of  the  defendants  was 
driven  in  before  the  omnibus  of  the  plaintiff.  Now,  of  course, 
one  may  say  that  it  is  no  part  of  the  duty  of  a  servant  to  ob- 
struct another  omnibus,  and  that  in  this  case  the  servant  had  dis- 
tinct orders  not  to  obstruct  the  other  omnibus.  I  beg  to  say,  in 
my  opinion,  those  instructions  were  perfectly  immaterial.  If 
they  were  disregarded,  the  law  casts  upon  the  master  the  liability 
for  the  acts  of  his  servants,  in  the  course  of  his  employment,  and 
the  law  is  not  so  futile  as  to  allow  the  master,  by  giving  secret 
instructions  to  a  servant,  to  set  aside  his  liability.  I  hold  it  to 
be  perfectly  immaterial  that  the  master  directed  the  servant  not 
to  do  the  act  which  he  did.  As  well  might  it  be  said  that  if  a 
master,  employing  a  servant,  told  him  that  he  should  never  break 
the  law,  he  might  thus  absolve  himself  from  all  liability  for  any 
act  of  the  servant,  though  in  the  course  of  the  employment." 
Btles,  J.,  puts  the  case  very  pertinently.  He  says :  "I  am  alsc 
of  opinion  that  my  brother  Martin's  direction  in  this  case  was 
correct.  He  uses  the  words  '  in  the  course  of  his  employment,' 
which,  as  my  brother  "Willes  has  pointed  out,  are  expressions  di- 
rectly justified  by  the  decisions.  His  direction,  as  I  understand 
it,  amounts  to  this,  that  if  a  servant  acts  in  the  prosecution  of  liis 
master's  business,  with  the  intention  of  benefiting  his  master,  and 
not  to  benefit  or  gratify  himself,  then  the  master  is  responsible, 
although  it  were  in  one  sense  a  willful  act  on  the  part  of  the 
servant.  Now,  it  is  said  that  this  was  contrary  to  the  master's  in- 
structions. That  might  be  said  in  ninety-nine  cases  out  of  a 
hundred,  where  actions  are  brought  against  the  master  to  recover 
damages  for  the  reckless  driving  of  a  servant.  It  is  said  that  it 
91 


722  Private  Cokporations. 

was  an  illegal  act.  So,  in  almost  every  case  of  an  action  against 
the  master  for  tlie  negligent  driving  of  a  servant,  an  illegal  act  is 
imputed  to  the  servant." 

Sec.  484.  implied  powers  of  servant.— In  Rounds  V.  Delaware 
&  Lackawanna  Railroad  Company^  a  New  York  case,  the  ques- 
tion of  the  implied  powers  of  a  servant  was  ably  discussed  and  con- 
sidered, and  what  we  conceive  to  be  tlie  true  rule  announced.  In 
that  case,'  the  plaintiff,  a  boy  twelve  years  old,  jumped  on  the  bag- 
gage car  of  the  defendants'  passenger  train,  to  ride  down  to  the 
round-house.  A  quantity  of  wood  was  pitched  along  the  track. 
While  the  train  was  being  backed  down,  and  when  it  arrived  at  the 
wood-pile,  the  baggageman  in  charge  of  the  train  discovered  the 
boy  on  the  car  and  ordered  liim  off.  The  boy  responded  that  he 
could  not,  because  the  wood  was  right  tliere.  The  baggage-master, 
with  an  oath,  kicked  the  plaintiff  off  the  car,  and,  falling  against 
the  wood,  one  of  his  legs  was  thrown  under  the  car  and  crushed. 
A  notice,  as  follows,  was  posted  in  the  baggage-car  :  "  No  person 
will  be  allowed  to  ride  in  this  baggage-car  except  the  regular  train- 
men employed  thereon.  Conductors  and  baggagemen  must  see 
this  order  strictly  enforced."  Still  another  notice  was  printed  in 
the  posted  time  cards,  as  follows :  "  Train  baggagemen  must  not 
permit  any  person  to  ride  in  the  baggage  car  except  the  conduc 
tor  and  news  agent  connected  with  the  train.  Conductors  and 
baggagemen  will  be  held  alike  accountable  for  a  rigid  enforce- 
ment of  this  rule."  In  an  action  to  recover  for  the  damages 
inflicted  by  the  injury,  the  court  held  that  the  defendants  were 
liable.  Countryman,  J.,  in  a  very  able  and  carefully-considered 
opinion,  reviewed  the  cases  bearing  upon  these  questions,  and, 
among  other  things,  said :  "  The  servant,  in  thus  removing  the 
plaintiff,  was  engaged  in  the  line  of  his  duty  and  obeying  the 
instructions  of  the  defendant,  and  to  shield  it  from  liability  the 
instructions  must  have  been  reasonable  and  proper  with  refer- 
ence to  the  rights  of  plaintiff,  and  must  have  been  executed, 
under  all  the  circumstances,  in  a  reasonable  and  proper  manner. 
Having  made  suitable  regulations,  the  defendant  was  also  bound 

'  Rounds  t).  Del.  &  Lackawanna  R.  R.  Co.,  5  T.  &  C.  (N.  T.)  475,  affirmed  by 
court  of  appeals. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.     723 

to  6ee  that  they  were  properly  executed.  The  principal  must 
necessarily  be  answerable  within  reasonable  limitations  for  the 
manner  in  which  his  instructions  are  carried  into  effect.  *  * 
*  And  the  principal  must  necessarily  be  bound  by  any  lack  of 
judgment  or  discretion  of  the  agent,  whereby  he  acts  improperly 
and  inflicts  unnecessary  injury."  ' 

Sec.  485.  injury  to  trespasser,  by  servant.— In  Lovett  V.  Salem^ 
etc.,  Railroad  Company,  it  was  held,  that  a  driver  of  horse  cars, 
whose  duty  it  is  to  keep  trespassers  from  riding  on  the  platform, 
would  naturally  be  expected  to  execute  the  order  in  a  proper  and 
lawful  manner,  but  if  he  in  foct  executes  it  in  an  improper  and 
unlawful  manner,  the  master  is  liable  therefor,  because  he  takes  the 
risk  upon  himself,  by  reposing  any  authority  at  all  in  the  servant 
to  do  an  act  which,  if  improperly  done,  may  result  in  injury  to 
others.  In  a  case  of  this  character,^  the  plaintiff,  a  boy  of  ten 
years  of  age,  wrongfully  got  upon  the  defendants'  street  railway 
car  while  it  was  in  motion ;  and  was  permitted  to  ride  some  dis- 
tance, when,  while  the  car  was  running  at  such  a  rate  of  speed 
as  to  make  it  unsafe  for  him  to  do  so,  he  was  ordered  by  the 
driver  to  jump  off,  which  he  did,  and  in  doing  so  was  thrown 
down,  and  his  right  arm  being  thrown  under  the  car  was  run 
over  and  crushed,  so  that  amputation  was  rendered  necessary, 
and  the  court  held  that  the  defendant  was  responsible  for  the 

'  Lovett  m.  Salem,  etc.,   R.   R.  Co.,  9  the  orders  of  the  station  master,  etc., 

Allen  (Mass.),  557;  Holmes  v.    Wake-  and  do  all  in  their  power  to  promote 

field,  ante;  Kline  «.  Central  Pacific  R.  the  comfort  of  the  passengers  and  the 

R.  Co.,  37  Cal.  400;  Sanford -y.  Eighth  interests  of  the  company.     It  was  held 

Ave.  R.  R.  Co.,  23  N.  Y.  343.  by  the  court  that  the  act  of  the  porter, 

A  doctrine  similar  to  this  was  held  in   pulling  the    passenger  out  of  the 

in   Bayley   'o.    The   Manchester,   etc.,  carriage,  was  an  act  within  the  course 

Railway  Co.,L.R.,7C.  P.  415.     In  of  his  employment  as  the  defendants' 

that  case  the  plaintiff  was  a  passenger  servant  for  which  they  were  responsi- 

upon  the  defendants'  train,  and  sus-  ble.     In  another  case  (Walker  v.  The 

tainHd  injuries  in  consequence  of  being  South-Eastern  Railway  Co.,  39  L.  J.  C. 

violently  pulled  oat  of  a  railway  car-  P.  346),  the  plaintiff,  on  arriving  at  the 

riage  by  one  of  the  defendants'  porters,  defendants'  station,  took  part  in  a  dis- 

who  acted  under  an  erroneous  impres-  pute   going   on    between   some    other 

sion  that  the  plaintiff  was  in  the  wrong  passengers   and  the   defendants'    aer- 

carriage.    The  defendants' by-laws  did  vants    relative   to   a    railway    ticket, 

not  expressly  authorize  the  company's  whereupon   the  defendants'    servants 

servants  to  remove  any   person  being  seized  him,  ran  him  down  an  incline, 

in  a  wrong  carriage,  but  they  provided  pushed  liim  out  of  the  station,  and   as 

that  no  person   should  be  allowed  to  he  passed  through  the  door,  gave  him 

enter  any  carriage  or  to  travel  therein  a  kick.     In  an  action   for  the  assault, 

without  having  first  paid  his  fare  and  the  defendants  were  held  liable, 

taken   a  ticket.     They   likewise   pro-  *  Lovett  d.  Salem,  etc. .  R.  R.  Co.,  9 

vided  that  the  porters  should  act  under  Allen  (Mass. ),  557 . 


724  Private  Corporations. 

injury,  the  order  of  the  driver  to  "  jump  off,"  considering 
the  age  of  the  plaintiff,  being  equivalent  to  a  forcible  ejec- 
tion.^ 

Sec.  486.  Liability  vrhen  servant  acts  contrary  to  instruction. —  In 
Garretzen  v.  Duenckel^  a  Missouri  case,'  the  application  of  this  rule 
was  well  illustrated.  In  that  case  the  defendant  was  the  proprie- 
tor of  a  gun  store,  and  his  clerk  upon  one  occasion,  when  showing 
a  gun  to  a  customer,  at  his  request,  and  being  informed  by  the 
purchaser  that  he  would  not  purchase  the  gun  unless  it  was  loaded, 
loaded  the  gun,  and,  while  being  examined  by  the  customer,  it 
was  accidentally  discharged  and  injured  the  plaintiff,  who  was 
sitting  at  a  window  on  the  opposite  side  of  the  street,  the  master 
had  expressly  instructed  the  servant  not  to  load  any  of  the 
fire-arms,  and  it  was  urged  in  defense  -that  the  act  of  the  ser- 
vant being  in  conflict  with  and  contrary  to  the  master's  orders, 
was  not  an  act  within  the  scope  of  the  servant's  authority,  and 
the  master  could  not  be  held  liable  therefor.  But  the  court  held 
that,  notwithstanding  the  express  order  of  the  defendant,  the  act 
was  one  done  in  the  prosecution  of  his  business  and  in  furtherance 
thereof,  and  was  within  the  scope  of  the  servant's  employment. 

Sec.  4.87-  Real  test  of  liability —  It  is  of  no  account  that  the 
master  did  not  direct  the  doing  of  the  act,^  or  even  that  it  was 
done  contrary  to  his  instructions,  or  without  his  knowledge ; 
the  simple  question  is,  whether  it  was  done  in  the  prosecution 
of  his  business  and  as  an  incident  thereto.*  It  is  of  no  impor- 
tance whether  the  act  is  necessary  to  the  prosecution  of  the 
master's  business   or  not.     Liability  attaches  if  it  was   done   in 

In  Shea  «.  Sixth  A  v.  R.  R.  Co.,  62  '^  Garretzen -y.  Duenckel,  50  Mo.  104; 

N.    Y.    180,  one   of   the   defendants'  11  Am.  Rep.  405. 

horse  cars  was  standing  at  the  corner  ^  Storey   «.    Ashton,  L.   R.,  4  Q.  B. 

of  a  street  in  New  York,  so  as  to  pre-  476  ;  Barwick'?).  Joint-Stock  Co.,  L.  R., 

vent  persons  from  passing  across  the  3  Exch.  265  ;  Seymour  v.  Greenwood, 

street  on  the  walk.     The  plaintiff,  be-  ante;   Tuberville    v.    Stamp,    Raym. 

ing  desirous  of  passing,  stepped  upon  266;  Pilliter  v.  Phippard,  11  Ad.  &  El. 

the  platform  of  the  car  for  that  pur-  347. 

pose,  when  the  driver  pushed  her  off,  ■*  Hamilton  v.  Third  Av.  R.    R.  Co., 

and  in  falling  she  broke  her  arm.  The  53  N.  Y.  25 ;    Barwick   v.   Joint-Stock 

court  held  that,  inasmuch  as  it  was  the  Co.,  ante  ;  Howe  v.  Newmarch,  ante  ; 

duty  of  the  driver  to  keep  trespassers  Ramsden   v.   Bost.    &  Alb.    R.  R.  Co., 

off  the  platform,  he  was  acting  in  the  a72te  ;  Goff  «.  Gt.  Northern   R.  R.  Co. 

scope   of    his   employment,   and   that  3  El.  &  El.  672;  Ewbank  «.  Nutting,  7 

the  defendants  were  liable  for  the  as-  C.  B.  797. 
eault. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      '?^25 

the  prosecution  of  the  work,  and  in  furtherance  thereof,  even 
tliough  the  act  was  ill-advised  and  contrary  to  the  master's 
orders.  The  test  is,  whether  the  act  was  done  in  the  course  of 
the  master's  business  and  in  furtherance  of  it.  If  so,  the  master 
is  responsible  for  the  consequences,  without  any  reference  to  the 
manner  of  the  execution  of  the  work.' 

The  fact  that  the  order  is  proper  and  only  contemplates  a 
proper  execution  on  the  part  of  the  servant  does  not  change  the 
rule  of  liability.  Having  clothed  the  servant  with  authority  to 
do  the  act  at  all,  the  employer  is  hound,  at  his peril^  to  see  that 
it  is  lyroperly  executed,  and  is  liable  alike  for  mistakes  of  judg- 
ment, or  infirmity  of  temper  on  the  part  of  his  servant." 

The  fact  that  he  has  expressly  directed  the  servant  how  to  do 
the  act,  or  not  to  do  a  jparticular  thing,  is  in  no  measure  a  defense. 
If  the  act  is  within  the  scope  of  the  servant'' s  employinent,  liability 
attaches  for  the  consequences  of  a  wrongful  execution  of  the 
duty,  without  any  reference  to  the  degree  of  care  exercised  by 
the  master  to  prevent  it.  It  is  not  the  instructions  of  the  master 
that  determine  the  extent  and  limit  of  the  agent's  authority, 
but  the  nature  of  the  employment,  the  character  of  the  service  re- 
quired, and  the  character  of  the  act  done,  and  the  circumstances 
under,  and  the  purpose  for  which  it  was  done.  Geover,  J.,  illus- 
trated the  matter  thus : '  "  If,"  said  he,  "  the  owner  of  a  building 
employs  a  servant  to  remove  the  roof  from  his  house,  and  directs 
him  to  throw  the  materials  upon  his  lot  where  no  one  would  be 
endangered,  and  the  servant,  disregarding  this  direction,  should 
carelessly  throw  them  into  the  street,  causing  an  injury  to  a  pas- 
senger, the  master  would  be  responsible  therefor,  although  done 
in  violation  of  his  instructions,  because  done  in  the  business  of 
the  master.  But  should  the  servant,  for  some  purpose  of  his  own, 
intentioncdly  throw  materials  upon  a  passenger,  the  master  would 
not  be  responsible  for  the  injury,  because  it  would  not  be  an  act 
done  in  his  business,  but  a  departure  therefrom  by  the  servant  to 
serve  some  purpose  of  his  own."  In  determining  the  question  of 
authority,  we  must  regard  the  object,  purpose  and  end  of  the  em- 
ployment.    When  a  person  employs  another  to  drive  his  carriage, 

'  Minter  v.  Pacific  R.  R.  Co.,  41  Mo.  *  Wood's  Law  of  Master  and  Set' 
503  ;  Croft  v.  Alison,  4  B.    &  Aid.  590.     vant,  566. 

3  Cosgrove  v.  Ogden,  49  N.  Y  255 


726  Private  Cokpoeations. 

it  is  not  to  be  presumed  that  he  employs  him  to  drive  it  purposely 
and  intentionally  against  the  carriage  of  another  when  such  act  is 
wholly  unnecessary  to  carry  out  any  purpose  of  his  master ;  but, 
if  the  servant,  in  driving  the  carriage,  finds  himseK  involved  in 
a  position  of  danger,  either  to  himself  or  the  team,  and  in  extri- 
cating himself  pui-posely  drives  against  the  carriage  of  another 
and  overturns  it,  this  is  most  certainly  within  the  line  of  his  duty, 
and  is  within  the  scope  of  his  authority,  because  he  is  presumed  to 
be  clothed  with  authority  to  do  every  thing  essential  to  effectuate 
the  purpose  and  ends  of  his  employment/  Blackburn,  J.,  in  a 
recent  case  heard  in  the  Queen's  Bench,"  very  aptly  illustrated  the 
rule  thus :  "  The  question  is,"  said  he,  "  whether  there  is  any 
evidence  of  an  authority  given  by  the  defendants  to  the  booking 
clerk  to  arrest  the  plaintiff,  under  the  circumstances  of  this  case. 
It  is  quite  clear  that  there  was  no  evidence  of  an  express  author- 
ity. Then  can  such  authority  be  implied  ?  The  facts  from  which 
an  authority  can  be  implied  are,  that  the  person  who  arrested  the 
plaintiff  is  a  ticket  distributor  in  the  employ  of  the  defendants ; 
that  he  gives  out  tickets  to  persons  intending  to  travel  by  the 
railway,  and  receives  the  money,  and  that  the  money  received  on 
behalf  of  the  defendants  is  put  into  a  till,  of  which  he  has  the 
charge  and  custody.  On  these  facts  it  may  be  fairly  said  that 
the  booking  clerk  has  an  implied  authority  to  do  all  acts  which 
are  necessary  for  the  protection  of  the  money  intrusted  to  him. 
I  am  inclined  to  think  that  if  a  man  in  charge  of  a  till  should 
find  a  man  attempting  to  rob  it,  and  he  could  not  prevent  it 
otherwise  than  by  taking  him  into  custody,  the  person  in  charge 
of  the  till  might  have  an  implied  authority  to  arrest  the  offender ; 
or  if  the  clerk  had  reason  to  believe  that  the  money  had  been 
actually  stolen  and  he  could  not  get  it  back  except  by  taking  the 
thief  into  custody,  and  he  took  him  into  custody  with  a  view  to 
a  recovery  of  the  money  taken  away,  it  might  be  that  that  also 
might  be  within  the  authority  of  a  person  in  charge  of  the  tUl. 
*  *  *  There  is  an  implied  authority  to  do  all  those 
things  that  are  necessary  for  the  protection  of  property  intrusted 
to  a  person,   or  for  fulfilling  a  duty  which  the  person  has  to  per- 

'  Limpus  V.   General   Omnibua  Co.,        '  Allen  v.  London  and  South  West 
ante  ;   Seymour  v.  Greenwood,  6  H.  &    ern  Railway  Co.,  L.  R.,  6  Q.  B.  68. 
N.  359. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.     727 

form.  *  *  *  p^Qi-  instance,  where  a  company  have, 
under  a  by-law,  a  power  to  arrest  a  man  if  he  does  not  pay  his 
fare,  the  primary  object  of  the  by-law  is  to  enforce  the  payment 
of  fares  to  the  company  and  to  protect  their  interest,  and  it  has 
been  rightly  held  that  when  a  company  leaves  a  servant  in  charge 
of  a  station  he  has  an  implied  authority  to  decide  that  the  by-law 
shall  or  shall  not  be  enforced  ;  but  if  the  servant  in  charge  of  the 
station  does  an  act  in  no  way  connected  with  the  business  of  the 
company,  there  would  be  no  implied  authority  for  the  act,  and 
the  company  would  not  be  liable."  *  In  Edwards  v.  The  London 
c&  South  Western  Railway  Co.,  ante,  Smith,  J.,  enunciated  the 
rule  of  hability  from  an  implied  authority,  thus :  "  No  doubt  if, 
in  furtherance  of  the  particular  business  of  the  company,  it  is 
necessary  to  arrest  a  person,  the  servants  of  the  company  have  an 
implied  authority  to  do  it.  Thus,  if  there  is  a  by-law  of  the  com- 
pany, and  authority  is  given  to  arrest  any  person  infringing  it,  it 
must  be  presumed  that  the  company  give  authority  to  any  one  they 
put  in  charge  of  the  station  so  to  enforce  it,  since  this  can  only 
be  done  by  the  company's  servants  on  the  spot."  In  Seymour  v. 
Greenwood,  6  H.  &  N.  359,  Baron  Pollock  said :  "  Suppose  a 
servant,  in  driving  along  a  road,  in  order  to  avoid  danger,  inten- 
tionally drove  against  the  carriage  of  another,  would  not  the 
master  be  liable  % "  Without  stopping  to  give  further  illustra- 
tions from  the  modern  cases,  it  may  be  said  to  be  well  settled 
that  the  master  is  not  only  responsible  for  the  negligence  or  mis- 
feasance or  malfeasance  of  the  servant  in  respect  of  the  discharge 
of  duties  expressly  imposed  upon  him,  but  also  in  all  cases  where 
the  act  of  the  servant  is  within  the  scope  of  his  impKed  author, 
ity,  and  in  determining  this,  the  nature  of  the  employment  and 
the  ends  and  purposes  sought  to  be  attained  are  material  elements, 
and  the  real  test  of  liability.'  Prima  facie,  when  the  act  is  one 
which  the  master  himself  might  have  done,  it  will  be  presumed 
that  it  was  an  act  within  the  scope  of  the  servant's  authority,  and 
the  burden  of  proving  want  of  authority  rests  upon  the  defend- 

1  Poulton  V.  Railway  Co.,  ante;  Ed-  Shea  v.  Eailroad   Co.,  ante;  Goddard 

wards   i).    Railway   Co.,   L.  R.,  5  C.  P.  d.  Grand  Trunk  R.    Co.,  57  Me.  202  ; 

445.  Rounds  t.  Lackawanna,  etc.,  R.   Co., 

»  Ramsden   ■».  Boston  &  Albany   R.  ante;  Peck  v.  H.  R.  &  N.  Y.  C.  R.  Co., 

Co.,  ante;   Howe  xi.  Newmarcb,  ante;  ante. 


728  Private  Corporations. 

ant.'  In  the  first  case  cited  in  the  last  note  the  plaintiff  brought 
an  action  for  an  assault  committed  upon  him  by  the  defendants' 
servant,  a  brakeman,  in  forcibly  ejecting  him  from  one  of  their 
passenger  cars.  It  appeared  that  the  defendants  set  apart  a  car 
for  ladies  and  gentlemen  accompanied  with  ladies.  The  servant 
was  stationed  at  the  entrance  of  the  cars  to  direct  passengers  what 
cars  to  take.  Tlie  plaintiff,  not  being  accompanied  by  a  lady, 
entered  the  car  reserved  for  ladies,  and  the  servant  directed  him 
to  get  into  another  car.  This  the  plaintiff  refused  to  do,  and  the 
assault  complained  of  was  committed  in  forcibly  removing  him. 
In  defense  it  was  urged  that  the  servant  exceeded  his  powers,  and 
was  not  authorized  to  remove  the  plaintiff  from  the  car,  but  only 
to  direct  him  what  car  to  take.  Upon  this  question  James,  J., 
said  :  "  That  a  master  is  not  liable  for  the  wrongful  acts  of 
his  servant,  unless  done  in  his  service  and  within  the  scope  of 
his  employment,  will  not  be  disputed.  If  the  employee  who 
removed  the  plaintiff  is  to  be  regarded  as  a  brakeman,  unauthor- 
ized to  perform  any  duties  other  than  such  as  pertained  to  that 
office,  and  volunteered  the  act  in  question  without  other  authority 
or  direction,  then  the  defendant  was  not  liable  in  this  case.  But 
as  brakeman  he  was  an  employee  of  the  company,  subject  to  its 
authority  and  the  direction  of  its  officers,  and  as  such  employee 
he  was  directed,  by  the  person  in  charge,  to  see  that  gentlemen 
without  ladies  did  not  enter  that  car,  and  it  was  in  the  perform- 
ance of  that  service  he  did  the  act  complained  of.  It  is  true  he 
was  not  ordered  to  remove  persons  from  the  car ;  his  orders  were 
to  notify  gentlemen  not  in  charge  of  ladies  that  such  car  was 
reserved,  and  direct  them  to  cars  forward  ;  so  that  in  removing 
plaintiff  he  clearly  exceeded  the  orders  given  him.  But  this  fact 
the  plaintiff  could  not  know  ;  as  between  him  and  the  company 
it  was  enough  that  the  act  was  done  in  the  prosecution  of  his 
master's  business,  and  if  he  deviated  from  or  exceeded  his  instruc- 
tions, that  fact  did  not  excuse  the  master  from  responsibility. 
The  order  to  the  brakeman,  and  his  performance,  warrants  the 
conclusion,  even  as  a  matter  of  law,  that  he  was  acting  within  the 
scope  of  the  employment  he  was  then  set  to  perform,  if  per- 

'  Peck  V.  H.  R.  R.  Co.,  6  T.  &  C.  (N.     Turnpike  Co.,  46  id.   23;  Cosgrove  ». 
Y.)  436;  Jackson  v.  Second  Av.  R.  Co.,    Ogden.  49  id.  225. 
■17  N.  Y.  274 ;  Higgins  v.    Watervliet 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      729 

flons  disregarded  his  directions  and  persisted  in  entering  that  car, 
Tlie  defendant  had  the  right  to  set  apart  a  car  for  lady  passengers, 
and  exclude  other  persons  from  it ;  if  other  persons,  after  notice, 
persisted  in  entering  it,  the  defendant  had  the  right  to  enforce 
their  removal,  using  no  more  force  than  necessary  for  that  pur- 
pose. The  brakeman  did  no  more  than  the  master  had  the  right 
to  do  under  the  circumstances,  and  the  presimiption  is  that  in 
doing  it  he  was  acting  within  the  scope  of  his  then  employment."  ' 

Sec.  488.   if  act  is  within  implied  power  of  servant  liability  exists.  — 

It  is  not  necessary,  in  order  to  fix  the  liability  of  the  corporation, 
that  the  agent  should,  at  tlie  time  of  the  injury,  have  been  acting 
under  its  orders  or  directions,  or  that  the  officers  of  the  corpora- 
tion should  know  that  the  servant  was  to  do  the  particular  act 
that  produced  the  injury  in  question.  It  is  enough  if  the  act  was 
within  the  scope  of  his  employment,  and  if  so,  it  is  liable,  even 
though  the  agent  acted  willfully  and  in  direct  violation  of  his 
orders. 

This  is  upon  the  principle  that  a  master  cannot  screen  himself 
from  liability  for  an  injury  committed  by  his  servant  within  the 
line  of  his  employment,  by  setting  up  private  instructions  or  orders 
given  by  him,  and  their  violation  by  the  servant.  "  By  putting 
the  servant  in  his  place,"  says  Mr.  Wood  in  his  work  up©n  The 
Law  of  Master  and  Servant,  p.  585,  "  he  becomes  responsible  for 
all  his  acts  within  the  line  of  his  employment,  even  though  they 
are  willful  and  directly  antagonistical  to  his  orders.  The  simple 
test  is,  whether  they  were  acts  within  the  scope  of  his  employ- 
ment ',  not  whether  they  were  done  while  prosecuting  the  master's 
business ;  hut  whether  they  were  done  hy  the  servant  in  further- 
ance thereof,  and  were  such  as  may  fairly  he  said  to  have  heen 
authorized  hy  him^  By  authorized  is  not  meant  authority  ex- 
pressly conferred,  but  whether  the  act  was  such  as  was  incident 
to  the  performance  of  the  duties  intrusted  to  him  by  the  master, 
even  though  in  opposition  to  his  express  and  positive  orders. 
Thus,  to  illustrate :  where  a  horse-car  conductor  who  forcibly 
and  violently  pushes  a  passenger  from  a  car  which  is  being  run 
by  him,  because  the  passenger  refuses  to  leave  the  car  until  it  comes 
to  a  full  stop,  it  being  no  part  of  his  duty  to  assist  passengers  in 

•Isaacs  V.  Third  Ave.  R.  Co.,  47N.T.122. 

92 


730  Private  Corpokations. 

getting  on  and  off  the  cars,  the  company  is  held  not  liable  for 
the  injuries  resulting  from  the  act,  hecause  it  is  not  within  the 
SGojye  of  the  conductor's  duties  or  employment,  and  is  not  such 
as  can  be  said  to  have  been  within  the  centemplation  of  the  em- 
ployer, or  as  to  have  been  authorized  by  him.  But,  if  the  assist- 
ing of  passengers  on  or  off  of  the  cars  had  been  a  part  of  his  duty, 
either  by  the  express  direction  of  the  master,  or  by  a  well-estab- 
lished usage,  the  act,  although  willful  and  wanton,  would  have  been 
within  the  scope  of  his  employment,  and  the  master  would  have 
been  liable  therefor.  Thus,  when  a  horse  railroad  company, 
among  other  things,  requires  its  drivers  to  keep  trespassers  off 
from  the  platform,  it  is  liable  for  the  act  of  tlie  driver  in  expelling 
a  person  therefrom,  even  though  his  act  is  willful  and  wanton, 
and  although  the  person  expelled  by  him  is  not  a  trespasser.' 

The  master  can  never  escape  liability  for  an  ahuse  of  authority 
by  the  servant ;  "^  therefore,  the  question  always  is,  whether  there 
was  any  authority,  express  or  implied,  on  the  part  of  the  servant 
to  do  the  act.'  If  so,  the  master  is  liable  ;  if  not,  he  is  not  lia 
ble,  even  though  the  act  was  done  by  the  servant  while  perform 
ing  his  master's  service."  In  ascertaining  this  fact,  the  nature  oi 
the  service,  its  character  and  incidents,  as  well  as  the  orders  of  the 
master,  if  any,  are  all  to  be  considered.  To  illustrate  :  a  person 
employed  as  a  conductor  upon  a  railroad,  whose  duty  it  is  to  col- 
lect the  fares  of  passengers,  is,  even  though  not  specially  directed 
so  to  do  by  his  employment  and  the  very  nature  of  his  duties, 
impliedly  clothed  with  authority  to  eject  a  person  from  the  cars, 

'  Shea   ■».  Sixth  Ave.  R.  Co.,  62  N.  firing  of  the   gun.     The    court   held 

Y.  180.  that,   inasmuch    as    the    servant  was 

*  Higgins  D.   Watervliet   Turn.  Co.,  authorized   to   discharge  the   gun  by 

46  N.  Y.    23  ;  Shea  t\  Sixth  Ave.  E.  the  defendants,  they  were   liable    for 

Co.,   ante;  Phila.  &  Read.    R.    Co.  •».  the  Wi«?<?ier  in  which  he  discharged  it, 

Derby,  14   How.    (U.   S.)   468  ;  Phila.,  whether   in  violation  of  their  instruc- 

etc. ,  Pi.    Co.,  -y.   Steam    Tow  Boat  Co.  tions  or   not.     Enos    v.    Hamilton,  24 

23  id.  209.  Wis.  ()58  ;  Horner  «.    Lawrence,  87  N. 

3  Shea -y.  Sixth   Ave.    R.    Co.,   ante;  J.  L.  46  ;  Case  «.   Mechanics' Bank,  4 

Baldwin  b.  Casella,  21  W.  R.  16.  N.  Y.  166  ;  Hynes  «.   Jungren,  8  Kan. 

■^  In  Oliver  i).   Northern  Transporta-  391;  Cosgrove   «.     Ogden,    49    N.    Y. 

tion  Co.,  3  Oregon,  84,  the  defendants'  255  ;  Tucker  ®.  Woolsey,  64  Barb.  (N. 

servant   injured  the   plaintiff  by  the  Y.)    142;    Ryan   v.   H.    R.    R.    Co.,  83 

careless    discharge    of   a  signal  gun.  N.  Y.  Sup.  Ct.  137  ;  North  River  Bank 

The    defendants    claimed    that    they  -y.    Aymar,    3  Hill   (N.   Y.),   262  ;  Mc- 

were  not  liable,  because  the  servant  Clanathan  «.  R.  Co.,  1  T.  &  C.  (N.  Y.) 

disobeyed  their  instructions  as  to  the  501. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      731 

who  sliall  neglect  or  refuse  to  pay  his  fare,  and  it  is  one  of  his 
duties,  implied  from  the  very  nature  of  the  employment  and  the 
character  of  the  service  ;  therefore,  if  in  the  performance  of  this 
duty,  he  uses  more  force  tlian  is  necessary  ;  '  or  if  he  assaults  or 
insults  a  person  who  has  in  fact  paid  his  fare,  and  is  lawfully  en- 
titled to  be  upon  the  train  ;  *  or  if  he  ejects  a  person  from  the 
train  at  a  place  where,  by  law,  he  has  no  right  to  eject  him,  the 
corporation  is  liable  for  his  acts  as  much  as  though  the  act  had 
been  specially  directed  and  authorized  by  it. 

Sec.  48y.  Matters  to  be  considered  in  deternxining  whether  the  act 
is  within  the  scope  of  the  agent's  authority.  —  In  determining  whether 
the  act  was  one  within  the  scope  of  the  agent's  authority,  the  char- 
acter of  the  business  and  its  probable  consequences  are  to  be  looked 
to.  Thus,  if  a  canal  company  employs  a  person  to  attend  a  draw- 
bridge,^ it  is  liable  for  injuries  inflicted  by  him  in  raising  the  draw. 
So,  if  a  person  is  employed  to  blast  in  a  quarry,  the  principal  is  liable 
for  injuries  resulting  from  the  agent's  failure  to  adopt  proper  precau- 
tions.* So,  where  a  person  is  employed  to  drive  an  omnibus  and 
pick  up  passengers,  the  employer  is  liable  for  injuries  inflicted  by 
him  either  upon  individuals  or  the  property  of  rival  companies 
by  improper  driving.^  So,  where  a  railway  company  employs  a 
conductor  to  rnn  a  train  and  collect  fares,  it  is  liable  for  an  assault 
committed  by  the  conductor  upon  a  pssenger  in  a  wrongful 
attempt  to  collect  or  secure  the  fare,'  or  where  a  brakeman  is 
posted  at  the  entrance  to  cars  to  direct  passengers  which  car  to 
take,  for  an  assault  committed  by  him  upon  a  passenger  in  remov- 
ing him  from  a  car ; '  or  where  a  station  agent  commits  an  assault 
npon  a  person  in  attempting  to  eject  him  from  the  station ;  *  and 
so,  generally,  where  the  act  is  one  done  in  doing  that  which  the 
servant  or  agent  was  authorized  to  do,  and  is  within  the  scope  of  his 
authority,  the  principal  is  answerable  for  the  consequences.'     In 

'Jackson  v.  Second  Ave.  R.  Co.,  47  '  Limpus  v.  General  Omnibus  Co. ,  1 

N.  Y.  274  ;  7  Am.  Rep.   448  ;  Hijrgins  H.  &  C.  526. 

■».  Watervliet  Turnpike  Co.,  46  N.  Y.  "  Ramsden   v.  Boston   &   Albanv  R 

23  ;  7  Am.  Rep.  293.  Co.,  104  Mass.  104. 

*Goddard  v.  Grand   Trunk    R.  Co.,  '  Peck  v.  R.Co.,  6  T.  &  C.  (N.  Y.)  436, 

57  Me.  202  ;  2  Am.  Rep.  39.  »  Hewett  y.  Swift,  3  Allen  (Mass.),423. 

3  Hunter  v.  Glasgow,  etc.,  Canal  Co.,  '  Brown  v.  McGregor,  17  F.  C.  (Sc.) 

14  S.  (Sc).  717.  233 ;  Baird  v.  Graliam,  1   Stuart  (Sc), 

*  Sword  V.  Cameron,  1  D.  (Sc.)  439.  578;  Green  v.  London,  etc.,  Omnibus 


732  Private  Corpokations. 

order,  liowever,  to  impute  liability  to  the  corporation,  the  relation 
of  master  and  servant  must  have  existed,  that  is,  the  servant  or 
agent  must  either  have  been  employed  or  controlled  by  the  cor- 
poration, or  the  right  of  control  must  have  existed  in  it,  or  it 
must  have  assented  to  the  performance  of  the  service  by  him,  or 
have  been  notified  of  it  after  it  vs^as  performed.' 

Seo.  490.  Contractor's  and  contractee's  liability.  —  If  the  service  was 
performed  by  an  independent  contractor,  who  performed  it  in  his 
own  way  without  being  subject  to  the  direction  of  the  corpora- 
tion, liability  does  not  exist,  unless  the  injury  is  a  necessary  result 
of  doing  the  work  at  all." 

In  a  Connecticut  case  ^  a  railroad  company  undertook  to  remove 
a  cargo  or  coal  from  a  vessel  to  its  freight  cars,  and,  having  had 
some  difficulty  with  the  gang  of  shovelei"s  who  were  on  a  strike, 
made  an  arrangement  with  its  weigh-master  to  allow  him  a  certain 
sum  per  ton  for  shoveling  and  dumping  the  coal,  and  that  he 
should  employ  the  shovel ers,  and  if  he  could  employ  them  for 
less  than  the  sum  allowed  him,  the  difference  should  be  his  per- 
quisite, independent  of  his  regular  wages  as  weigh-master.  The 
weigh-master  then  hired  a  gang  of  shovelers,  made  his  returns 
weekly  to  the  company  of  the  number  of  tons  shoveled,  received 
the  amount  allowed  him  and  paid  the  shovelers.  The  regular 
pay-rolls  of  the  employees  of  the  company,  including  the  weigh- 
master,  did  not  embrace  the  shovelers.  It  was  held  that  the 
shovelers  were  not  the  servants  of  the  company. 

So,  w^iere  certain  persons  were  authorized  to  construct  a  public 
sewer  at  their  own  expense,  and  they  employed  a  person  to  do 
the  work  at  an  agreed  price,  it  was  held,  in  an  action  for  injuries 

Co,,  7   C.   B.   (N.   S.)  290;   Garretzen  Whatman  v.  Pearson,  L.   R,,  3  C.  P. 

«.  Duenckel.   50  Mo.  104 ;  Goff  c.    Gt.  428. 

Western    R.    Co.,   3   El.   &   El.    672;        '^  Hunt   v.    R.    Co.,   51    Pa.  St.  475; 

Moore   v.    Fitchburg     R.  Co.,  4   Gray  Hilliard  ■!).  Richardson,  3  Gray  (Mass.), 

(Mass.),   465;    Ramaden   v.    Boston   &  349;    Schular  v.    Hudson    R.   Co.,  38 

Albany  R.  Co.,  104  Mass.  117;    Adams  Barb.  (N.  Y.)  653  ,  Potter  ®.  Seymour, 

t.  Cole,  1  Daly  (N.  Y.  C.  P.),  147;  Cor-  4  Bosw.  (N.  Y.)  140;  Painter  v.  Pitts- 

rigan  -c.  Union  Sugar  Refinery  Co.,  98  burg,   46    Pa.     St.   213  ;    Brackett   v. 

Mass.  577  ;  Cosgrove  v.  Ogden  ;  Hill  v.  Lubke,  4  Allen  (Mass.),  138. 
Morey,  26  Vt.  178.  3  Burke    v.  Norwich,  etc.,  R.  Co.,  34 

•  McGuire  v.    Grant,  25  N.  J.  r56  ;  Conn.  474 ;  Murphy  v.  Caralli,  3  H.  «S 

Kimball  ■».  Cushman,  103  Mass.  194;  C.  462  ;  Murray  «.  Currie,  L.  R.,  6  C.  P 

24. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      733 

received  by  reason  of  the  negligent  manner  in  which  the  sewer 
was  left  at  night,  that  the  contractor  could  not  be  held  responsi- 
ble therefor.'  The  rule  is  that  where  an  employee  is  exercising 
a  distinct,  an  independent  employment,  and  is  not  under  the  imme- 
diate control,  direction  or  supervision  of  the  employer,  the  latter 
is  not  responsible  for  the  negligence  or  carelessness  of  the  em- 
ployee. Thus,  where  a  public  licensed  drayman  was  employed  to 
haul  a  quantity  of  salt  from  a  warehouse,  and  deliver  it  at  the 
store  of  the  employer  at  so  much  per  barrel,  and  while  in  the  act 
of  delivering  the  salt  one  of  the  barrels,  through  the  carelessness 
of  the  drayman,  rolled  against  and  injured  a  person  passing  on 
the  sidewalk,  it  was  held  that  the  employer  was  not  liable  for  the 
injury." 

Where  an  employer  made  a  bargain  with  his  employee  to  cut 
all  the  logs  the  employer  had  on  certain  land,  and  to  deliver  them 
to  the  employer  at  a  place  named,  the  employer  having  no  inter- 
est in  the  running  of  the  logs  until  they  reached  the  point  of  de- 
livery, nor  was  he  to  render  any  assistance,  pecuniary  or  otherwise, 
in  the  cutting  or  running  of  the  logs, —  it  was  held,  that  the  relation 
of  master  and  servant  did  not  exist,  and  that  the  employee  alone 
was  liable  for  any  injury  occasioned  to  others  by  his  conduct  in 
performing  his  contract.'  So,  where  the  plaintiff  was  injured  by 
being  thrown  from  his"  wagon  by  collision  with  a  car  owned  by  the 
defendant,  but  drawn  by  horses  owned  by  a  contractor  with  whom 
they  had  contracted  to  draw  their  cars  and  furnish  horses  and 
drivers,  the  horses  at  the  time  of  the  injury  being  driven  by  a  man 
employed  by  the  latter,  it  was  held,  that  the  contractor  alone  was 
liable.*  In  a  case  where  a  railway  company,  by  agreement  under 
seal,  engaged  a  contractor  to  build  the  railway,  reseiwing  powder  to 
the  company  to  watch  the  progress  of  the  work,  and  to  dismiss  any 
incompetent  workmen  employed  by  the  contractor.  In  construct- 
ing a  viaduct  on  parts  of  the  railway  over  a  public  highway,  a 
stone,  through  tiie  negligence  of  the  workmen,  fell  upon  the 
plaintiff's  husband,  who  was  passing  along  the  road  underneath, 
and  caus.^d  his  death, — it  w^as  held,  that  the  company  was  not 

1  Blake  v.  Ferris,  5  N.  Y.  48.  *  Moore  v.  Sanborne,  3  Micb.  519. 

'  De  Forrest  v.  Wright,  2  Micb.  *  Weyant  v.  New  York  &  Harlem 
368.  Railroad,  3  Duer  (N.  Y.) ,  360. 


734  Private  Cokporations. 

liable  for  the  damages/  and  that  a  mere  reservation  of  the  right  to 
discharge  any  of  the  workmen  did  not  affect  their  liability,  unless 
the  defendant  also  reserved  and  exercised  control  over  the  work 
itself.  And  this  is  held  to  be  the  rule  even  as  to  municipal  cor- 
porations, unless  they  have  the  exclusive  control  and  care  over 
the  subject-matter  of  the  contract.  In  a  Pennsylvania  case," 
Judge  Strong,  in  commenting  upon  the  policy  of  the  rule,  said  : 
"  It  is  difficult  to  discover  any  substantial  reason  or  good  policy 
for  holding  the  present  defendants  responsible.  The  negligence 
complained  of  was  not  theirs.  It  does  not  appear  that  they  knew 
of  it.  The  verdict  determines  that  the  fault  was  on  the  contract- 
ors. Over  them  the  defendants  had  no  more  control  than  the 
plaintiff's  husband  had.  They  were  not  in  a  subordinate  relation 
to  the  defendants,  neither  were  they  his  agents.  They  were  in  an 
independent  employment,  and  sound  policy  requires  that  in  such 
a  case  the  contractor  alone  should  be  held  liable.  In  making  a 
sewer  he  has  necessarily  the  temporary  occupancy  of  the  street  in 
which  the  work  was  done,  and  it  must  be  exclusive." 

A  railroad  corporation  is  not  liable  for  injuries  to  buildings  in 
the  vicinity  of  its  road  caused  by  blasting  done  by  those  who  have 
contracted  to  grade  the  road  or  persons  in  their  employ,  although, 
under  the  contract,  the  corporation  reserves  the  right  to  retain  in 
its  hands  sums  sufficient  to  pay  all  damages  that  are  not  adjusted 
within  thirty  days  from  the  time  they  are  inflicted." 

So,  where  A  contracted  with  B  and  C  to  build  her  a  house,  to 
be  finished  complete,  B  and  C  employed  D,  a  blacksmith,  to  make 
and  place  a  grating  in  the  area.  The  hole,  over  which  the  grating 
was  to  be  placed,  was  left  uncovered,  and  E  fell  into  it  and  broke 
his  leg.  It  was  held  that  B  and  C,  the  first  contractors,  were  lia- 
ble to  E.^ 

Where  work  was  done  for  a  railroad  company  under  a  contract, 
it  was  held  that  the  company  were  not  responsible  for  injury  re- 
sulting to  a  third  person  from  the  negligent  manner  of  doing  the 

'  Reedie  v.  London  &  Northwestern  ^  Tibbets  ■».    Knox   &  Lincoln  R.  R. 

R'way  Co.,  6  Rallw.  Cas.  184 ;  20  L.  J.  Co.,  63  Me.  437. 

Exch.    65;  4  Exch.  244;    Hobbitt  v.  •«  McCleary  v.  Kent,  3  Duer  (N.  T.), 

Same,  id.  244  27. 

^  Painter  v.  Mayor  of  Pittsburg,  46 
Pa.  St.  213. 


Kbgligence  and  Wrongful  Acts  of  Agents,  etc.      735 

work,  though  they  employed  their  own  surveyor  to  superintend 
it,  and  to  direct  what  should  be  done.' 

Generally,  a  sub-contractor  is  not,  in  law,  regarded  as  the  serv- 
ant of  the  person  employing  him.  Thus,  where  the  defendant,  a 
builder,  was  employed  by  the  committee  of  a  club  to  execute  cer- 
tain alterations  at  the  club-house,  including  the  preparation  and 
fixing  of  gas-fittings,  he  made  a  sub-contract  with  B,  a  gas-litter,  to 
execute  this  part  of  the  work.  In  the  course  of  doing  it,  through 
B's  negligence,  the  gas  exploded  and  injured  the  plaintiff.  It  was 
held  that  the  defendant  was  not  liable  for  the  injury.'  In  a 
Scotch  case,'  it  was  held  that  the  same  rule  applies  as  between  a 
contractor  and  sub-contractor,  as  applies  between  the  original  con- 
tractee  and  contractor,  the  court  remarking,  that  where  a  person 
contracts  with  one  man  to  do  a  piece  of  work,  and  the  latter  sub- 
contracts with  another,  the  sub-contractor  alone  is  liable  for  any 
damage  committed  in  the  course  of  the  work  by  him.* 

In  a  recent  English  case  "  an  interesting  question  was  raised  as 
to  the  liability  of  a  sub-contractor  for  the  act  of  his  servant,  to  a 
third  person,  between  whom  and  the  master  there  was  no  privity, 
when  the  liability  in  any  measure  depends  upon  a  contract.  In 
that  case,  by  an  agreement  between  the  Smithfield  Club  and  the 
defendants,  who  were  proprietors  of  a  building  and  premises  at 
Islington,  called  the  Agricultural  Hall,  the  club  were  to  have  the 
exclusive  use  of  the  hall  during  the  period  of  their  annual  show 
of  stock,  etc.,  the  defendants  providing  and  paying  a  sufficient 
staff  (who  were  to  be  under  the  sole  control  of  the  secretary  and 
stewards  of  the  club),  to  receive,  take  care  of,  and  redeliver  the 
stock,  etc.,  exhibited,  and  also  paying  the  club  £1,000,  in  consid- 
eration of  which  the  defendants  were  to  receive  certain  fees  or 
admission  money  from  the  visitors.  The  stock  and  articles  to  be 
exhibited  were  received  at  the  gate  of  the  defendants'  premises  by 
one  Sharman  (upon  orders  signed  by  the  secretary  of  the  Smith- 
field  Club),  who  contracted  with  the  defendants  for  a  lump  sum, 
amongst  other  things,  to  receive  them  and  to  re-deliver  them  at 

'  Steel   1).  Southeastern  R'way    Co.,  '  McLean  v.  Russell,  22  Jiir.  39-4. 

32  En^.  L.  &  Eq.  366.  ■*  Shield  v.  Edinbursrh  &  Glasgow  R 

2  Rapson  v.  Cubitt,  9  M.  &  W.  710  ;  R.  Co.,  28  Jur.  539  ;  Richmond  v.  Rus- 

1  Car.  &  M.  64 ;   6  Jur.  606.       But  see  sell,  22  Sc.  Jur.  394. 

McCleary  v.  Kent,  3  Duer  (N.  Y.),  27,  "Goslin   v.  Agricultural  Hall  Co.,  L. 

contra  R,  1  C.  P.  D.  (_C.  A.)  482. 


736  Private  Corporations. 

the  end  of  the  show  upon  like  orders,  the  defendants  in  no  way 
interfering.  One  Stilgoe,  who  exhibited  a  pen  of  three  sheep  at 
the  show  in  1873,  sold  them  to  the  plaintiff,  and  upon  the  plain- 
tiff's drover  producing  an  order  for  their  removal  signed  by  Stil- 
goe, Sharman,  or  one  of  his  men,  delivered  him  by  mistake  sheep 
from  another  pen.  These  the  plaintiff  rejected,  and  he  brought 
an  action  against  the  defendants  for  converting  his  sheep,  and  it 
was  held  that  the  defendants  were  not  responsible  under  the  cir- 
cumstances for  the  acts  or  defaults  of  Sharman  or  his  men.  And 
this  decision  was  sustained  on  appeal,  the  court  on  appeal  holding 
that,  as  between  the  plaintiff  and  the  defendants,  there  was  no  priv- 
ity of  contract,  and  no  duty  on  the  part  of  the  latter  to  re-deliver 
the  stock,  etc.,  at  the  close  of  the  show. 

Sec.  491.  Liability  in  case  of  a  nuisance- attaches  only  when  a  nui- 
sance necessarily  results.  —  Where  a  person  lets  work  to  be  done 
by  another,  by  contract  or  job,  which  is  innocent  and  lawful 
in  itself,  but  which  Tinay^  if  carelessly  or  negligently  done, 
result  in  injury  to  another,  he  is  not  charged  with  liability 
if  such  work  is  in  fact  carelessly  and  negligentjy  performed. 
He  is  only  liable  in  such  cases  when  the  work  to  be  done 
necessarily  creates  a  nuisance.  When  it  is  lawful  in  and  of 
itself  in  all  its  details  he  is  not  liable  for  the  acts  of  the  con- 
tractor or  his  servants  unless  he  retains  control  over  the  work 
and  the  instruments  of  its  performance.  He  may  personall}^, 
or  by  an  agent,  superintend  the  work,  or  direct  as  to  what  shall 
be  done,  provided  he  does  not  retain  control  over  the  method  and 
means  of  its  accomplishment.  Thus,  where  a  person,  in  erecting 
a  building  upon  a  public  street,  lets  out  the  stone  work  to  be  done 
by  a  contractor,  under  the  direction  and  to  the  satisfaction  of  a 
sujperintendent  employed  hy  him,  this  reservation  is  not  such  a 
reservation  of  control  over  the  method  and  instruments  of  accom- 
plishing the  work,  as  renders  him  liable  for  an  injury  resulting 
from  the  negligent  execution  of  the  work  by  the  contractor.' 

But  when  the  work  is,  of  itself,  in  any  of  its  details,  unlawful, 
or  necessarily  results  in  the  creation  of  a  nuisance,  the  employer 

>Chambera  v  Ohio  Life  Ins.  and  ■».  Hooper,  11  Allen  (Mass.),  419  ;  Huni 
Trust  Co.,  1  Dis.  (Ohio)  337;  Forsyth    v.  Penn.  R.  Co.,  51  Pa.  St.  475. 


Negligence  ani>  Wrongful  Acts  of  Agents,  etc.      737 

having  the  power  to  abate  it,  and  it  being  his  duty  to  do  so,  he  is 
liable  if  an  injury  results  from  a  nuisance  created  by  the  contractor 
with  the  assent  of  the  employer,  express  or  implied.'  So,  too,  he  is 
liable  if  he  retains  control  over  the  method  and  means  of  doing  the 
work.  Thus,  where  the  defendant  let  a  contract  for  re-paving  the 
streets  of  a  city,but  reserved  entire  control  over  the  manner  of  doing 
the  work,  it  was  held  that  the  relation  of  master  and  servant 
existed,  and  that  the  defendant  was  liable  for  injuries  resulting 
from  the  negligent  or  improper  execution  of  the  work,'  or  if  he 
interferes  and  directs  hoio  the  work  shall  be  done,  and  injury 
results  to  others  while  his  orders  are  being  executed.'  "  When," 
says  Appleton,  J.,*  "  the  contract  is  to  do  an  act  in  itself  lawful, 
it  is  presumed  it  is  to  be  done  in  a  lawful  manner.  Unless,  there- 
fore, the  relation  of  master  and  servant  exists,  the  party  contract- 
ing is  not  responsible  for  the  negligent  or  tortious  acts  of  the 
person  with  whom  the  contract  is  made,  especially  if  those  acts 
are  outside  of  the  contract.  If  the  injury  was  the  natural  result 
of  work  contracted  to  be  done,  and  it  could  not  be  accomplished 
without  causing  the  injury,  the  person  contracting  for  doing  it 
would  be  held  responsible." 

"  The  authority  is  implied  from  the  employment,  and  is  a  natural 
and  legitimate  incident  of  the  service.  Thus,  where  a  brakeman 
was  stationed  at  the  entrance  of  railway  cars  at  a  depot,  to  direct 
passengers  which  car  to  take,  and  one  car  was  set  apart  for  ladies, 
or  gentlemen  accompanied  with  ladies,  and  a  gentleman  without 
a  lady  entered  the  ladies'  car,  and  the  brakeman  forcibly  and  vio« 
lently  ejected  him  fi'om  the  car,  it  was  held  that  the  company  was 
liable  for  the  injury  so  inflicted,  because,  having  placed  the 
brakeman  in  that  position  to  see  that  the  rules  of  the  company 
were  observed,  he  must  be  regarded  as  being  impliedly  clothed 
with  authority  to  enforce  obedience  thereto  by  force."  ' 

1  Clark  <€.  Fry,  8  Oliio  St.  358 :  Car-  "  Peck  v.  N.  Y.  C.  E.  Co.,  6  T.  &  C. 
man  v.  Steubenville,  etc.,  R.  Co.,  4  (N.  Y.)  436.  James,  J.,  in  delivering 
id.  399  ;  Dygert  v.  Schenck,  23  Wend,  tlie  opinion  of  the  court,  very  aptly 
(N.  Y.)  44G  ;  Vanderpool  v.  Husson,  28  expressed  the  rule  thus:  "If  the  em- 
Barb.  (N.  Y.)  196  ;  Matheny  ■».  "SVolffs,  ployee,  who  removed  the  plaintiff,  is 
2  Duv.  (Ky.)  137.  to  be  regarded  as  a  brakeman,  uiiau- 

*  Cincinnati  v.  Stone,  ante.  thorized  to  perform  any  duties  other 

^Heffernan  v.  Benkard,  1  Robt.  (N.  than  such  as  pertained  to  that   office, 

Y.)  433.  and  volunteered  the   act   in   question 

■*  Eaton  V.  European  &  Northern  R.  without  other  authority  or   direction 

Co.,  59  Me.  520  ;  8  Am.  Rep.  430.  then   the   defendant  was    not   liable 

93 


738  Private  Corporations. 

Sec.  492.  Corporations  bound  to  the  same  degree  of  care  as  natural  peiw 
sons  —  degree  of  care. — From  what  has  been  said  it  will  be  seen  that 
corporations  are  bound  to  the  same  degree  of  care  in  the  conduct 
of  their  business,  and  are  subject  to  the  same  rules  of  liability  for 
wrongful  acts  committed  by  them  in  the  Une  of  their  duty,  as  in- 
dividuals are,  and,  being  liable  for  the  tortious  or  wrongful  acts  of 
their  servants  or  agents,  it  follows  as  a  natural  and  legitimate  result 
that  they  are  hable  for  the  manner  in  which  their  duties  are  dis- 
charged, or,  in  other  words,  for  the  negligence  of  their  officers^ 
agents  or  servants  in  the  discharge  of  their  duties,  in  whatever 
department  they  are  employed.  The  question  of  liability  for  acts 
claimed  to  be  negligent  must  depend  largely  upon  the  powers 
and  pui-poses  of  the  corporation  and  the  agencies  employed  in 
the  conduct  of  its  business.'  The  rule  is  that  a  degree  of  care 
must  be  observed  commensurate  with  the  character  of  the  agen- 
cies employed,  and  tJie  risk  to  others  from  their  improper  or 
negligent  employtnent?' 

Thus,  while  a  railroad  company  is  bound  to  exercise  the  highest 
degree  of  care  in  the  selection  of  its  machinery,  cars,  servants  and 
other  appliances,  and  in  the  construction  of  its  road-bed,  and  in 
keeping  the  same  in  repair,  yet  it  is  not  liable  for  the  result  of 
an  accident  which  could  not  have  been  prevented  by  the  exercise 
of  such  care.  In  other  words,  when  an  injury  results  from, 
causes  that  the  exercise  of  the  highest  degree  of  ca/re  could  not 


But,     as  brakeman,  he  was    an  em-  plaintiff  could  not  know,  as  between 

ployee  of  the  company,  subject  to  its  him  and  the  company   it  was  enough 

authority  and  the  control   of   its    offi-  that  the  act  was  done  in  the  prosecu- 

cers,  and,  as   such   employee,  he    was  tion  of   the  piaster's  business ;  and  if 

directed  by  the   person  in   charge   to  he   deviated  from  or  exceeded  his  in- 

see  tliat  gentlemen  without  ladies  did  stritctions,  that  fact  did  not  excxise  the 

not  enter  that  car,  and   it  was   in  the  master  from  Wibility.     The   order  to 

performance  of  that  service  he  did  the  the    brakeman   and  his   performance 

act  complained  of.     It  is  true  he  was  warrants    the   conclusion,  even   as  a 

not  ordered  to  remove   persons    from  matter  of   law,   that    he    was   acting 

the  car ;  his  orders  were  to  notify  gen-  within  the  scope  of   the    employment 

tlemen   not   in  charge  of   ladies  that  he  was  set  to  perform."     Limpus   «. 

Buch  car  was  reserved,  and  direct  them  Geul.  Omnibus  Co.,  anie/  Seymour  v. 

to  cars  forward ;   so  that  in  removing  Greenwood,   ante;   Moore   v.   Railway 

the  plaintiff  he  clearly  exceeded    the  Co.,  21  W.  R.  145  ;    Bayley  v.  Railway 

orders  given  him.     But  this  fact  the  Co.,  L.  R.,  7  C.  P.  415. 


'  Philadelphia,  etc.,  R.  Co.  v.  Derbey,        ^  Wood's   Law   of  Master  and  Ser- 
14  How.  (U.  S.)  468.  vant,  688,  788. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      739 

have  prevented,  it  is  not  liable,  as  such  injuries  are  the  result  of 
inevitable  accident.* 

Sec.  493.  Not  insurers  against  all  casualties. —  A  railroad  corpora- 
tion is  not  an  insurer  against  every  possible  casualty,  but  only  for 
such  as  result  in  spite  of  the  highest  degree  of  vigilance."  While 
it  is  bound  to  construct  its  road-bed  and  maintain  it  and  its 
bridges  in  a  safe  condition  for  the  use  of  its  passengers,'  yet,  it  is 
not  liable  for  injuries  resulting  from  defects  therein  that  no  de- 
gree of  care  or  vigilance  could  have  detected.  Thus,  while  it  is 
undoubtedly  bound  to  construct  them  in  such  a  manner  as  to 
withstand  the  effects  of  ordinary  freshets,  or,  possibly,  extra- 
ordinary freshets,  yet  it  is  not  responsible  for  not  securing  them 
against  unprecedented  freshets,  such  as  could  not  have  been  rea- 
sonably foreseen  or  guarded  against.*  In  the  case  last  cited, 
an  action  was  brought  for  an  injury  received  by  the  plaintiff  while 
riding  over  the  defendants'  road.  The  case  disclosed  that  the 
road-bed  was  constructed  some  five  years  prior  to  the  accident,  and 
ran  through  a  marshy  country  subject  to  floods;  that  it  was  con- 
structed on  a  low  embankment  composed  of  a  sandy  sort  of  soil 
likely  to  be  washed  away  by  water,  and  that  the  cidverts  vaere  in- 
s^ifficient  to  carry  off  the  water.  It  was  not  shown,  however,  that 
the  soil  of  the  line  had  heen  washed  away  hefore,  or  that  the  water 
had  ever  come  up  to  the  enibanhtnent.  It  also  appeared  that,  on  the 
day  upon  which  the  accident  occurred,  an  extraordinary  storm, 
attended  with  very  violent  rain,  had  been  raging  for  over  sixteen 
hours,  and  that  in  consequence  of  this  a  stream  near  to  the  spot  at 
which  the  accident  occurred  had  swollen  to  a  torrent  and  washed 
away  a  bridge,  and  passed  down  with  great  force  upon  the  line.  By 
midnight  the  water  had  worn  away  the  earth  under  the  sleepers, 
in  some  places  leaving  the  rails  unsupported  and  exposed,  but  it 
did  not  appear  that  the  water  had  at  any  part  of  the  line  caused 
the  evil,  or  that  the  condition  of  the  line  could  he  perceived.  The 
train  upon  which  the  plaintiff  was  injured  was  the  express,  and 
upon  the  whole  went  at  the  ordinary  rate  of  an  express  train, 

'  Kansas   Pacific   R.    Co,    u.   Miller,  ^  Pittsburg    &   Fort  Wayne  R.  Go. 

2  Col.  443.  ■».  Gilleland,  56  Pa.  St.  445. 

'■*  Chicago,   etc.,   R.     Co.   «.  Stumps,  *  Withers   ®.  No.  Kent.   R.  Co.,  27 

69  111.  409.  L.  J..  Ex.  417. 


740  Pkivate  Corporations. 

although  there  was  some  evidence  that  A  was  being  driven  at  a 
faster  rate  at  the  time  when  the  accident  occurred,  to  make  up 
for  lost  time.  The  train  had  passed  over  the  line  safely  until 
the  accident  occurred,  by  reason  of  the  undermining  of  the 
sleepers  and  the  consequent  giving  away  or  settling  of  the  rails, 
which  threw  the  train  down  an  embankment  and  seriously  injured 
the  plaintiff.  The  jury  returned  a  verdict  for  the  plaintiff  for 
£1,500  damages,  which,  upon  hearing  in  Exchequer,  was  set  aside 
upon  the  ground  that  there  was  no  sufficient  evidence  of  negli- 
gence on  the  part  of  the  defendants  to  sustain  it.  Bramwell,  B., 
said :  "  It  is  said  that  the  construction  of  the  line  was  such  as 
to  make  it  dangerous  in  a  flood,  and  that,  therefore,  the  defend- 
ants' servants  must  have  known  that  it  was  dangerous  to  drive  at 
an  express  rate  of  speed.  But  negligence  must  he  shown  hy  the 
plaintiff.  It  is  not  enough  to  show  that  an  accident  arose  from 
certain  extrinsic  or  external  causes.  Where  is  the  evidence  of 
negligence  ?  It  is  contended  on  the  part  of  the  plaintiff  that  the 
company's  servants  were  hound  to  know  the  consequences  which 
were  likely  to  follow  from  the  flood.  That  is  not  so.  They  were 
hound  only  to  know  that  which  could  he  known  hy  the  exercise  of 
ordinary  skill  and  prudence^  otherwise  they  would  be  made 
insurers  of  the  safety  of  the  passengers.  There  was  no  engineer- 
ing or  other  skilled  evidence  to  show  that  water  would  wash 
away  the  soil  of  which  the  embankment  was  made.  So  far  from 
there  being  any  evidence  to  show  that  there  was  negligence,  there 
was  evidence  to  negative  the  negligence  imputed.  The  very  ex- 
istence of  the  line  for  five  years,  notwithstanding  that  the  dis- 
trict was  subject  to  floods,  tended  to  negative  the  only  negligence 
that  was  set  up.  There  was  nothing  to  show  that,  until  the 
accident  occurred,  there  had  been  any  thing  to  indicate  danger, 
or  to  warn  the  company's  servants  to  cease  running  the  trains. 
The  verdict  was  wholly  unwarranted.''''  *  The  track  must 
he  in  a  safe  condition  so  far  as  human  foresight  can  ac- 
complish that  result,  but  unless  negligence  in  some  respect 
contributing  to  an  injury  resulting  from  defects  therein  can  be 

'  In    Pittsburg,  Fort   Wayne,   etc.,  Birmingham    Water  Works   Co.,    \\ 

B.    Co.  «.    Gilleland,   56  Pa.  St.   445,  Exch.    781  ;     Fast   v.  Third  A  v.    R. 

a   similar   doctrine   was  held.       See,  Co..  1  Daly  (N.  Y.  C.  P),  148. 
also,  similar    in    principle,  Blyth  ■». 


Negligence  and  Wrongful  Acrrs  of  Agents,  etc.      741 

attributed  to  the  company  it  is  not  liable.'  No  precise  rule  of 
diligence  can  be  stated,  but  the  company  is  bound  to  construct  its 
roadway  in  such  a  manner  as  to  be  able  to  resist  all  such  action 
of  the  weather,  from  floods  or  whatever  cause  arising,  that  may 
be  expected  to  occur,  although  only  at  long  intervals,  and  as  a 
necessary  sequence,  if  extraordinary  or  unprecedented  floods  have 
once  occurred,  it  must  redouble  its  vigilance,  and  place  its  embanic- 
ments  in  such  a  condition  as  to  resist  another  of  similar  severity 
or  intensity.' 

Sec.  494.  Care  required  of  railroad  corporations  in  relation  to  engines, 
cars,  track,  etc.  —  The  same  degree  of  care  is  required  in  the  selec- 
tion of  engines  and  cars,  and  other  appliances  for  the  prosecution 
of  the  business.^  The  company  is  not  exonerated  from  liability 
for  injuries  resulting  from  defects  in  its  vehicles,  because  it  pur- 
chased them  from  competent  manufticturers,  but  is  responsible  for 
defects  therein  resulting  from  the  negligence  of  the  manufactur- 
ers, precisely  the  same  as  it  would  be  if  it  manufactured  them 
itself.*  It  is  not  responsible  for  all  defects  therein,  but  only  for 
such  as  could  have  been  ascertained  by  the  exercise  of  the  highest 
degree  of  vigilance,^  or,  in  other  words,  for  defects  which  could  not 
have  been  detected  by  any  degree  of  care  or  skill,  either  in  the 
course  of  manufacture  or  afterward.*  In  New  York  a  different 
rule  of  liability  has  been  held,  and  the  company  is  held  to  be 
bound  at  its  peril  to  provide  safe  cars,  and  is  responsible  for  in- 
juries resulting  from  defects  therein,  irrespective  of  the  question 
of  negligence.' 

The  rule  in  reference  to  the  degree  of  vigilance  to  be  observed 
was  well  expressed  in  an  English  case,  previously  cited.*    In  that 

'  Toledo,   etc.,  R.    Co.  v.  Apperson,  *  Readhead  v.  Midland  R.  Co.  Jj.  R.,  4 

49  111.    480 ;   Reed  v.   K  Y.  Cent.  R.  Q.  B.  379. 

Co.,  56  Barb.  (N.  Y.)  493  ;    Gonzales  v.  '  Alden  u.  N.  Y.  Cent.  R.  Co.,  26  N. 

N.  Y.  Cent.  R.  Co.,  39  How.  Pr.  (N.  Y.)  Y.  102. 

407.  In  Hegeman  v.  Western  R.  R.  Co., 

-  Great  Western  R.  Co.  of  Canada  v.  13  N.  Y.   9,  the   plaintifif"  was  injured 

Fawcett,  1  Moore's  P.  C.  C.  (N.  S.)  101.  by   the   breaking   of  an   axle,  from  a 

^  Readhead  v.  Midland  R.  Co.,  L.  R.  latent   defect    vliicli   could    not  have 

2  Q.  B.  412  ;   Burns  v.  Cork,  etc.,  R.  teen  discovered  hy  the  most  vigilant  ex- 

Co.,  13  I.  R.  C.  L.  543  ;  Grotet).  Chester,  amination,  and  the  company  was  held 

etc.,  R.  Co.,  2  Exch.  251.  chargeable. 

■*  Burns  v.  Cork,  etc.,  R.  Co.,  ante.  *  Manser  v.  Eastern  Counties  R.  Co, 

5  Stokes  V.  Eastern  Counties  R.  Co.,  81  L.  T.  (N.  S.)  585. 
2  F.  &  F.  691;   Mauser  «.  Eastern  Coun- 
ties R.  Co.,  31  L.  T.  (N.  S.)  585. 


742  Private  Cokpokations. 

case,  an  action  was  brought  by  the  plaintiff  to  recover  damages  for 
injuries  sustained  by  him  whilst  traveling  on  the  defendants'  rail- 
way, as  he  alleged,  from  the  negligence  of  the  company.  It 
arose  from  an  imperfect  weld  in  the  formation  of  a  wheel  —  in 
this  case  the  driving-wheel.  It  appears  in  this  case,  that  driv- 
ing wheels  are  usually  formed  in  the  first  instance  with  a  thick- 
ness of  about  2^  inches.  They  are  allowed  to  run  some  time, 
and  then  ground  down  or  re-turned  for  the  purpose  of  making 
them  again  smooth ;  and  this  operation  is  performed  about  three 
times.  Ultimately  the  thickness  of  the  wheel  is  reduced  from 
about  2J  or  2J  inches  to  about  1^.  If  it  happens  to  be  below  1\ 
it  is  considered  worn  out,  and  should  not  be  continued  in  the  use. 
About  three  times  a  wheel  may  be  re-turned ;  or  it  may  be  re- 
turned only  twice,  but  with  three  different  thicknesses.  Before 
it  is  used  the  first  time  it  should  be  hammered  all  round  and  all 
over  to  test  its  soundness,  and  to  ascertain,  as  far  as  it  is  possible 
to  ascertain,  if  it  be  perfect,  whether  it  will  ring,  and  is  sound 
in  every  part.  This  wheel  had  been  so  tried  before  it  was  used. 
It  had  run  many  thousands  of  miles,  and  had  been  reduced  ^  or 
•|  an  inch  of  its  thickness.  But  although  the  wheel  had  been 
tested  by  the  universal  hammering  in  the  first  instance,  it  had  not 
been  subjected  to  that  test  after  it  had  been  reduced  in  thickness 
by  wear.  The  wheel  was  defective,  it  gave  way,  and  hence  the 
accident. 

The  cause  was  tried  in  London  before  the  Lord  Chief  Bnron, 
when  the  jury  returned  a  verdict  for  the  plaintiff,  for  £2,000, 
damages. 

Channell,  B.,  said :  "  This  was  an  action  brought  to  recover 
compensation  in  damages  for  injuries  sustained  by  the  plaintiff, 
owing   to   the   alleged   negligence  of  the  defendants.     *     *     * 

"  The  Lord  Chief  Baron,  in  summing  up,  appears  to  me 
(if  I  may  take  the  liberty  of  saying  so)  to  have  left  the  case 
at  the  trial  to  the  jury  very  fairly  toward  the  company.  There 
were  certain  passages  selected  by  Mr.  Bovill,  and  strongly  com- 
mented on,  but  there  were  other  passages  in  the  summing  up  to 
which  the  attention  of  the  court  was  called,  and  to  which  it  will 
be  necessary,  I  think,  we  should  advert.  His  Lordship,  after  stat- 
ing the  nature  of  the  action,  said :  '  With  respect  to  the  law  there 


Negligence  and  Wkonoful  Acts  of  Agents,  etc.       743 

is  really  no  doubt  whatever.  If  every  part  of  the  case  was  as  clear 
aud  undoubted  as  the  legal  questions  that  arise,  there  would  be 
very  little  difficulty  indeed  in  disposing  of  the  case,  without  any 
trouble  whatever.  There  can  be  no  doubt  that  in  point  of  law 
the  defendants  are  bound  to  provide  carriages  and  other  appli- 
ances which  shall  present  every  reasonable  prospect  of  safety. 
They  are  bound  to  guard  against  every  source  of  danger  that  they 
can  foresee.  But  if  the  case  stated  by  Mr.  Bovill  for  the  defend- 
ants be  made  out  in  point  of  fact,  as  to  which  there  is  contradict- 
ory testimony,  which  it  is  for  you  to  decide  —  if  that  case  be 
made  out  in  fact,  then  undoubtedly  the  defendants  would  be  enti- 
tled to  your  verdict.  The  defendants  are  not  liable  for  any  cause 
of  danger  that  cannot  be  foreseen  by  the  exercise  of  reasonable 
care  and  caution  in  preparing  for  the  journey ;  and  if,  therefore, 
the  entire  cause  of  accident  was  this  defective  weld,  which  was 
not  known,  and  could  not,  by  any  reasonable  skill,  care  or  pru- 
dence, be  discovered,  then  the  defendants  are  entitled  to  your  ver- 
dict.' The  law  in  that  respect  was  laid  down  as  favorably  to  the 
company  as  the  company  had  a  right  to  expect.  That  was  his 
Lordship's  observation  at  the  commencement  of  the  summing  up ; 
at  the  end  of  the  summing  up,  in  substance,  that  direction  is  re- 
peated, his  Lordship  saying,  it  is  important  that  every  attention 
should  be  paid  to  the  machinery,  '  in  order  that  the  lives  of  the 
passengers  may  be  placed  in  as  much  safety  as  possible.'  He  goes 
on  to  say :  '  The  company,  however,  are  not  bound  to  do  that 
which  is  impossible ;  they  are  not  bound  to  see  that  which  is  invis- 
ible, but  they  are  bound  to  take  every  precaution.  It  is  entirely, 
gentlemen,  for  you  to  decide  whether  in  your  judgment  they 
have  done  every  thing  which  their  situation  in  providing  conven- 
iences for  passengers  required  of  them,  and  whether  there  was  any 
deficiency,  or  whether  they  entirely  and  perfectly  discharged  that 
duty.  If  they  entirely  performed  it,  I  think  they  are  entitled  to 
your  verdict.  If  they  did  not,  if  there  was  any  thing  that  might 
reasonably  be  required  of  them  under  the  circumstances  which  in 
your  judgment  they  did  not  perform,  I  think  they  would  be  lia- 
ble, and  it  would  be  entirely  for  you  to  say  what  damages  the 
plaintiff  would  be  entitled  to  in  the  event  of  your  thinking  him 
entitled  to  your  verdict.'     Now,  it  is  impossible,  I  think,  that  the 


744  Priyate  Coepokations. 

rule  could  be  laid  down  more  correctly  than  it  was,  both  at  the 
commencement  and  the  conclusion  of  his  Lordship's  summing-up. 
But  there  were  particular  passages  in  the  course  of  the  summing-up, 
which  were  excepted  to.  This  passage  was  excepted  to.  Mr, 
Bramwell,"  an  engineer,  had  been  called  on  the  part  of  the  plain- 
tiff, and  in  the  course  of  his  cross-examination  he  said : 
*  I  know  of  no  mode  of  discorering  the  defect ;  if  the 
tire  be  struck  that  may  or  may  not  detect  it.'  Now,  it 
is  quite  clear,  looking  at  the  cross-examination  of  Mr 
Bramwell,  and  of  all  the  other  witnesses,  what  was  meant  to  be 
stated  was  this  :  there  was  no  test  that  was  absolutely  fixed  —  no 
test  that,  in  every  instance,  would  turn  out  to  be  sure  and  success- 
ful ;  but  it  cannot  be  contended  a  test  ought  not  to  be  adopted, 
if  it  is  a  useful  one,  and  may  reasonably  be  expected  to  bring 
about  the  result,  because  it  is  not  absolutely  fixed.  Now,  the  par- 
ticular remark  that  was  objected  to  was  this  :  '  In  all  probability, 
if  this  tire  had  undergone  the  process  not  merely  of  ringing  it 
with  a  hammer  to  see  whether  it  was  sound,  but  of  hammering 
it  all  round  and  all  over,  the  defect  would  have  been  discovered, 
because  there  can  be  no  doubt,  in  regard  to  a  bell  which  is  now 
silent  (but  which  we  heard  for  some  time  as  if  the  whole  material 
of  the  clock  at  Westminster  were  perfect),  it  was  cracked,  but 
continued  to  strike ;  and  nobody  was  aware  of  it.  Somebody  ob- 
served on  a  rainy  day^  when  the  bell  was  struck  and  the  water 
trickled  down,  it  had  a  tremulous  motion  on  each  side,  and  the 
vibrations  were  not  perfectly  equal.  The  man  called  somebody 
to  watch  it,  and  then  they  discovered  that  the  bell  was  cracked. 
So  that  there  can  be  no  doubt  that  merely  going  to  a  tire  and 
striking  it  with  a  hammer  will  not  tell  you.'  That  is  the  sub- 
stance of  my  Lord's  observation.  It  was  an  observation  founded 
on  experience  —  that  the  test  of  the  hammer  upon  the  tire  would 
enable  you  to  see  whether  the  tire  would  ring  where  it  was 
cracked  in  one  part.  But  what  was  contended  for  on  the  part  of 
the  plaintiff  was,  the  tire  should  have  been  hammered  all  over ; 
and  there  was  a  body  of  evidence  and  an  important  witness  to 
that  point.  There  was  abundant  evidence  to  show,  when  the 
tire  had  been  re-turned,  as  it  is  called,  if  it  had  been  hammered 
all  over,  in  all  probability  this  defect  would  have  been  discovered. 


Negligence  and  "Wrongful  Acts  of  Agents,  etc,       745 

It  appears  tliat  there  is  nothing  in  my  Lord's  observations  that 
can  warrant  any  objection  on  the  score  of  misdirection,  *  *  *  A 
witness  had  said :  '  It  should  have  been  hammered  all  round.' 
My  Lord  goes  on  to  explain  what  is  meant  by  that :  —  '  What  he 
means  by  that,  I  suppose  is,  that  they  should  not  merely  strike  it 
with  a  hammer  to  see  whether  it  would  ring,  which,  no  doubt,  a 
cracked  piece  of  metal  would,  but  they  should  have  hammered 
it  all  round  to  ascertain  ;  and  certainly,  as  the  iron  becomes  less 
and  less,  no  doubt  that  is  a  sort  of  care  which  should  be  taken, 
because  by  the  hammering  you  may  stumble  upon  some  particu- 
lar spot  that  is  defective.  One  of  the  witnesses  for  the  defend- 
ants told  us  to-day,  that  there  was  a  thickness  as  of  a  piece  of 
paper  —  a  thickness  over  the  imperfection  in  the  weld,  and  if  you 
came  to  hammer  there,  there  is  no  doubt,  I  think,  that  you  would 
discover  that.'  Now,  my  Lord  certainly  expresses  his  own  opin- 
ion ;  if  the  weld  had  been  reduced  to  this  thinness,  as  appeared 
from  one  of  the  defendants'  witnesses,  in  his  judgment,  if  it  had 
been  hammered  all  over,  the  defect  would  have  been  discovered. 
Though  my  Lord  expresses  that  opinion,  he  does  not  withdraw  it 
from  the  consideration  of  the  jury,  but  he  goes  on  to  say  :  '  You 
must  judge  for  yourselves.  I  have  no  doubt,  gentlemen,  that  if 
not  all  of  you,  a  great  many  of  you,  must  have  the  means  of 
judging  upon  that  subject  quite  as  well  as  any  of  the  witnesses, 
and  probably  much  more  than  myself.'  That  was  an  opinion 
certainly  given  by  my  Lord  as  to  a  point  that  arose  in  the  course 
of  the  evidence  —  an  opinion  in  which  few  would  disagree  ;  but 
whether  it  be  right  or  wrong  is  not  the  question  we  have  to  de- 
termine. The  matter  was  not  submitted  to  the  jury  as  a  matter 
of  law — it  was  not  decisive  of  the  evidence ;  but  the  question 
was  left  to  the  jury  that  they  might  exercise  fully  and  freely  their 
judgment  upon  the  subject.  JSTow,  the  only  other  passage  that 
was  objected  to  was  a  passage  to  this  effect :  —  'I  cannot  help 
saying,  in  passing,  that  it  appears  to  me,  before  an  old  tire  is  ever 
sent  to  be  re-turned,  and  put  in  use  for  the  purposes  of  a  leading 
wheel,  it  ought  really  to  be  hammered  all  over ;  because  there 
may  be  (and  this  is  an  illustration  of  it)  a  wheel  that  has  per- 
formed thousands  of  miles  with  perfect  safety,  which  has  appar- 
ently got  the  best  character  that  a  wheel  can  have,  but  it  turns 

94 


746  Private  Corporations. 

out  to  have  been  ground  down  until  you  came  to  within,  accord- 
ins-  to  the  case  of  the  defendants,  a  surface  not  thicker  than 
paper,  that  separated  you  from  an  imperfect  weld.  You  are  quite 
as  well  able  to  judge  as  I  am.  If  that  were  accurately  tested  by 
hammering  over  every  part  of  it,  you  would  say  whether  that 
would  not  certainly  be  discovered.  If  there  was  nothing  but  the 
thickness  of  a  piece  of  paper  to  separate  you  it  might  not  be  vis- 
ible to  the  eye,  but  it  must  be  ascertainable  by  a  hammer,  which 
would  certainly  give  a  different  sound  when  you  came  to  that 
spot.'  Again  :  my  Lord  expresses  an  opinion  in  which  I  entirely 
concur,  and  it  appears  to  me  to  have  been  correct  upon  the  evidence. 
But  my  Lord  did  not  express  his  opinion  at  all  to  the  contrary,  or 
fetter  the  jury  ;  the  question  was  left  fully  and  freely  to  them  to 
exercise  their  own  judgment  upon.  It  appears  to  me  there  is  no 
ground  whatever  for  saying  there  was  any  misdirection  of  which 
the  defendants  have  a  right  to  complain,  and  it  really  was  hardly 
insisted  on  that  there  was  no  evidence  to  go  to  the  jury ;  it  is 
enough  to  say,  the  evidence  of  Mr.  Bramwell,  the  evidence  of 
Sir  C.  Fox,  the  evidence  of  Mr.  Braithwaite,  and  the  evidence  of 
Mr.  May,  formed  a  strong  case  on  the  part  of  the  plaintiff  to  go 
to  the  jury,  which  my  Lord  could  not  have  refused  to  leave  to 
them.  I  am  clearly  of  opinion  that,  had  he  done  so,  the  plain- 
tiff would  have  had  good  ground  for  excepting  that  the  evidence 
had  not  been  submitted  to  the  jury  as  it  ought  to  have  been. 
Then,  as  to  the  case  of  the  verdict  being  against  the  weight  of 
evidence,  no  doubt  there  was  a  strong  body  of  evidence  on  the 
part  of  the  defendants.  JSTo  doubt  many  witnesses  were  called, 
witnesses  of  experience  and  respectability,  and  one  would  not 
necessarily  be  dissatisfied  if  the  jury  had  found  upon  the  evidence 
a  verdict  for  the  defendants.  On  the  other  hand,  there  was 
strong  and  positive  evidence  on  the  part  of  the  plaintiff.  I  can- 
not say  the  jury  have  come  to  a  wrong  conclusion.  I  am  not 
called  on  to  say  I  should  have  found  the  same  verdict  myself.  I 
can  see  no  ground  for  expressing  any  judicial  dissatisfaction  with 
the  verdict  of  the  jury.  I  would  refer  to  one  witness  as  a  wit- 
ness of  very  considerable  importance  —  Sir  Charles  Fox  —  who 
gave  evidence  having  a  most  material  bearing  upon  the  case.  He 
was  engaged  largely  in  the  manufacture  of  wheels  of  all  descrip- 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      747 

tions,  and  he  was  asked  whetlier  he  adopted  any  process  to  test 
the  tire.  He  was  asked,  '  Do  you  hammer  it  ? '  and  he  says : 
'  The  process  upon  which  I  have  manufactured  all  my  wheels 
has  been  this,  to  let  all  the  different  parts  of  the  work  be  done  by 
piecework,  so  that  if  a  man  found  a  defective  bar  he  did  not  get 
paid  for  bending.  If  a  man  had  to  bend  a  defective  bar,  or  bend 
a  good  bar,  and  bent  it  improperly,  we  did  not  pay  for  them,  so 
that  every  man  was  looking  back  through  the  whole  process  of 
the  manufacture  up  to  the  last ;  and  then  we  have  a  gentleman 
to  whom  we  pay  300Z.  a  year  to  examine  every  wheel.'  So  that 
this  gentleman  kept  a  person  in  his  employ  at  a  considerable  sal- 
ary for  no  other  purpose  than  to  test  wheels  when  they  were 
made.  He  says  they  are  tapped  with  a  hammer,  and  when  he  is 
asked  how  tires  are  tested,  he  says  no  defect  would  be  passed  over 
with  the  hammer.  No  witness  pretended  to  say  it  was  an  abso- 
lute and  positive  test,  but  there  is  no  excuse  for  not  adopting  it, 
if  it  can  be  reasonably  expected  to  produce  a  satisfactory  result. 
This  was  the  universal  process  adopted  by  this  gentleman  at  a 
considerable  cost  and  expense.  He  is  asked  this  question  :  '  Have 
you  found  any  returned  to  you  after  being  passed  by  you  as  com- 
plete?' 'We  guaranteed  all  the  wheels  we  made  for  twelve 
months,  and  having  turned  out  20f000  wheels  for  several  years,  I 
think  the  whole  amount  of  our  guarantee  has  been  twenty-four.' 
Now,  the  w^heel  in  question  had  been  reduced  a  considerable  size ; 
it  was  reduced  to  a  small  thinness ;  it  was  blocked  and  re-turned, 
and  if  this  process  had  been  adopted,  not  to  hammer  any  one  part 
to  see  whether  it  would  ring,  but  to  hammer  it  all  over,  as  was 
the  universal  practice  on  the  part  of  Sir  Charles  Fox,  a  practice 
carried  out  at  a  considerable  expense,  it  was  for  the  jury  to  say 
whether  the  defect  might  not  have  been  discovered.  I  repudiate 
the  notion  altogether  that  a  process  ought  not  to  be  adopted,  be- 
cause of  necessity  you  would  not  arrive  at  a  positive  test.  It 
seems  to  me  there  is  no  ground  for  saying  the  verdict  is  against 
the  weight  of  evidence,  and  that  a  new  trial  should  be  granted. 
Therefore,  having  at  my  Lord's  request  gone  carefully  through 
the  evidence,  I  repeat  the  opinion  I  was  prepared  to  give  when 
the  rule  was  moved,  that  the  verdict  ought  to  stand." 

Pollock,  C  B.,  said  :    "  I  entirely  agree  with  the  rest  of  the 


748  Private  Corporations. 

court  on  the  subject  of  refusing  the  rule  why  there  should  not 
be  a  new  trial.  "When  Mr.  Bovill  moved  this  rule,  he  certainly 
took  a  very  strong  view  of  the  case  on  the  part  of  the  defendants, 
it  appeared  to  me  it  was  desirable  that  the  matter  should  be 
looked  into  with  very  great  care,  in  order  that  no  mistake  might 
be  made.  I  am  very  much  obliged  to  my  learned  brothers  who 
have  taken  the  trouble  of  going  through  the  short-hand  writer's 
notes  which  Mr.  Bovill  furnished  us  with.  A  very  strong  state- 
ment made  by  Mr.  Bovill  I  own  rather  startled  me.  I  certainly 
did  not  recognize,  in  his  statement  of  the  matter,  any  thing  like 
what  I  remember  to  have  been  said  in  the  course  of  the  trial. 
According  to  his  statement,  certainly,  at  one  time,  there  was  no 
evidence  whatever  to  support  the  view  that  had  been  presented  to 
the  jury,  as  he  said,  under  the  authority  of  the  Bench.  On  turn- 
ing to  the  evidence,  certainly  it  appeared  there  was  abundant  ma- 
terial for  the  remark  that  was  presented  to  the  jury  by  me,  but 
which  was  left  entirely  to  them,  not  at  all  pressing  my  opinion 
upon  them,  but  stating,  it  appeared  to  me,  that  any  person  con- 
versant with  machinery,  and  the  ordinary  business  connected  with 
such  matters,  would  probably  be  far  better  able  to  judge  than  I 
was  of  the  point.  There  was  much  other  important  matter  upon 
which  the  jury  might  have  decided,  and  very  likely  did  decide, 
the  case ;  but  as  far  as  this  point  was  concerned  the  question  was 
this — about  the  nature  of  the  accident  there  was  no  doubt  what- 
ever, it  arose  from  an  imperfect  weld  in  the  formation  of  a 
wheel  —  that  was  the  driving-wheel.  A  driving-wheel  is  formed 
in  the  first  instance  with  a  thickness  of  2^  inches  ;  it  is  allowed 
to  run  some  time,  and  is  then  ground  down,  or  re-turned,  for  the 
purpose  of  making  it  again  smooth,  and  this  operation  is  per- 
formed about  three  times  ;  ultimately  the  thickness  of  the  wheel 
is  reduced  from  2^  or  2^  to  IJ  ;  if  it  happens  to  be  below  1 J  they 
consider  it  is  worn  out,  and  do  not  continue  it  in  the  service. 
About  three  times  is  the  number  of  times  that  a  wheel  may  be 
re-turned,  or  twice  it  may  be  re-turned,  so  that  it  is  put  into  use 
with  three  difEerent  thicknesses.  Now,  the  first  time,  before  it  is 
used  at  all,  it  is  hammered  all  over.  I  cannot  understand  the  ex- 
pression, but  the  expression  in  the  evidence  was,  'hammered  all 
round ; '  which  I  apprehend  to  be  testing  with  the  hammer  not 


[Negligence  and  AVrongfcl  Acts  of  Agents,  etc.       749 

merely  whether  it  will  ring,  but  whether  it  is  sound  in  every 
part.  jSTow,  if  it  be  worth  while  to  do  that  when  the  wheel  is 
first  in  its  state  of  newness,  in  order  to  test  it  by  applying  the 
hammer  to  every  part  of  it,  to  see  whether  it  be  sound  or  not,  it 
surely  must  be  worth  while,  every  time  you  take  away  from  it  a 
quarter  or  half  an  inch  of  its  thickness,  in  order  to  prepare  it  for 
a  fresh  journey.  That  was  the  question  the  jury  had  to  decide  ; 
and  I  agree  with  my  learned  brothers  that  the  law  was  laid  down 
correctly,  and  as  favorably  for  the  defendants  as  it  could  be. 
The  question  then  would  be  —  Did  they  use  any  reasonable  pre- 
caution in  order  to  discover  whether  the  wheel  in  its  last  condi- 
tion was  fit  for  service  f  Why  it  appeared  to  be  perfectly  clear 
upon  the  evidence  that,  though  they  had  tested  the  wheel  by  the 
universal  hammering  in  the  first  instance  of  applying  it  to  the 
purposes  of  a  locomotive,  it  had  never  been  subjected  to  it  since, 
and  an  imperfect  weld,  which  may  be  imperceptible  to  the  ham- 
mer when  the  wheel  is  2^  inches  thick,  may  be  quite  perceptible 
wlien  the  wheel  is  reduced  to  1^.  Therefore  it  was  a  question 
for  the  jury.  There  was  evidence  that  they  actually  applied  the 
test  when  the  wheel  was  new  ;  there  was  evidence  that  they  had 
not  applied  it  when  the  wheel  was  turned  the  first  time,  and  when 
it  was  turned  the  second,  time ;  and  I  think  it  is  no  answer  in 
fact  or  law  to  say  that  the  test  is  not  decisive.  It  might  have 
escaped  the  discovery,  notwithstanding  the  test  had  been  applied, 
because  at  the  time  of  the  accident  all  parties  were  perfectly 
agreed  that  it  was  an  imperfect  weld,  which  gradually  came  to 
the  surface  at  the  time  of  the  accident.  The  witnesses  for  the 
plaintiff  said  in  their  judgment  it  was  apparent  that  the  thinness 
of  paper  had  been  worn  through.  By  the  evidence  of  the  wit- 
nesses for  the  defendants,  the  thickness  was  no  more  than  the 
thickness  of  a  bit  of  paper,  and  the  question  is  whetlier,  if  it  liad 
been  hammered,  it  would  not  have  disclosed  by  the  sound,  im- 
mediately, that  there  was  some  imperfection  below,  and  that  it 
was  not  sound.  Under  these  circumstances  I  perfectly  concur  in 
the  opinion  expressed  by  my  learned  brothers,  that  there  sliould 
be  no  rule  in  this  case." 

This  rule  seems  to  be  more  consistent  with  principle,  and  bet 
ter  calculated  to  subserve  public  interests  than  that  adopted  m 


750  Private  Corpokations. 

New  York  ;'  particularly  when  coupled  with  another  rule,  that 
the  mere  fact  that  the  vehicle  was  defective,  jprima  facie,  raises  a 
presumption  of  negligence." 

But  this  rule  seems  to  have  been  essentially  modified  by  later 
decisions  in  that  state,  and  there  would  seem  to  be  no  question 
that  some  negligence  is  now  required  to  be  shown  in  order  to 
uphold  a  recovery.^ 

There  seems  to  be  an  inconsistency  in  holding  the  company  up 
to  such  a  rigorous  rule  of  liability  as  to  cars,  when  no  such  rule 
prevails  as  to  the  track  over  which  tlie  cars  are  propelled.  If  it 
be  said  that  the  reason  results  from  the  fact  that  the  cars  are 
manufactured,  and  therefore  the  company  is  bound,  at  its  peril, 
to  know  of  the  existence  of  latent  defects,  it  may  be  answered 
that  the  same  is  true  of  the  track.  It  is  manufactured  so  to 
speak,  and  the  same  rule  should  apply  to  that,  as  applies  to  the 
cars.  Yet,  the  courts  of  Kew  York  hold  that  as  to  the  track  and 
its  management,  the  company  is  exonerated  from  liability,  if  it 
has  exercised  the  highest  degree  of  care  in  respect  to  it.* 

So,  it  has  been  held  that  an  accident  resulting  from  the  mis- 
placement of  a  switch,  by  "  some  evil-disposed  person,"  not 
connected  with  the  company,  the  company  being  chargeable  with 
no  fault,  is  an  inemtahle  accident  for  which  the  company  is  not 
responsible.^ 

In  the  selection  of  railc,  and  other  materials  of  which  its  track 
is  composed,  as  well  as  in  the  construction  of  its  roadway  and 
bridges,  it  is  bound  to  exercise  the  highest  degree  of  care,  and 
apply  all  those  tests  usually  applied  for  ascertaining  their  suitable- 
ness, and,  having  done  that,  aii(i  keeping  up  the  same  degree  of 
vigilance  in  ascertaining  whether  it  subsequently  becomes  de- 
fective, it  is  not  responsible  for  injuries  resulting  from  defects,  in 
spite  of  such  mgilance."  It  is  difficult  to  conceive  how  a  person 
or  corporation  can  be  held  chargeable  with  negligence,  when  he 
has  exercised  the  highest  degree  of  care  to  prevent  the  injury.'' 

1  Frink  v.  Potter,  17  111.  406  ;  Ingalls  » Frink  v.  Potter,  17  111.  406  ;  Deyo 

c.  Bills,  9  Mete.  (Mass.)  1.  v.  N.  Y.  C.  R.  Co.,  84  N.  Y.  9. 

'^Dawson  ■».  Manchester,  etc.,  R.  Co.,  «  Nashville,  etc.,  R.  Co.  v.  Messino, 

5L.  T.(N.S.)683;  Brignoli  ®.  Chicago,  1  Sneed  (Tenn.),  220;  Deyo  v.  N.  Y., 

etc.,  R.  Co.,  4  Daly  (N.  Y.  C.  P.),  183.  C.  R.  Co.,  ante. 

3 Deyo  V.  N.  Y.  C.  R.  Co.,  ante.  '  In  Frink  v.  Potter,  ante,  where  a 

*  Keeley  v.  Erie,  etc.,  R.  Co.,  47  How.  passenger  was  inj  ured  by  the  breaking 

Pr.  (N.  Y.)  256.  of   an  axle  from  the  effect  of    frost, 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      751 

It  must  exercise  tlie  highest  degree  of  care  in  all  respects  involv- 
ing  the  safety  of  passengers,  and  if  guilty  of  any,  even  the  slight- 
est negligence,  it  is  responsible  for  all  injurious  consequences.' 

Sec.  4:95.  Duty  of  railroad  company  as  to  stations.  —  It  is  bound  to 
keep  its  stations  and  premises  in  proper  repair,  so  as  to  prevent 
injuries  to  passengers  going  to  them  to  take,  or  arriving  there 
u;pon,  their  trains,*  and  a  passenger  arriving  at  the  station  con- 
tinues to  be  a  passenger  until  he  has  left  their  premises.  So,  too, 
a  person  honafide  at  the  station  for  the  purpose  of  taking  pas- 
sage upon  a  train,  is  a  passenger,  although  he  has  not  in  fact  pur- 
chased his  ticket.' 


Sec.  496.  Instancesof  negligence,  where  the  corporation  W£is  held  liable. 
— Actions  have  been  upheld  for  injuries  sustained  from  defective 
platforms;*  from  a  failure  to  provide  suitable  lights  to  enable  pas- 


tbe  court  held  that,  if  the  defendant 
•was  guilty  of  any,  even  the  slightest 
negligence  in  not  providing  against 
such  a  result,  it  was  liable.  This  is 
equivalent  to  holding  that,  if  by  the 
exercise  of  any  reasonable  precaution 
the  result  could  have  been  averted, 
the  defendant  was  bound  to  exercise 
such  precaution,  and  failing  to  do  so, 
was  liable  for  negligence.  See,  also, 
Dawson  v.  Manchester,  etc.,  R.  Co., 
ante;  Toledo,  etc.,  R.  Co.  v.  Apperson, 
49  111.  480 ;  Reed  «.  N.  Y.  C.  R.  Co.,  56 
Barb.  (N.  T.)  493  ;  Gonzales  v.  N.  Y. 
C.  R.  Co.,  39  How.  Pr.  (N.  Y.)  407. 

1  Gay  nor  v.  Old  Colony  R.  Co.,  100 
Mass.  208. 

^McPadden  v.  N.  Y.  C.  R.  Co.,  44 
N.  Y.  478. 

The  fact  that  the  vehicle  or  track  is 
defective  and  an  injury  results,  is 
prima  facie,  evidence  of  negligence. 
Brignoli «.  Chicago,  efrc.,R.  Co.,  4  Daly 
(N.  Y.  C.  P.),  183. 

3  Buffett  V.  Troy  and  Boston  R.  Co., 
40  N.  Y.  168. 

''As  where  the  flaps  were  improperly 
turned  back.  Bramwell,  B.,  in  Corn- 
man  v.  Eastern  Counties  R.  Co., 
4  H.  &  N.  784. 

In  McDonald  i;.  Chicago,  etc.,  R.  Co., 
26  Iowa,  134,  the  plaintiff,  in  company 
with  her  husband,  purchased  a  ticket 
at  Cedar  Rapids  upon  the  defendants' 
line  of  railway  to  Fulton,  111.  In 
attempting  to  get  aboard  the  train 
Bome  twenty  minutes  before  it  waa 


time  for  it  to  leave,  and  at  a  point  some 
distance  from  the  usual  place,  she 
stepped  upon  the  end  of  a  plank  in 
the  platform  which,  being  loose  and 
out  of  place  at  one  end,  gave  way,  and 
let  her  down  upon  the  track  headfore- 
most under  the  train,  breaking  her  leg 
and  otherwise  injuring  her.  It  was 
so  dark  that  the  plaintiff  could  not  see 
the  condition  of  the  plank.  The 
defendants  showed  that  the  point  at 
which  the  injury  happened  was  some 
300  feet  from  the  station,  and  that  the 
usual  place  for  passengers  to  get  on 
or  off  the  train  was  at  a  point  imme- 
diately iH  front  of  the  station. 

It  was  also  shown  by  the  defendant, 
that  it  was  customary  when  the  train 
arrived,  as  in  this  instance,  from  the 
west,  to  run  back  so  as  to  bring  the 
baggage  and  express  cars  to  a  point 
opposite  the  freight  depot  for  the 
purpose  of  discharging  and  receiving 
baggage  and  express  matter.  This 
movement,  on  the  evening  on  which 
the  accident  in  question  happened; 
placed  the  passenger  coaches  west  of 
the  west  end  of  the  platform,  so  that 
the  nearest  passenger  car  was  about 
one  car-length  beyond  the  steps  at  the 
west  end  of  the  platform.  It  was 
while  the  cars  were  thus  standing 
that  the  plaintiff,  without  waiting  for 
them  to  be  drawn  up  to  the  platform 
in  front  of  the  passenger  depot,  started 
for  them,  walking  the  whole  length  of 
the  platform,  and  in  descending  the 


752 


Pkivate  Cokpokations. 


sengers  safely  to  leave  the  premises;  *  from  defective  steps  to  plat* 
form;"  from  pits  or  unfenced  holes  in  the  station  ground/  from  the 
slipperiness  of  stairs  leading  to  the  station;*  from  allowing  articles  to 


Bteps  the  injury  for  which  this  action 
was  brought  happened.  Defendant  also 
produced  evidence  to  the  effect  "  that 
there  was  plenty  of  room  to  get  on 
and  oif  the  trains  from  the  platform  ; 
and  that  there  was  no  necessity  for 
any  one  to  go  down  these  steps  to  get 
on.  Before  leaving  trains  always  draw 
up  in  front  of  the  passenger  depot 
and  stop  to  take  on  passengers.  The 
accident  happened  fifteen  or  twenty 
minutes  before  ths  leaving  time 
of  the  train.  The  steps  are  not 
intended  or  used  for  passengers  to 
get  on  the  trains." 

The  defendant  asked  the  court 
to  give  the  following  instructions, 
viz.  : 

"1.   If  the  jury    believe   from   the 

'  Patten  ■».  Chicago,  etc.,  R.  Co.,  32 
Wis.  524;  Nicholson  v.  Lane.  & 
Yorkshire  R.  Co.,  34  L.  J.  (Exch.) 
84;  Birkett  v.  Whitehaven  June. ,  4  H.  & 
N.  730;  Martin  v.  Gt.  Northern  R. 
Co.,  16  C.  B.  180;  Cornman  v.  East- 
ern Counties  R.  Co.,  4  H.  &N.  781; 
Toomey  v.  London,  etc.,  R.  Co.,  3  C.  B. 
(N.  S.)  146  ;  Foy  v.  London,  etc.,  R.  Co., 
18  id.  225. 

^  McDonald  v.  The  Chicago,  etc.,R. 
Co.,  ante. 

'  Burgess  v.  R.  Co.,  95  Eng.  Com. 
Law,  923. 

In  Tobin  v.  Portland,  Saco  &  Ports- 
mouth R.  Co.,  59  Me.  183,  the  liability 
of  railroad  companies  to  persons  com- 
ing to  their  stations  upon  business, 
and  not  as  passengers,  for  injuries 
caused  by  defects  in  station  platforms 
was  adjudicated,  and  it  was  held  that 
a  hackman  could  recover  of  a  railroad 
company  for  an  injury  received  while 
carrying  a  passenger  to  their  depot  for 
transportation,  by  stepping,  without 
fault,  into  a  cavity  in  the  platform 
negligently  left  in  a  defective  condi- 
tion. It  is  the  well-settled  rule  that 
railroad  companies  are  bound  to  keep 
their  platforms  and  landing  places  safe 
and  convenient  for  all  who  make  use 
of  their  cars  as  a  means  of  convey- 
ance. But  it  is  not  so  clear  what  tlie 
liability  of  the  company  is,  in  this 
respect,  to  persons  not  passengers. 
But  AppletoNjC.  J.,  in  delivering  the 


evidence  that  the  defendant,  at  the 
time  of  the  alleged  injury  at  the  sta- 
tion at  Cedar  Rapids,  was  provided 
with  a  safe  and  suitable  platform  in 
front  of  and  adjacent  to  the  passenger 
rooms  of  said  station,  so  that  passen- 
gers could  safely  and  conveniently 
pass  from  said  room  to  the  trains,  and 
that  passenger  trains  stopped  at  said 
platform  for  the  purpose  of  receiving 
passengers,  and  if  said  plaintiff,  in 
attempting  to  get  upon  said  train  by 
a  different  and  unusual  way  and  at  a 
different  and  unusual  place,  met 
with  said  accident,  then  the  plaintiff 
ig  not  entitled  to  recover  in  this 
action. 

"  2.  That  if   the  plaintiff",  Margaret 
McDonald,    attempted   to   enter    said 

opinion  of  the  court  in  this  case,  said: 
"  The  hackman,  conveying  passengers 
to  a  railroad  depot  for  transportation, 
and  aiding  them  to  alight  upon  the 
platform  of  the  corporation,  is  aa 
rightfully  upon  the  same  as  the  pas- 
sengers alighting.  It  would  be  absurd 
to  protect  the  one  from  the  conse- 
quences of  corporate  negligence  and 
not  the  other.  The  hackman  is  there 
in  the  course  of  business  ;  but  it  is  a 
business  important  to  and  for  the  con- 
venience and  profit  of  defendants. 
The  general  principle  is  well  settled 
that  a  person  injured,  without  neglect 
on  his  part,  by  a  defect  or  obstruction 
in  a  way  or  passage  over  which  he  is 
induced  to  pass,  for  a  lawful  purpose, 
by  an  invitation,  express  or  implied, 
can  recover  damages  for  the  injury 
sustained  against  the  individual  so 
inviting  and  being  in  fault  for  the 
defect."  Barrett  "u.  Black,  56  Me. 
498  ;  Carleton  v.  Franconia  Iron  and 
Steel  Company,  99  Mass.  216.  From 
the  general  duty  which  railroad  com- 
panies owe  to  persons  thus  apparently 
invited,  such  as  friends  and  com- 
panions of  passengers,  porters  and 
hackmen,  it  would  seem  that  they 
are  responsible  for  injuries  resulting 
from  a  neglect  of  that  duty  in  re- 
spect to  platforms,  station  approaches 
etc. 

*  Davis  V.  London,  etc.,  R  Co.,  2  F. 
&  F.  588. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      7." 3 

stand  or  lie  upon  the  platform  obstructing  and  endangering  travel 
over  it,  as  a  switch  handle  ; '  and  generally  the  company  is  bound, 
as  to  its  passengers  or  persons  upon  its  premises  "  by  invitation," 
to  see  to  it  that  its  premises  are  in  such  a  condition,  in  all  reapectSy 
that  a  person  in  the  exercise  of  ordinary  care  can  leave  them 
without  injury,  and  this  extends  to  and  embraces  proper  and  suit- 
able platforms,  steps  and  walks,  as  well  as  suitable  lights.''' 


train  at  a  place  not  prepared  or 
designed  by  the  defendant  for  receiv- 
ing passengers  on  trains,  there  being 
no  paramount  necessity  for  so  doing, 
and  in  making  such  attempt  she 
received  the  said  injury,  then  her 
own  fault  contributed  to  tlie  same, 
and  the  plaintiflf  cannot  recover. 

"  3.  Tlie  liability  of  the  defendant  as 
a  common  carrier  did  not  commence 
as  to  the  plaintiffs  until  the  train 
which  they  were  to  take  was  drawn 
up  to  the  usual  place  for  receiving 
passengers,  unless  they  were  directed 
by  some  authorized  agent  of  defend- 
ant to  go  upon  the  train  at  another 
and  different  place  or  before  the  train 
reached  the  usual  place." 

Each  of  these  was  refused,  and  the 
defendant  excepted. 

The  court,  after  referring  to  the 
issues  made  by  the  pleadings,  charged 
the  jury  as  follows  : 

"  The  principal  question  for  you  to 
determine  is,  by  whose  fault  or  negli- 
gence did  the  accident  occur?  If  one 
of  the  steps  was  loose  and  not  nailed 
down,  by  reason  of  which  the  accident 
happened,  it  is  such  a  want  of  care  as 
would  render  the  defendant  liable, 
unless  you  find  that  the  accident  hap- 
pened, or  was  contributed  to,  by  the 
want  of  ordinary  care  and  prudence  on 
the  part  of  the  plaintiff.  It  is  for 
you  to  determine  from  the  evidence 
whether  the  plaintiff  used  ordinary 
care  and  prudence  in  leaving  the 
depot  and  going  to  the  cars  by  the 
way  and  at  the  time  she  did,  and  by 
ordinary  care  is  meant  such  care  and 
prudence  as  an  ordinarily  prudent 
person  would  exercise  under  like  cir- 
cumstances. If  you  find  that  an  ordi- 
narily prudent  person  would  not  have 
gone  down  the  steps  of  the   platform 

'  Martin  v.  Great  Northern  Railway 
Co.,  16  C.  B.  179. 

95 


where  the  accident  occurn^d,  but 
would  have  waited  until  the  jjassenger 
cars  were  opposite  the  passenger  depot, 
then  the  defendant  is  not  liable.  And 
if  you  find  that  the  plaintiff  went  by 
a  way  which  was  not  used  or  traveled 
over  by  passengers  to  enter  the  cars, 
and  that  a  person  of  ordinary  pru- 
dence would  not  have  gone  by  that 
way,  you  may  fairly  infer  that  there 
was  a  want  of  ordinary  care  on  her 
part.  Passengers  must  exercise  ordi- 
nary care  in  approaching  and  entering 
the  cars.  If,  however,  you  find  that 
the  defendant  backed  its  train  up  to 
the  place  where  it  stood  when  the 
accident  happened  ;  that  persons  could 
conveniently  and  safely  approach  the 
train  where  it  then  stood  but  for  the 
defective  step,  aud  there  was  no  rule 
or  regulation  of  the  company  prohib- 
iting persons  from  approaching  the 
cars  by  that  way,  and  that  an  ordinar- 
ily prudent  person  would  have  ap- 
proached the  train  by  that  way,  the 
defendant  is  liable,  if  the  accident 
occurred  by  reason  of  the  defective 
step." 

The  defendant  excepted  to  thia 
charge,  and  it  was  fully  sustained  on 
apjx'al  by  the  supreme  court  of  Iowa. 

Actions  have  been  upheld  for  inju- 
ries resulting  from  defective  depot, 
floors.  Liscombe  v.  Jersey,  etc.,  R.  Co., 
6  Lans.  (N.  Y.)  75  ;  from  defective  plat- 
forms. Tobin  r>.  Portland,  etc.,  R.  Co., 
59  Me.  183 ;  Sevmour  «.  Chicaaro,  etc., 
R.  Co.,  3  Biss.  (U.  S  C.  C.)  43  ;  Mc- 
Donald V.  Chicago,  etc.,  R.  Co.,  26 
Iowa,  124  ;  and  generally  for  injuries 
resulting  upon  their  premises  without 
the  fault  of  the  passenger,  from  de- 
fects thereon,  or  obstructions  thereon. 
Burgess  v.  Railroad  Co.,  95  Eng.  Com, 
Law,  923. 

'  Cornman  v.  Eastern  Co.  Railway 
Co.,  4  H.  &N.  781. 

In  Beard  ».  Conn.  «&  Pass  R.  Co.,  48 


754 


Private  Cokporations. 


Sec.  497.  Duty  of  railroad  corporations  as  to  stopping  of  trains.  — 
The  trains  must  also  be  stopped  at  the  station  so  that  passengers 
can  ahght  upon  the  platform,  and  if  they  are  stopped  at  any  other 
place,  and  the  station  is  called,  so  that  passengers  are  required,  or 
have  a  i-ight  to  understand  that  they  are  required  to  stop  there, 
the  company  is  liable  for  injuries  received  in  leaving  such  place, 
to  the  same  extent  and  upon  the  same  ground  that  it  would  be 
liable  for  injuries  received  by  the  defectiveness  of  its  own  preni- 
i 


iscs. 


Vt.  101,  the  plaintiff  was  at  the  defend- 
ant's depot  for  the  purpose  of  taking 
the  train.  There  was  a  platform  ex- 
tending from  the  east  side  of  the  depot 
to  the  track  over  which  passengers 
passed  in  going  to  and  from  the  cars. 
There  were  stairs  leading  through  the 
center  of  the  depot  to  the  street  on  the 
opposite  side  which  was  several  feet 
lower  than  the  track,  and  there  were 
also  stairs  at  either  end  of  the  depot, 
leading  from  the  platform  to  the  street. 
The  stairs  at  the  north  end  of  the  de- 

'  Columbus,  etc.,  R.  Co.  v.  Farrell, 
31  Ind.  408 ;  Memphis,  etc.,  R.  Co.  v. 
Whitfield,  44  Miss.  466. 

In  Delamatyri).  The  Milwaukee,  etc., 
R.  Co.,  24  Wis.  578,  the  plaintiff  re- 
ceived an  injury  while  descending  from 
the  defendant's  train  at  Hanover  Junc- 
tion, as  was  alleged,  by  reason  of  the 
defendant  not  having  furnished  a  safe 
and  proper  means  of  descent.  The 
train  consisted  of  only  two  cars,  of 
which  the  one  in  the  rear  was  the 
ladies  car,  and  the  other  a  gentleman's 
car,  immediately  in  front  of  which  was 
a  baggage  car.  When  the  train 
stopped  at  the  junction  the  plaintiff 
was  seated  in  the  ladies'  car.  By  direc- 
tion of  the  hrakeman  she  passed  through 
the  gentleman's  car  to  the  car  plat- 
form at  its  front  end,  for  the  purpose 
of  descending  them.  The  steps  at- 
tached to  this  platform  had  not  been 
drawn  up  opposite  to  the  station  walk 
or  platform.  The  platform  was  only 
a  few  inches  above  the  rail,  and  nearly 
two  and  a  half  feet  below  the  lower 
car  step,  and  was  over  three  feet  from 
the  rail  horizontally.  The  plaintiff 
could  not  reach  the  station  platform, 
by  stepping  down  in  the  usual  man- 
ner, but  was  obliged  to  jump  some 
distance  obliquely.  The  ground  im- 
mediately   opposite     the     steps    was 


pot  were  open  at  the  top,  and  there 
was  nothing  to  indicate  that  they  were 
not  for  the  use  of  passengers.  In  fact 
they  were  built  by  and  were  intended 
for  the  sole  use  of  the  express  com- 
pany, but  they  were  on  the  defendant's 
premises.  The  plaintiff'in  attempting 
to  iDass  down  these  stairs  in  the  dark 
from  the- iipper  platform  to  the  street, 
without  fault  on  her  part,  fell  from 
the  lower  platform  to  the  ground  and 
was  injured.  It  was  held  that  the  de- 
fendant was  responsible  for  the  injury 

muddy  and  slanted  away  rapidly  from 
the  ends  of  the  ties,  so  as  to  make  a 
kind  of  pit,  unsuitable  for  a  landing 
place.  The  sister  of  the  plaintiff  had 
got  off  at  this  point,  safely,  immedi- 
ately before  the  plaintiff  attempted  to 
do  so.  The  plaintiff  descended  to  the 
lower  step  holding  a  sunshade  and 
basket  in  one  hand,  and  her  skirts 
with  the  other,  hesitated,  and  made 
some  remarks  about  the  impracticabil- 
ity of  alighting  there,  but  being  en- 
couraged by  her  sister,  took  the  hand 
of  the  latter  and  sprang  for  the  plat- 
form. As  she  sprang,  her  skirts  caught 
upon  a  part  of  the  brake,  and  she  fell 
in  such  a  way  that  her  head  and 
shoulders  and  a  considerable  portion 
of  her  body  rested  upon  the  station 
platform,  and  in  the  fall,  broke  her 
arm.  No  officer  or  employee  of  the 
company  was  present  to  aid  her  in 
alighting.  tJnder  this  state  of  facts 
it  was  held  that  the  plaintiff  was  en- 
titled to  recover.  In  commenting  up- 
on the  question  whether  the  plaintiff, 
under  the  circumstances,  was  guilty 
of  such  contributory  negligence  as 
would  prevent  a  recovery  by  her, 
Cole,  J.,  very  pertinently  said  :  "  As 
a  matter  of  law,  to  cliaracterize  this 
conduct  of  hers  as  careless  and  negli- 
gent, would  seem  to  be  manifestly  un- 


Negligence  and  "Wkongful  Acts  of  Agents,  etc.      7."5 

So,  too,  it  is  the  duty  of  the  company  to  stop  its  train  at  a 
station  long  enough  to  give  all  passengers  desiring  to  stop  there 
time  to  get  out  of  the  cars,  and  failing  to  do  so,  if  a  passenger 
while  the  cars  are  in  motion,  but  before  tliey  have  acquired 
rapid  motion,  jumps  from  the  cars  and  is  injured,  the  company 
is  liable  therefor.' 


warranted,"  and  it  was  left  for  tlie 
jury  to  say,  whether  in  fact  the  con- 
duct of  the  plaintiff  was  so  negligent 
as  to  estop  her  from  a  recovery. 

A  similar  doctrine  was  held  in  Rob- 
son  v.  The  N.  E.  R.  Co.,  L.  R.,  10  Q.  B. 
271,  where  a  passenger  of  a  railway  is 
invited  to  alight  at  a  spot  where  there 
is  no  platform,  so  that  usual  means  of 
descent  are  absent,  the  duty  of  the 
railway  company  not  to  expose  the 
passenger  to  undue  danger  requires 
them  to  provide  some  reasonably  fit 
and  safe  substitute  ;  and,  in  tlie  case 
of  a  female  passenger,  a  jury  may 
reasonably  find  that  the  company  fails 
in  this  duty  where  the  only  means  of 
alighting  provided  are  tlie  usual  iron 
step  and  footboard,  with  no  attendants 
to  assist  the  passenger  in  alighting. 
Plaintitl',  a  female,  was  a  passenger  by 
defendant's  railway  to  B.,a  very  small 
station  ;  on  the  arrival  of  the  train  at 
the  station  tiie  engine  and  part  of  the 
carriage  in  wliich  plaintift'  was  riding 
were  driven  past  the  end  of  the  plaL- 
forin,  which  is  short,  and  came  to  a 
standstill,  the  door  of  the  plaintiff's 
compartment  being  beyond  the  end  of 
the  platform.  Upon  the  train  stop- 
ping, plaiutifl^rose  and  opened  the  door, 
and  stepped  on  to  the  iron  step  ;  she 
looked  out  and  saw  the  station-master, 
who  is  the  only  attendant  kept  there, 
taking  luggage  out  of  or  putting  lug- 
gage into  a  van.  She  did  not  see  the 
guard  or  any  other  railway  servant, 
and  she  stood  on  the  step  looking  for 
somebody  to  help  until  she  became 
afraid  of  the  train  moving  away  ;  and, 
no  one  then  coming,  she  tried  to  alight 
by  getting  on  to  the  footboard  ;  slie 
had  her  back  to  the  carriage,  and  she 
liad  hold  of  the  door  with  her  right' 
hand,  and  got  one  foot  on  to  the  foot- 
board, and  whilst  endeavoring  to  get 
the  other  foot  on  to  the  footboard  she 


lost  her  hold  of  the  carriage  door,  and 
slipped,  and  fell,  and  was  injured. 
■She  had  a  small  bag  on  her  left  arm, 
and  an  uml)rella  and  two  small  ar- 
ticles in  her  left  hand,  but  nothing  in 
lier  right  hand.  Tlie  judge  liaving 
nonsuited  the  plaintiff  on  the  above 
evidence,  with  leave  to  enter  a  verdict 
for  the  plaintiff,  /«^W,  first,  that  there 
was  evidence  from  wliiclia  jury  might 
have  properly  found  tliat  the  plaintiff 
was  invited  or  liad  reasonable  ground 
for  supposing  she  was  invited  to  alight 
by  the  company's  servants  ;  and  that 
the  defendants  had  failed  in  their  duty 
toward  the  plaintiflf",  and  had  not  pro- 
vided a  reasonable  substitute  for  a 
platform.  Also,  that  the  jury  might 
not  improperly  have  found  that  tlie 
expectation  of  being  carried  beyond 
the  B.  station  was  reasonably  enter- 
tained by  the  plaintiff,  and  that  the 
inconvenience  would  have  been  such 
as  not  to  render  it  imprudent  on  lier 
part  to  expose  herself  to  the  danger 
incurred  in  alighting;  and  that  the 
defendants  were,  therefore,  liable  fur 
the  injury  resulting  from  the  plain- 
tiffs act,  which  had  been  caused  by 
their  negligent  breach  of  duty.  And 
that  the  nonsuit  was  therefore  wrong, 
and  the  verdict  ought  to  be  entered 
for  the  plaintiff. 

In  Indianapolis  "R.  Co.  v.  Farrell,  31 
Ind.  408,  the  train  ran  beyond  the  plat- 
form where  passengers  were  usually 
landed  and  stopped  over  a  culvert,  and 
the  railroad  hands,  whose  duty  it  was 
to  announce  the  stations,  announced 
the  station.  The  plaintiff,  without 
fault  on  his  part,  in  getting  off  from 
the  train  (it  being  so  dark  that  he 
could  not  see  where  the  train  was),, 
fell  into  the  culvert  and  was  injured, 
and  it  was  held  that  he  was  entitled 
to  recover. 


1  Filer  v.  N.  Y.  C.   R.  Co.,  49  N.  Y.     Mo.  509  ;  Illinois  Cent.  R.  Co.  v.  Able 
47  ;  Loyd  v.   Hannibal,  etc.,  R.  Co.,  53     59111.  131. 


756  Pkivate  Coeporations. 

"  It  is  the  duty  of  railway  passenger  carriers,"  say  the  court  in 
McDonald  v.  Chicago,  etc.,  R.  Co.,  ante,  "  to  provide  comfortable 
rooms  for  the  accommodation  of  passengers,  while  waiting  at  sta- 
tions, and  to  enforce  such  regulations,  in  regard  to  smoking  therein, 
as  to  enable  passengers  to  occupy  them  in  reasonable  comfort.  If 
this  is  not  done,  it  will  afford  reasonable  excuse  for  passengers  to 
enter  the  cars  before  they  are  drawn  up  in  front  of  the  platform 
in  preparation  for  immediate  de]3arture.  And,  if  in  so  doing  a 
passenger  sustains  injury  through  a  defect  in  the  platform,  against 
or  opposite  which  the  cars  are  standing,  *  *  *  the  company 
will  be  held  responsible.  Railway  passenger  carriers  have  power 
to  make  reasonable  rules  and  regulations,  in  regard  to  the  con- 
duct of  passengers,  extending  to  the  time  and  mode  of  entering 
the  cars  ;  but  such  rules  and  regulations  must,  in  some  way,  be 
made  known  to  passengers^  or  they  will  not  be  in  fault  for  not 
conforming  to  them."  It  was,  accordingly,  held,  in  this  case, 
that  the  female  plaintiff,  who  found  the  passenger  room  unfit  for 
occupation,  by  reason  of  tobacco  smoke  and  other  impurities,  and  at- 
tempted to  enter  the  cars  which  liad  not  yet  been  drawn  up  to 
the  platform,  and  was  injured  by  the  giving  away  of  the  steps  at 
the  end  of  the  platform,  was  entitled  to  recover.  Dillon,  C.  J., 
laid  down  the  following  rule  as  applicable  to  all  cases  of  injury 

But  it  seems  that  no  recovery  can  be  company  is  bound  to  stop  the  train,  or 

had  if  the  cars  are  under  such  motion  because  it  is  very  important  that  the 

as  to  render  it  obviously  dangerous  for  passenger  should  stop  at  that  particu- 

a   person   to   attempt  to   leave  them,  lar  time.     The  company,  in  such  case, 

Damout  v.  N.  0.,  etc.,  R.  Co., 9  La.  Ann.  is  bound  to  respond  in  damages  for  its 

441;  Jeffersonville,  etc.,  R.  Co.  «.  Hend-  breach  of  duty  in    not   stopping,  6?/.^  ia 

ricks,  26  Ind.  228;  R.  Co.  «.  Aspell,  23  not  liable  for  ivjuries  received  by  the 

Pa.    St.    147 ;    Gavett   v.   Manchester,  passenger  in  attempting  to  leave  when 

etc.,  R.  Co.,  16  Gray  (Mass.),  501  ;  and  it    is    dangerous  for   him,    to    do    so. 

under  sucli  circumstances  it  is  not  suf-  Georgia  R.  Co.  v.  McCurdy,  45  Ga.  288. 

licient  to  charge  the  company  that  the  But  in  all  cases  the  question  of  liabil- 

conductor  advised   the    passengers  to  ity  must  necessarily  be  determined  by 

make  the  attempt.     It  is  the  duty  of  the   facts  and    circumstances  of  each 

the  passenger    to    exercise    his   own  case.     Whether  the  train  was  in  rapid 

judgment,   and   if  the  danger  was  so  motion,  whether  the  train  was  started 

great  that  a  man  of  ordinary  prudence  while  the   passenger  was  attempting 

would    not   have   attempted  it,  he  is  to  leave,  and  whether  the  real  danger 

guilty  of  such  contributory  negligence  was  obvious.     Jetfersonville  R.  Co.  v. 

as  bars   a  recovery.     Chicago,  etc.,  R.  Hendricks,  ante.     But  see    Burrows  v. 

Co.  «.  Randolph,  53  111 .  510  ;  Jefferson-  Erie  R.Co.,  3  T.&  C.  (N.  Y.)  44,  in  which 

ville.etc  ,R.Co.  v.'^vf\ti,ante ;  Chicago,  it  was  held  tliat  no  recovery  could  be 

etc.,  R.  Co.  1).  Hazzand,  26  111.  373.  had    where   the   injury    was   brought 

W^hen  the  danger  is  apparent  it  must  about  by  the  action  of  a  person  not  in 

not    be   braved    simply   because    the  the  employ  of  the  company. 


Negligence  and  AVkongfl'L  Acrs  of  Ackxts,  etc.      757 

about  stations  and  in  entering  cars :  "  Railway  companies  are 
bound  to  keep  in  a  safe  condition  all  portions  of  tlieir  platfonna 
and  approaches  thereto,  to  which  tiie  public  do  or  would  naturally 
resort,  and  all  portions  of  their  station  grounds  reasonably  near 
to  the  platforms,  where  passengers,  or  those  who  have  purchased 
tickets,  with  a  view  to  take  passage  on  their  cars,  would  naturally 
or  ordinarily  be  likely  to  go."  ' 


Railway  companies  are  bound  to  bring  their  trains  to  a  halt  at 
places  convenient  for  passengers  to  alight.^  In  CocHe  v.  South- 
eastern Railway  Company^  ante^  it  ai)peared  that  the  car  in  which 
the  plaintiff  rode,  being  the  last  car,  remained  about  four  feet 
from  the  platform  when  the  train  had  stopped,  and  the  plaintiff, 


'  Barges  v.  R.  Co.,  95  Eng.  Com. 
L.  923  ;  Martin  v.  R.  Co.,  81  id.  179. 

In  Shepperd  ^.  The  Midland  Railway, 
20  W.  R.  705,  the  plaintiff,  while  wait- 
ing for  the  train,  it  being  cold,  walked 
back  and  forward  on  the  platform  in 
front  of  the  station,  and  slipping  on  a 
strip  of  ice,  fell,  dislocating  his  shoul- 
der.    Held  that  he  could  recover. 

In  Caswell  «.  Boston  h  Wor.  R.  Co., 
98  Mass.,  it  was  held  that  where  a  pas- 
senger had  stepped  upon  the  platform 
in  front  of  the  station  to  wait  for  a 
train,  and  by  the  negligent  misplace- 
ment of  a  switch,  an  engine  appeared 
to  be  approaching  directly  toward  the 
platform,  and  the  passenger  had  cause 
to  apprehend  danger,  and,  while  run- 
ning to  avoid  it,  was  injured,  the  com- 
pany was  liable. 

In  Lougmore  v.  G.  W.  Ry.  Co.,  115 
Eng.  C.  L.  183,  it  appeared  that  a  rail- 
way company,  for  the  more  convenient 
access  for  passengers  between  two 
platforms  of  a  station,  erected  across 
the  line  a  wooden  bridge  which  the 
jury  found  to  be  dangerous.  Held, 
that  the  company  were  liable  for  the 
death  of  a  passenger  through  the 
faulty  construction  of  the  bridge,  al- 
though there  was  a  safe  one,  about 
one  hundred  yards  further  around 
which  the  deceased  might  have  used. 

In  Cockle  ■«.  S.  E.  Railway  Co.,  27 
L.  T.  (N.  S.)  320,  a  railway  train  in 
which  the  plaintiff  was  a  passenger, 
on  arriving  at  the  station  of  the  plain- 
tiffs destination,  was  drawn  up  with 
the  body  of  the  train  alongside  the 
platform,  but  with  the  last  carriage, 


in  which  the  plaintiff  rode,  opposite  a 
receding  part  of  the  platform,  at  which 
persons  could  not  aligiit  —  a  apace  of 
about  four  feet  intervening  between 
it  and  the  train.  Arriving  trains  were 
not  usually  drawn  up  at  this  spot,  but 
at  a  point  farther  on,  where  the  plat- 
form was  well  lighted  with  gas  lanipa 
It  was  a  dark  night,  and  there  were  no 
lamps  lighted  near  the  place  wheie 
the  plaintiff's  carriage  stopped.  !N*o 
express  invitation  to  the  passengers  to 
aliglit,  and  no  warning  of  danger  in 
alighting  was  given  by  the  company's 
servants,  but  the  train  had  come  to  a 
final  standstill.  The  plaintiff"  opened 
the  door  of  her  carriage,  stepped  out, 
and  fell,  and  tliereby  sustained  in- 
juries in  respect  of  which  she  brought 
her  action  against  the  company.  Held, 
by  the  court  (athrniing  the  judgment 
of  the  court  of  coinnian  pleas,  and  fol- 
lowing Pneger  n.  The  Bristol  and  Ex- 
eter Railway  Co..  24  L.  T.  R.  [N.  S.] 
105),  that  the  action  was  maintainable; 
for  the  leaving  a  carriage  which  has 
been  brought  up  to  a  place  at  which 
it  is  unsafe  for  a  passenger  to  alight, 
under  circumstances  which  warrant  a 
passenger  in  believing  that  it  is  in- 
tended ehe  shall  get  out,  and  that  she 
may,  therefore,  do  so  with  safety, 
without  any  warning  of  her  danger, 
amounts  to  negligence  on  the  part  of 
the  company,  for  which,  at  least  in 
the  absence  of  contributory  negligence 
on  the  part  of  the  passenger,  an  action 
may  be  maintained. 

*  Delamatyr  v.  Railroad  Co.,  24  Wi^ 
518. 


758 


PllIVATE    COKPOKATIONS. 


in  attempting  to  aliglit,  believing  she  was  about  to  step  on  the 
platform,  fell,  in  conse'][uence  of  the  insufficiency  of  light  at  that 
point,  and  was  injured.  Held,  that  plaintiff  could  recover.  In 
this  case,  Cooicbuun,  C.  J.,  said  :  "  An  invitation  to  passengers  to 
alight  on  the  stojjping  of  a  train,  without  any  warning  of  danger 
to  a  passenger,  who  is  so  circumstanced  as  not  to  be  able  to  alight 
without  danger,  such  danger  not  being  visible  and  apparent, 
amounts  to  negligence,  *  *  *  and  it  appears  to  us  that  the 
bringing  up  of  a  train  to  a  final  stand-still,  for  the  purpose  of  the 
passengers'  alighting,  amounts,  to  an  invitation  to  alight,  at  all 
events,  after  such  a  time  has  elapsed  that  the  passenger  may 
reasonably  infer  that  it  is  intended  he  should  get  out  if  he 
proposes  to  alight  at  the  particular  station."  ' 

Reasonable  time  for  leaving  the  cai*s  should  be  allowed,  and  if 
the  time-tables  do  not  allow  sufficient  time  for  all  passengers, 
whether  young  or  old,  to  leave  the  cars  in  safety,  and  an  injury 


'Prseger  v.  The  Bristol  and  Exeter 
Eailway  Co.,  24  L.  T.  Rep.  (N.  S.) 
105,  was  a  case  exactly  similar,  and 
the  plaintiff  recovered. 

In  Colorado  &  Indiana  Central 
Railroad  Co.  v.  Farrell,  31  Ind.  408, 
where-  the  train  passed  beyond  the 
platform  and  stopped,  leaving  one  of 
the  cars  over  a  culvert,  the  conductor 
announcing  the  name  of  the  station, 
and  a  passenger  in  attempting  to  alight 
was  injured  by  reason  of  darkness 
and  not  being  able  to  see  where  the 
car  was,  the  company  was  held  liable. 
Whittaker  v.  Manchester  &  Sheffield 
R.  Co.,  Law  Rep.,  5  C.  P.  464,  note  3 
was  a  case  precisely  similar,  and  the 
plaintiff  was  allowed  to  recover.  But 
in  Bridges  v.  North  London  R.  Co.,  24 
L.  T.Rep.  (N.  S.)  835;  L.  R.,  6  Q.  B. 
377,  it  was  held  that  where  a  passen- 
ger alighted  from  the  last  car  of  a 
train,  while  such  car  was  standing 
in  a  tunnel  in  the  vicinity  of  a  station, 
a  recovery  could  not  be  had  for  the 
death  of  the  passenger  in  consequence, 
there  being  no  evidence  that  the  train 
had  come  to  a  final  stand-still,  or  to  a 
place  where  the  company  designed 
the  passenger  should  alight. 

See,  also,  Siner  v.  Great  Western 
Railway  Co.,  Law  Rep., 4  Ex.  117. 

In  Frost  v.  Grand  Trunk  Railway  Co., 


10  Allen,  387,  it  was  held,  that  "  if  a 
railroad  train  is  stopped  at  night, 
merely  for  the  purpose  of  allowing  a 
train,  which  is  expected  from  the  op- 
posite direction,  to  pass  by,  and  no 
notice  is  given  by  the  servants  of  the 
company  to  passengers  that  they  may 
leave  the  cars,  one  who  leaves  the 
cars  and  walks  into  an  open  cattle- 
guard,  and  receives  personal  injury 
thereby,  cannot  maintain  an  action 
against  the  company  to  recover  dam- 
ages therefor ;  and  it  is  immaterial 
that  he  was  misinformed  by  some  per- 
son not  in  the  employment  of  the  com- 
pany that  he  must  go  and  see  to  having 
his  baggage  passed  at  a  custom-house, 
supposed  to  have  been  reached  by  the 
train,  or  that  the  train  was  near  a  pas 
senger  station,  which  was  not  the 
place  of  his  destination." 

In  Forsyth  d.  Boston,  etc.,  R.  Co., 
103  Mass.  510,  where  a  passenger,  on 
alighting  from  a  car  at  night,  instead 
of  walking  along  the  platform  to  the 
end  steps,  voluntarily  stepped  off  the 
side  into  a  cattle-guard,  although 
knowing  where  the  highway  crotised 
the  railroad  track,  it  was  held  tluit  he 
was  not  in  the  exercise  of  due  care, 
and  could  not  recover  for  injuries  thus 
occasioned. 


Kegligence  and  AYkoxgful  Acts  of  Agents,  etc.      7."'9 

is  thereby  occasioned,  the  company  will  be  liable.'  But  sick  per 
sons,  and  persons  unable  to  take  care  of  themselves  should  pro- 
vide themselves  M'ith  proper  assistants  while  traveling  in  railroad 
cars ;  and  if  a  person  is  sick  and  unable  to  walk  without  assist- 
ance, thereby  requiring  longer  delay  at  the  station  than  usual,  he 
should  give  timely  notice  to  the  conductor." 

Passengers  at  intermediate  stations,  where  trains  stop  for 
refreshments,  have  the  same  rights  in  reference  to  safe  egress  and 
ingress  and  proper  station  accommodations  and  platforms  as  at 
the  termini  of  the  passage.^  But  the  rights  of  the  passenger 
while  a  train  is  stopping  at  an  intermediate  station  for  the  pur-. 
poses  of  the  railroad  alone,  and  not  for  the  refreshment  of  the 
passenger^  are  not  so  extended.* 

From  the  decisions  it  is  apparent  that  passengers  are  allowed 
considerable  latitude  in  traveling  by  railroad  :  that  the  responsibil- 
ity of  railroad  companies  is  made  commensurate  with  the  general 
duties  which  they  owe  the  passengers,  such  as  safe,  convenient 
and  comfortable  modes  of  ingress  and  egress  from  trains,  plat- 
forms, station  approaches  and  passenger  rooms ;  and  that  the  ap- 
plication of  the  rules  of  law,  both  in  this  country  and  in  England, 
has  been  thus  far  characterized  with  a  due  regard  both  for  the 
rights  of  the  railways  and  the  public. 

In  an  action  against  a  railroad  company,  for  injuries,  resulting 
from  attempting  to  leave  the  train  when  in  motion,  an  impor- 
tant element  in  the  case  is,  whether  the  train  was  in  fact  stopped 

■  Railroad  Company  v.  Baddeley,  54  ^  McDonald  v.  Chicago  &  N.  W.  R, 

111.  19  ;  5  Am.  Rep.  71.  Co.,  ante. 

-  New  Orleans,  etc.,  R.  Co.  i\  Stat-  *  Frost  v.  Grand  Trunk  R.  Co.,  ante. 

ham,  42  Miss.  607.     In  Illinois  Central  In  State  v.  Grand  Trunk  R.  Co.,  4  Am. 

R.  Co.  V.  Slatton,  5  Am.   Rep.  100  ;  o4  Rep.  258  ;   58  Me.  17G,   the    rule  was 

111.  13o,  it  appeared  that  the  train  upon  laid  down  that  a  i>assenger  on  a  rail- 

which    the    passenger  was   traveling,  way,  who  purchases  a  ticket  for  a  dis- 

having  stopped  at  a  station,  remained  tant   station   and   gets   off   the    train 

a  reasonable    time    for   passengers   to  temporarily,  and  without  notice,  invi- 

alight,  but  he,  not  availing  himself  of  tation  or  objection,  while  it  is  stopping 

the  opportunity,  waited  until  the  train  at  an  intermediate  station,  dees  no  il- 

began   to  move,  wlien,  in    attempting  legal  act,  but,  for  the  time,  he  surren- 

to   leave   the    cars,  he  was  fatally  in-  ders  his  place  and  rights  as  a  passen- 

jured.     Held,  that  the   company  was  ger ;  but  he  may  return  and  resume 

not  liable,   there   being   no    proof   of  his  place  and  rights  as  a  jiassenger  on 

mismanagement  of   the  train  or   care-  the  train  before  it  starts,  and  the  offi- 

less  conduct  of  the  employees.  cers  of  the  railway  are  bo'ind  to  give 

reasonable  notice  of  the  starting  of 
the  train. 


7<10  Peivate  Cokpokations. 

a  sufficient  time,  reasonably,  to  enable  the  passengers  to  get  off. 
If  so,  it  cannot  be  said  to  have  been  guilty  of  negligence  in  the 
management  of  its  train,  and  no  recovery  can  be  had. '  In  the 
last  cited  case,  the  court  held  that  the  defendant  was  entitled 
to  an  instruction,  that  "  if  the  train  had  stopped  a  sufficient  time 
to  enable  the  plaintiff  to'  leave  it  safely,  and  had  then  again 
started  on  its  course,  and  passed  the  platform,  and  the  plaintiff 
then  left  the  platform  of  the  car  while  the  train  was  in  motion, 
rather  than  be  carried  by,  he  was  guilty  of  carelessness  and  could 
not  recover  for  the  injuries  sustained  by  him ; "  also,  that  "  if  the 
defendant  stopped  its  train  a  sufficient  time  to  allow  the  plaintiff 
to  leave  it  safely,  it  was  not  guilty  of  negligence."  The  train 
must  be  stopped  a  sufficient  time  reasonably  to  enable  all  persons 
desiring  to  stop  at  the  station  to  do  so,  and  the  question  as  to 
whether  it  did  so  in  a  given  case  is  one  of  fact  for  the  jury. " 

Sec.  499  .  injuries  received  in  getting  upon  a  train-  —  The  same  duty 
and  the  same  rule  of  liability  exists  on  the  part  of  a  railroad  com- 
pany, in  reference  to  stopping  its  trains  sufficiently  long  to  enable 
passengers  to  get  on  to  it.  Generally,  it  may  be  said,  a  person 
attempting  to  get  aboard  a  train  while  it  is  in  motion,  is  guilty  of 
such  contributory  negligence  as  will  bar  a  recovery  for  an  injury 
received  while  attempting  to  do  so.  And  the  fact  that  pressing 
business  requires  that  he  should  take  the  train,  or  any  otJter  ex- 
cuse, will  not  excuse  his  negligence,  or  entail  the  consequences 
thereof  upon  the  company.  If  he  was  in  fact  guilty  of  contrib- 
utory negligence,  although  the  company  was  also  negligent,  no 
recovery  can  be  had. '  But  while,  as  previously  stated,  generally, 
an  attempt  to  get  aboard  a  train  in  motion  will  be  treated  as  evi- 
dence of  negligence  jper  se  on  the  part  of  the  passenger,  yet,  in- 
stances may  exist  when  it  is  not  so,  and  the  passenger  is  justified 

'  Davis  ».  Chicago,   etc.,  R.     Co.,  18  Pa.  St.  203  ;   Fairraount,  etc.,    R.  Co. 

Wis.  175.  v.  Statler,    54    id.   375;  Toledo,    etc., 

^  Penusylvania,    etc.,  R.    Co.   v.  Kil-  R.     Co.   v.    Baddesley,     54     111.    19  ; 

gore,    32    Pa.    St.    292  ;    Paulk    v.    S.  Southern  R.  Co.  v.  Kendrick.   40  Miss. 

W  R.  Co.,   24   Ga.  356;  Illinois,  etc..  374;    Inhoff  v.    Chicago,   etc.,    R.    Co., 

R.   Co.    ■».   Statton,  54   111.  123  ;  Lam-  20  Wis.  344. 

peth    V.    North    Carolina   R.    Co.,   66  ^  jjabner  «.    New  Orleans,   etc.,   R. 

N.  C.  494  ;   Evansville,  etc.,   R.  Co.  v.  Co.,  23  La.  Ann.  492  ;  Keating  «.  N.  Y. 

Duncan,  28  Ind.  441  ;  Lloyd  v.  Hanni-  C.  R.  Co.,     8    Lans.      (N.      Y.)     409  ; 

bal,    etc.,   R.   Co.,  53  Mo.    509;   Pen-  Knight  v.  Pontchartrain    K,    Co.,   23 

neylvania     R.     Co.     v.    Kilgore,     32  La.  Ann.  462. 


Negligence  and  "Wrongful  Acts  of  Agents,  etc.      701 

in  malving  tlie  attem])t,  but  in  such  cases,  liability  arises  if  at  all 
because  of  the  fact  that  the  danger  was  not  obvious ; '  or  because 
the  agents  of  the  company  directed  the  passenger  to  make  the 
attempt."  But,  even  where  the  agents  of  the  company  direct  the 
passenger  to  do  so,  the  company  is  not  liable,  if  it  'was  gi^oss  negli- 
gence on  the  part  of  the  passenger  to  make  the  attertipt,  in  view 
of  all  the  circumstances,  and  whether  it  was  so  or  not,  is  a  ques- 
tion for  the  jury. ' 

Sec.  .500.  Accommodations  —  contributory  negligence.  —  A  railroad 
company  is  bound  to  furnish  its  passengers  reasonable  and  proper 
accommodations  for  traveling,  and  if  it  has  an  insufticient  num- 
ber of  cars,  so  that  passengers  are  compelled  to  ride  upon  the 
flatform,  it  is  liable  for  injuries  received  by  them  while  rid- 
ing there,  ^  but  for  injuries  received  while  tmnecessarily  riding 
there  the  company  is  not  responsible,  *  nor  while  passing 
from  one  car  to  another  unnecessarily. '  The  fact  that  the  don.- 
dnctor permits  a  passenger  to  ride  upon  the  platform,  when  there 
is  no  necessity  for  his  doing  so,  does  not  render  the  company  lia- 
ble for  injuries  received  by  him ;  no  person  has  a  right  to 
charge  another  with  the  consequences  of  his  own  negligence, 
simply  because  such  persons  permitted  him  to  do  the  act.  ^  In 
all  cases,  when  questions  of  liability  under  such  circumstances 
arise,  it  is  a  question  for  the  jur}''  whether  the  plaintiff  was  guilty 
of  such  contributory  negligence  as  will  prevent  a  recovery,  and 
this  must  be  determined  in  view  of  all  the  facts,  and  if  upon  the 
whole  it  is  found  that  the  negligence  of  the  'company  was  the 
proximate  cause  of  the  injury,  the  fact  that  the  plaintiff  was  neg- 
ligent in  being  where  he  was  will  not  prevent  a  recovery.  * 

'  Curtis  1?.  Detroit,  etc.,  R.     Co.,  27  'Higgins    v.   N.   T.   &  Harlem   R. 

Wis.   158 ;    Johnson  v.    Westchester,  Co.,  2  Bosw.  (N.  Y.)  132. 

etc.,  R.  Co.,  70  Pa.  St.  357.  »  Zemp   v.    Wilmington,  etc.,  R.  Co., 

« Detroit,   etc.,   R.   Co.   v.   Curtis.  23  9  Rieli   (S.  C.),84;  Edgerton  «.  N.    Y. 

Wis.  152.  &  Harlem  R.  Co.,  35  Barb.  (N.  Y.)  389  ; 

3 Phillips  V.  R.  &  S.  R.  Co.,  49  N.  Y.  Sheridan   v.   Brooklyn,  etc.,  R.  Co.,  36 

177;  Curtis ».  Detroit,  etc.,  R.  Co.,  «//<e.  N.  Y.  39;   Willis   v'  Long    Island    R. 

*  Willis  V.  Long  Island  R.  Co.,34N.  Co.,  34  id.  670;  Clark  v.  8th  Ave.  R. 
Y.  670.  Co.,  36  id.  135  ;  Meesel  v.  Lynn,   etc., 

*  Hickey  v.  Boston,  etc.,  R.  Co.,  14  R.  Co.,  8  Allen  (Mass.),  234.  So  for 
Allen  (Mass.),  429  ;  Quin  «.  HI.  Cent.  R.  injuries  received  while  riding  in  the 
Co.,  51  HI.  495.  baggage  car,   if    by    consent    of    con- 

^  Macon,  etc.,  R.  Co.  v.  Johnson,  ductor.  O'Donnel  v.  AUeghanr  R. 
38  Ga.  409.  Co.,  50  Pa.  St.  490.     So  where  a'  paa- 

'96 


7G2 


Private  Cokporatioxs. 


Sec.  501.  Duty  to  passengers  —  implied  obligations.  —  Xot  only 
is  a  railroad  company  or  other  carrier  of  passengers  bound 
to  exercise  proper  care  to  prevent  injury  to  its  passengers 
while  upon  its  jpreviises^  in  going  to  or  from  its  trains^  hut  it 
is  also  hound  to  exercise  reasonahle  care  and  diligence  in  pro- 
tecting them,  from  insults  or  injury  from  other  passengers,  while 
riding  thereon,  as  well  as  from  its  own  se7"vants.  It  is  not  held 
to  the  same  degree  of  care  in  this  respect  as  it  is  held  to  in  the 
selection  of  the  agencies  of  its  business,  but  it  is  bound  to  exer- 
cise that  degree  of  care  that  a  prudent  man  would  exercise  under 
similar  circumstances  in  the  conduct  of  his  own  business.  The 
mere  fact  that  one  passenger  is  injured  by  an  assault  committed 
by  another  does  not  of  itself  even  constitute  a.  prima  facie  cause 
of  action,  but  if  it  is  also  shown  that  the  person  who  committed 
the  injury  was  improperly  admitted  iipon  the  train,  being 
druiik  and  disorderly  at  the  time  /  or  was  improperly  permitted 
to  remain  there  hecause  of  his  riotous  or  improper  conduct 
after  he  got  upon  the  train,  the  company  is  liable  for  all  the 
consequences. ' 


Benger  leaps  from  the  car  to  avoid  in- 
jury, if  tlie  danger  was  such  as  to 
justify  the  step,  the  company  is  re- 
sponsible for  the  consequences.  S. 
West.  R.  Co.  ».  Paulk,  24  Ga.  356  ;  R. 
Co.  «.  Aspell,  26  Pa.  St.  167  •  Frink  v. 
Potter,  17   111.  406  ;  Eldridge   v.  Long 


Island  R.  Co.,  1  Sandf.  (N.  Y.)  89.  So 
for  injuries  received  from  sudden 
movements  of  the  train,  either  in 
starting  or  stopping.  Stimson  d.  N. 
Y.  Cent.  R.  Co.,  82  N.  Y.  383 ;  Gordon 
v.  R.  Co.,  40  Barb.  (N.  Y.)  546 ;  Brown 
V.  N.  Y.  Ceut.  R.  Co.,  32  N.  Y.  597. 


'Goddard-y.  Grand  Trunk  Railway 
Co.,  57  Me.  202;  2  Am.  Rep.  39  ;  Rail- 
road Co.  V.  Finney,  10  Wis.  388  ;  Moore 
v.  Railroad  Co.,  4  Gray  (Mass.),  465; 
Ramsden  «.  Boston  and  Albany  R.  Co., 
104  Mass.  117  ;  6  Am.  Rep.  200;  Phila. 
&  Reading  R.  Co.  ■;;.  Derby,  14  How. 
(U.  S.)  468  ;  Sherley  «.  Billings,  8  Bush 
(Ky.),  147;  8  Am.  Rep.  451;  Bryant  ». 
Rich,  105  Mass.  180  ;  8  Am.  Rep.  311  ; 
Holmes  ».  Wakefield,  12  Allen  (Mass.), 
580  ;  Duggins  v.  Watson,  15  Ark.  118  ; 
Passenger  R.  Co.  -y.  Young,  31  Ohio  St. 
518  ;  8  Am.  Rep.  78  ;  Railroad  Co.  ■«. 
Blocher,  27  Md.  277  ;  Nieto  -u.  Clark,  1 
Clifford  (U.  S.  C.  C),  145;  F.lint  v. 
Trans.  Co.,  34  Conn.  554  ;  Seymour  v. 
Greenwood,  7  H.  &  N.  355;  Railroad 
Co.  v.  Vandiver,  42  Pa.  St.  865  ;  Land- 
reauxu.Bel,  5  La.  {().  S.)434;  Rail- 
road Co.  «.  Hinds,  58  Pa.  St.  512 ;  The 


Atlantic  and  Qt.  Western  R.  Co.  v. 
Dunn,  19  Ohio  St.  162;  2  Am.  Rep.  382; 
The  Little  Miami  R.  Co.  b.  Wetmore, 
19  Ohio  St.  110  ;  2  Am.  Rep.  373  ;  Jef- 
ferfeOnvilleR.  Co. ».  Rogers,  88  Ind.  116; 
10  Am.  Rep.  103;  Craker  v.  The  Chi- 
cago and  North  Western  R.  Co.,  86 
Wis.  657;  17  Am.  Rep.  504;  Chamber- 
lain y.  Chandler,  4  Mas.  (U.  S.)  242  ; 
Stephen  ».  Smith,  29  Vt.  190  ;  Railroad 
Co.  «.  Anthony,  48  Ind.  183  ;  Bayley  -y. 
Railroad  Co.,  L.  R.,  7  C.  P.  415*;  Cole 
man  v.  R.  Co.,  106  Mass.  160  ;  Maroney 
v.  R.  Co.,  id.  153;  Brand  v.  Railroad 
Co.,  8  Barb.  (N.  Y.)  368  ;  Weed  -y. 
Panama  R.  Co.,  17  N.  Y.  362. 

lu  Brand  v.  Railroad,  8  Barb.  368 
the  court  say :  "A  passenger  ou  board 
a  stage-coach  or  railroad  car,  and  a 
person  on  foot  in  the  street,  do  not 
stand  in  the  same  relation  to  the  car- 


Kegligenck  and  "Wkoxgful  Acts  of  Agents,  etc.     7C3 

OKC.  503.  Ground  upon  which  liability  is  predicated.  —  The  lia- 
bility of  a  railroad  company  to  its  ])asseng(.'rs  is  predicated 
upon  a  different  ground  from  its  liability  to  its  own  or  ser- 
vants' agents,  or  others  who  do  not  occnpy  that  relation  to  it. 
The  rule  is,  that  where  a  person  or  corporation  by  contract  or 
statute  is  bound  to  do  certain  things,  they  are  absolutely  responsi- 
ble for  the  manner  in  which  the  duty  is  performed,  and  cannot 
excuse  themselves  from  liability  because  they  have  committed 
the  duty  to  others  who  were  believed  to  be  possessed  of  supej-ior 
qualiUcations  for  performing  such  duties.  Mr.  Wood,  in  his 
Law  of  Master  and  Servant  (pp.  645-652),  in  commenting  upon 
this  question,  says  :  "  lie  is  bound  to  discharge  his  legal  obli- 
gation to  the  latter,  and  if  he  commits  this  duty  to  another, 
he  does  it  at  his  peril." '  For  instance,"  he  adds,  "  and  to  illus- 
trate the  application  of  the  rule,  a  carrier  of  passengers  for  hire  — 
as  a  railroad  company  —  by  the  sale  of  a  ticket,  or  the  receipt  of 
the  price  for  transportation  from  one  point  to  another  expressly 
contracts  to  carry  such  person  to  the  point  covered  by  the  con- 
tract. In  addition  to  that,  the  'aw  impliedly  raises  a  contract  on 
his  part  to  carry  such  person  safel}'^,  so  far  as  human  foresight 
can  guard  against  disaster ;  to  carry  him  in  the  usual  and  ordi- 
nary mode,  incident  to  such  travel ;  to  treat  him  respectfully, 
and  protect  him,  so  far  as  due  care  on  his  part  can  do  so, 
from  injury  from  other  persons  riding  by  the  same  conveyance. 
These  are  among  the  imjjlied  obligations  imposed,  and  they  are 
absolute  duties  that  cannot  be  shirked  or  evaded,  and  for  a  failure 
in  the  observance  of  which  he  is  liable  to  the  passengers  whether 
such  failure  results  from  his  own  act  or  the  act  of  those  to  whom 

rier.  Toward  the  one  the  liability  of  expelled  from  the  platform  of  a  car  by 
the  carrier  springs  from  a  contract,  ex-  the  defendants'  servants  was  held  en- 
press  or  implied,  and  upheld  by  an  titled  to  recover  damages  for  the  same, 
adequate  consideration.  Toward  the  So,  where  a  person  is  rightfully  ex- 
other  he  is  under  no  obligation  but  pelled,  if  excessive  force  is  used,  or  an 
that  of  justice  and  humanity.  Hence  improper  place  is  selected.liability  at- 
a  passenger  who  is  injured  by  a  ser  taches.  Hibbard  «.  R.  Co.,  15N.  Y. 
vant  of  the  carrier  may  have  a  right  455  ;  Hilliard  v.  Qoold,  3-1  N.  11.  2;50  ; 
of  action  against  him,  when  one  not  a  Johnson  v.  Concord  R.  Co.,  4G  id.  213  ; 
passenger,  for  a  similar  injury,  would  ISandford  v.  Eighth  Av.  R.  Co.,  23  N.Y. 
not.  343  ;  Terre  Haute,  etc.,  R.  Co.  v.  Van- 
In  Meyer  «.  Second  Av.  R.  Co.,  8  atta,  21  111.  188;  Stephen  v.  Smith,  29 
Bos.  (N.  Y.)  305,  affirmed  17  N.  Y.  Vt.  IGO. 
362,  a  passenger  who  was  wrongfully 

'  Goddard  •«.  Grand  Trunk   Railway     Moore   v.    R.    Co.,   4    Gray    (Mass.), 
Co..  57  Me.  202  ;  2  Am.  Rep.  3!) ;  Rail-    465. 
road   Qo.   V.    Finney,  10    Wis.    388  ; 


rcJ: 


PltlVATE    COKPOEATIONS. 


he  committed  the  diit}'.'  In  a  Pennsylvania  case"  tliis  question 
was  ably  considered.  In  that  case  an  action  was  brought  for  an 
injury  to  the  plaintiff's  wife  by  the  lighting  of  passengers  among 
themselves.  It  appeared  that  drunken  and  quarrelsome  men 
intruded  themselves  into  the  ladies'  car  in  large  numbers  at  one 
of  the  stations,  and  a  fight  ensued,  during  which  the  plaintiff's 
arm  was  broken.  In  passing  upon  the  question  of  liability 
of  the  railroad  company  therefor,  Woodakd,  C.  J.,  said  : 


'In  K.  Co.  V.  Finney,  10  Wis.  388, 
the  plaintiff  was  unlawfully  put  out  of 
a  car  by  the  conductor.  In  Seymour 
V.  Greenwood,  7  H.  &  N.  355,  a  pas- 
senger was  assaulted  and  put  out  of 
the  defendant's  omnibus  by  one  of  its 
servants.  In  Moore  v.  Railroad  Co.,  4 
Gray  (Mass.),  465,  the  plaintiff,  a  pas- 
senger, was  forcibly  expelled  from  the 
defendants' train  by  the  conductor,  and 
in  all  these  cases  the  company  was 
held  responsible.  So,  in  Railroad  v. 
Vandiver,  42  Pa.  St.  365,  a  passen- 
ger received  injuries,  of  which  he 
died,  by  being  thrown  from  the  plat- 
form of  a  railroad  car  because  he  re- 
fused to  pay  his  fare  or  show  his 
ticket,  he  averring  he  had  bought 
one  but  could  not  find  it.  TLe  evi- 
dence showed  he  was  partially  intoxi- 
cated. It  was  urged  in  defense  that 
if  the  passenger's  death  was  the  result 
of  force  and  violence,  and  not  the  re- 
sult of  negligence,  then  (such  force  and 
violence  being  the  act  of  the  agents 
alone  without  any  command  or  order 
of  the  company)  the  company  was  not 
responsible  therefor.  But  the  court 
held  otherwise.  "  A  railway  com- 
pany," said  the  court,  "  selects  its  own 
agents  at  its  own  pleasure,  and  it  is 
bound  to  employ  none  except  capable, 
prudent  and  humane  men.  In  the 
present  case  the  company  and  its 
agents  were  all  liabl»  for  the  injury 
done  to  the  deceased." 

In  Weed  v.  Railroad,  17  N.  Y.  362, 
the  jury  found  specially  that  the  act 
of  the  servant  by  whicli  the  plaintiff 
was  injured  was  willful.  The  court 
held  the  willfulness  of  the  act  did 
not  defeat  the  plaintiffs  right  to 
look  to  the  railroad  company  for 
redress. 

In  Railroad  v.  Derby,  14  How.  468, 
where  the  servant  of  a  railroad  com- 


pany took  an  engine  and  run  it  over 
the  road  for  his  own  gratification,  not 
only  without  consent,  but  contrary  to 
express  orders,  the  supreme  court  of 
the  United  States  held  that  the  railroad 
company  was  responsible. 

In  Railway  «. Hinds, 53  ta,  St.  512,  a 
passenger's  arm  was  broken  in  a  fight 
between,  some  drunken  persons  tliat 
forced  their  way  into  tlie  car  at  a  station 
near  an  agricultural  fair,  and  the  com- 
pany was  held  responsible,  because 
the'conductor  went  on  collecting  fares, 
and  did  not  stop  the  train  and  expel 
the  rioters,  or  demonstrate,  by  au 
earnest  effort,  that  it  was  impossible 
to  do  so. 

In  Flint  v.  Transportation  Co.,  34 
Conn.  554,  where  the  plaintiff  was  in- 
jured by  the  discharge  of  a  gun 
dropped  by  some  soldiers  engaged  in 
a  scuffle,  the  court  held  that  passenger 
carriers  are  bound  to  exercise  the  ut- 
most vigilance  and  care  to  guard  tliose 
they  transport  from  violence  from 
whatever  source  arising ;  and  the 
plaintiff  recovered  a  verdict  for 
$10,000. 

In  Landreaux  v.  Bel,  5  La.  (0.  S.) 
434,  the  court  say  that  carriers  are  re- 
sponsible  for  the  misconduct  of  their 
servants  toward  passengers  to  the 
same  extent  as  for  tlieir  misconduct 
in  regard  to  merchandise  committed 
to  their  care;  that  no  satisfactory 
distinction  can  be  drawn  between  the 
two  cases. 

In  Chamberlain  v.  Chandler,  3 
Mason,  242,  Judge  Story  declared,  in 
language  strong  and  emphatic,  that  a  " 
passenger's  contract  entitles  him  to 
respectful  treatment ;  and  he  expressed 
the  hope  that  every  violation  of  thia 
right  would  be  visited,  in  the  shapa 
of  damages,  with  its  appropriata 
punishment. 


'  Pittsburgh  &  Fort  Wayne  R.  Co.  v.  Hinds,  53  Pa.  St.  503. 


Negligence  and  AVkongfcl  Acts  of  Agents,  etc.      TG5 

"There  is  no  such  privity  between  the  conipaiiy  and  the  dis- 
orderly passenger  as  to  make  them  liable  on  the  principle  of 
respondeat  superior.  The  only  ground  on  which  they  can  be 
charged  is  a  violation  of  the  contract  they  made  with  the  injured 
party.  They  undertook  to  carry  the  plaintiff  safely,  and  so  neg- 
ligently performed  this  contract  that  she  was  injured.  This  is 
the  ground  of  her  action  ;  it  can  rest  upon  no  other.  The  negli- 
gence of  the  company  or  of  their  officers  in  charge  of  the  train  is 
the  gist  of  the  action,  and  so  it  is  laid  in  the  declaration.  And 
this  question  of  negligence  was  submitted  to  the  jury  in  a  manner 
of  which  the  company  have  no  reason  to  complain.  The  only 
question  for  us  as  a  court  of  error,  therefore,  is  whether  the  case 
was,  upon  the  whole,  one  that  ought  to  have  been  submitted. 
The  manner  of  the  submission  having  been  unexceptionable, 
was  there  error  in  the  fact  of  submission  ? 

"  The  learned  judge  reduced  the  case  to  three  propositions.  lie 
said  the  plaintiff  claims  to  recover, 

"  1st.  Because  the  evidence  shows  that  the  conductor  did  not  do 
his  duty  at  Beaver  station,  by  allowing  improper  persons  to  get 
on  the  cars. 

"  2d.  Because  he  allowed  more  persons  than  was  proper  under 
the  circumstances  to  get  on  the  train,  and  to  remain  upon  it. 

"  3d.  That  he  did  not  do  what  he  could  and  ought  to  have  done 
to  put  a  stop  to  the  fighting  upon  the  train  which  resulted  in  the 
plaintiffs  injury. 

"  As  to  the  first  of  the  above  propositions,  the  judge  referred  the 
evidence  to  the  jury  especially  with  a  view  to  the  question  whether 
the  disorderly  character  of  the  men  at  Beaver  station  had  fallen 
under  the  conductor's  observation  so  as  to  induce  a  reasonable 
man  to  apprehend  danger  to  the  safety  of  the  passengers. 

"The  evidence  on  this  point  was  conflicting,  but  it  must  be 
assumed  that  the  verdict  has  established  the  conclusion  that  the 

la  Nleto   V.  Clark,    1    Cliflnrd,   145,  ness  and    everv    wanton    interference 

where     the     steward     of     the     ship  with  their  persons  from  all    those  in 

assaulted    and     grossly     insulted    a  charge  of  the  ship ;  tliat  the  conduct 

female    passenger,  ,Judge    Cmfford  of   the  steward    disqualified  him    for 

declares,    in    language   equally     em-  his  situation,  and  justified  the  master 

phatic,  that   the   contract  of   all  pas-  in   immediately    discharging  him,  ul- 

sengers    entitles   them   to    respectful  though  the  vessel  was  then  in  a  foreigt 

treatment  and  protection  against  rude-  port.  Railroad  v.  Blocher,  27  ^Id.  277 


766  PlilVATE    CORPOKATIONS. 

conductor  knew  that  drunken  men  were  getting  into  tlie  cars. 
Let  it  be  granted  also  as  a  conclusion  of  law  that  a  conductor  ia 
culpably  negligent  who  admits  drunken  and  quarrelsome  men 
into  a  passenger  car.     What  then  ? 

"  The  case  shows  that  an  agricultural  fair  was  in  progress  in 
the  vicinity  of  Beaver  station ;  that  an  excited  crowd  assembled 
at  the  station  rushed  upon  the  cars  in  such  numbers  as  to  defy  the 
resisting  power  at  the  disposal  of  the  conductor,  and  that  the 
man  who  commenced  the  fight  sprung  upon  the  platform  of  the 
hindmost  car  after  they  were  in  motion. 

"  Of  what  consequence,  then,  was  the  fact  that  the  conductor 
knew  these  were  improper  passengers  ?  It  is  not  the  case  of  a 
voluntary  reception  of  such  passengers.  If  it  were,  there  w'ould 
be  great  force  in  the  point,  for  more  improper  conduct  could 
scarcely  be  imagined  in  the  conductor  of  a  train  than  voluntarily 
to  .receive  and  introduce  among  quiet  passengers,  and  particularly 
ladies,  a  mob  of  drunken  rowdies.  But  the  case  is  that  of  a  mob 
rushing  with  such  violence  and  in  such  numbers,  upon  the  cars, 
as  to  overwhelm  the  conductor  as  well  as  the  passengers. 

"  It  is  not  the  duty  of  railroad  companies  to  furnish  their  trains 
with  a  police  force  adequate  to  such  emergencies.  They  are 
bound  to  furnish  men  enough  for  the  ordinary  demands  of  trans- 
portation, but  they  are  not  bound  to  anticipate  or  provide  for 
such  an  unusual  occurrence  as  that  under  consideration. 

"  When  passengers  purchase  their  tickets  and  take  their  seats 
they  kuQw  that  the  train  is  furnished  with  the  proper  hands  for  the 
conduct  of  the  train,  but  not  with  a  police  force  sufficient  to  quell 
mobs  by  the  wayside.  No  such  element  enters  into  the  implied 
contract.  It  is  one  of  the  incidental  risks  which  all  who  travel 
must  take  upon  themselves,  and  it  is  not  reasonable  that  a  passen- 
ger should  throw  it  upon  the  transporter. 

"  These  observations  are  equally  applicable  to  the  second  prop- 
osition. The  conductor  did  not  '  allow '  improper  numbers,  any 
more  than  improper  characters,  to  get  upon  the  cars.  He  says 
he  took  no  fare  from  them,  and  in  no  manner  recognized  them  as 
passengers.  To  allow  undue  numbers  to  enter  a  car  is  a  great 
wrong,  almost  as  great  as  knowingly  to  introduce  persons  of  im- 
proper character,  and,  in  a  suitable  case,  we  would  not  hesitate  to 


Negligence  and  Wrongful  Acts  of  Agents,  eic.      707 


cliastise  the  practice  severely.  But  this  is  not  a  case  in  which  the 
conductor  had  any  volition  whatever  in  respect  either  to  ninu- 
bers  or  characters.  He  was  simply  overmastered ;  and  the  only 
ground  upon  which  the  plaintiil;  could  charge  negligence  upon 
the  company  would  be  in  not  furnishing  the  conductor  with  a 
counter  force  sufficient  to  repel  the  intruders.  This  was  not  the 
ground  assumed  by  the  plaintiff,  and  it  would  scarcely  have  been 
maintainable  had  it  been  assumed.  Taking  the  case  as  it  is  pre- 
sented in  the  evidence,  we  think  it  was  error  for  the  court  to  sub- 
mit the  cause  to  the  jury  on  these  two  grounds.  But  upon  the 
third  ground  we  think  the  cause  was  properly  submitted.  If  the 
conductor  did  not  do  all  he  could  to  stop  the  fighting ,  there  was 
negligence.  Whilst  a  conductor  is  not  provided  with  a  force  suffi- 
cient to  resist  such  a  raid  as  was  made  upon  the  train  in  this  in- 
stance, he  has,  nevertheless,  large  powers  at  his  disposal,  and,  if  , 
properly  used,  they  are  generally  sufficient  to  preserve  order 
within  the  cars,  and  to  expel  disturbers  of  the  peace.  His  offi- 
cial character  and  position  are  a  power.  Then  he  may  stop  the 
train  and  call  to  his  assistance  the  engineer,  the  firemen,  all  the 
brakemen,  and  such  passengers  as  are  willing  to  lend  a  helping 
hand,  and  it  must  be  a  very  formidable  mob,  indeed,  more  formid- 
able than  we  have  reason  to  believe  had  obtruded  into  these  cars, 
that  can  resist  such  a  force.  Until  at  least  he  has  put  forth  the 
forces  at  his  disposal,  no  conductor  has  a  right  to  abandon  the 
scene  of  conflict.  To  keep  his  train  in  motion  and  busy  himself 
wath  collectiu":  fares  in  forward  cars  whilst  a  general  fij^ht  was 
raging  in  the  rearmost  car  wdiere  the  lady  passengers  had  been 
placed,  was  to  fall  far  short  of  his  duty.  Nor  did  his  exhortation 
to  the  passengers  to  throw  the  fighters  out  come  up  to  the 
demands  of  the  hour,  lie  should  have  led  the  way,  and  no  doubt 
passengers  and  hands  would  have  followed  his  lead.  He  should 
have  stopped  the  train  and  hewed  a  passage  through  the  intrusive 
mass  until  he  had  expelled  the  rioters,  or  have  demonstrated,  by 
an  earnest  experiment,  that  the  undertaking  was  impossible." 

Sec.  503.      Liability  for  willful  wrongs  of  agents.  —      In    a    Maine 
case,'  the   liability  of  a  railway  company  for  an  injury  inflicted 

•  Goddard  v.  Grand  Trunk,  etc  ,  R.  Co.,  57  Me.  203. 


7G8  Private  Cokpokations. 

upon  a  passenger  by  one  of  its  servants  was  discussed.  In 
that  case  it  appeared  that  the  plaintiff  was  a  passenger  in  the  de- 
fendant's train,  and  that,  on  request,  he  surrendered  his  ticket  to 
a  brakeman  employed  on  tlie  train,  wlio,  in  the  absence  of  the  con- 
ductor, was  authorized  to  demand  and  receive  it;  that  the  brake- 
man  afterward  approached  the  plaintiff,  and,  in  language  coarse, 
profane  and  grossly  insulting,  denied  that  he  had  either  sur- 
rendered or  shown  him  his  ticket ;  that  the  brakeman  called 
the  plaintiff  a  liar,  charged  him  with  attempting  to  avoid  the  pay- 
ment of  his  fare,  and  with  having  done  the  same  thing  before, 
and  threatened  to  split  his  head  open  and  spill  his  brains  right 
there. on  the  spot ;  that  the  brakeman  stepped  forward  and  placed 
his  foot  upon  the  seat  on  which  the  plaintiff  was  sitting,  and, 
leaning  over  the  plaintiff',  brought  his  list  close  down  to  his  face,  and, 
shaking  it  violently,  told  him  not  to  yijp^  if  he  did,  he  would  spot 
him  ;  that  he  w^as  a  damned  liar ;  that  he  never  handed  him  his 
ticket ;  that  he  did  not  believe  he  paid  his  fare  either  way  ;  that 
this  assault  was  continued  some  fifteen  or  twenty  minutes,  and 
until  the  whistle  sounded  for  the  next  station ;  that  there  were 
several  passengers  present  in  the  car,  some  of  whom  were  ladies, 
and  that  they  were  all  strangers  to  the  plaintiff ;  that  the  plaintiff 
was  at  the  time  in  feeble  health,  and  had  been  for  some  time  un- 
der the  care  of  a  physician,  and  at  the  time  of  the  assault  was 
reclining  languidly  in  his  seat ;  that  he  had  neither  said  nor  done 
any  thing  to  provoke  the  assault ;  that,  in  fact,  he  had  paid  his 
fare,  had  received  a  ticket,  and  had  surrendered  it  to  this  very 
brakeman  who  delivered  it  to  the  conductor  only  a  few  minutes 
before,  by  whom  it  was  afterward  produced  and  identified ;  that 
the  defendants  were  inmiediately  notified  of  the  misconduct  of  the 
brakeman,  but,  instead  of  discharging  him,  retained  him  in  his 
place ;  that  the  brakeman  was  still  in  the  defendants'  employ  when 
the  case  was  tried  and  was  present  in  court  during  the  trial,  but 
was  not  called  as  a  witness,  and  no  attempt  was  made  to  justify  or 
excuse  his  conduct.  Upon  this  evidence  the  defendants  contended 
that  they  were  not  liable,  because  the  brakeman's  assault  upon  the 
plaintiff  was  willful  and  malicious,  and  was  not  directly  nor  im- 
pliedly  authorized   by  them ;  that  "  the  master  is   not   respcnsi- 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      769 

ble  as  a  trespasser,  unless,  by  direct  or  implied  authority  to  the 
servant,  he  consents  to  the  unhiwful  act," 

"  The  falhicy  of  this  argument,  when  applied  to  the  common 
carrier  of  passengers,"  said  Walton,  J.,  "consists  in  not  discrim- 
inating between  the  obligation  which  he  is  under  to  his  passenger, 
and  the  duty  which  he  owes  a  stranger.  It  may  be  true  that  if 
the  carrier's  servant  willfully  and  maliciously  assaults  a  stranger, 
the  master  will  not  be  liable  ;  but  the  law  is  otherwise  when  he 
assaults  one  of  his  master's  passengers.  The  carrier's  obligation 
is  to  carry  his  passenger  safely  and  properly,  and  to  treat  him 
respectfully,  and  if  he  intrusts  the  performance  of  this  duty  to 
his  servants,  the  law  holds  him  responsible  for  the  maimer  in  which 
they  execute  the  trust.  The  law  seems  to  be  now  well  settled 
that  the  carrier  is  obliged  to  protect  his  passenger  from  violence 
and  insult,  from  whatever  source  arising.  He  is  not  regarded  as 
an  insurer  of  his  passenger's  safety  against  every  possible  source 
of  danger ;  but  he  is  bound  to  use  all  such  reasonable  precautions 
as  human  judgment  and  foresight  are  capable  of  to  make  his 
passenger's  journey  safe  and  comfortable.  He  must  not  only 
protect  his  passenger  against  the  violence  and  insults  of  strangers 
and  co-passengers,  but,  a  fortiori,  against  the  violence  and  insult 
of  his  own  servants.  If  this  duty  to  the  passenger  is  not  per- 
formed, if  this  protection  is  not  furnished,  but,  on  the  contrary, 
the  passenger  is  assaulted  and  insulted,  through  the  negligence  or 
the  willful  misconduct  of  the  carrier's  servant,  the  carrier  is  neces- 
sarily responsible. 

"  And  it  seems  to  us  it  would  be  cause  of  profound  regret  if  the 
law  were  otherwise.  The  carrier  selects  his  own  servants  and  can 
discharge  them  when  he  pleases,  and  it  is  but  reasonable  that  he 
should  be  responsible  for  the  manner  in  which  they  execute  their 
trust.  To  their  care  and  fidelity  are  intrusted  the  lives  and  limbs 
and  comfort  and  convenience  of  the  whole  traveling  public,  and  it 
is  certainly  as  important  that  these  servants  should  be  trustworthy 
as  it  is  that  they  should  be  competent.  It  is  not  sufficient  that 
they  are  capable  of  doing  well,  if  in  fact  they  choose  to  do  ill ; 
that  they  can  be  as  polite  as  a  Chesterfield,  if,  in  their  intercoui-se 
with  the  passengers,  they  choose  to  be  coarse,  brutal  and  profana 
The  best  security  the  •  traveler  can  have  that  these  servants  will 

97 


770  Peivate  Cokpokations. 

be  selected  with  care  is  to  hold  those  by  whom  the  selection  is  made 
responsible  for  their  conduct." 

Still  further  on  in  the  course  of  his  opinion,  he  summarizes 
the  rule  of  liability  thus :  "  The  law  requires  the  common 
carrier  of  passengers  to  exercise  the  highest  degree  of  care  that 
human  judgment  and  foresight  are  capable  of,  to  make  his  pas- 
senger's journey  safe.  Whoever  engages  in  the  business  impliedly 
promises  that  his  passengers  shall  have  this  degree  of  care.  In 
other  words,  the  carrier  is  conclusively  presumed,  we  say  con- 
clusively presumed,  for  the  law  will  not  allow  the  carrier,  by  notice 
or  special  contract  even,  to  deprive  his  passenger  of  this  degree 
of  care.  If  the  passenger  does  not  have  such  care,  but  on  the 
contrary  is  unlawfully  assaulted  and  insulted  by  one  of  the  very 
persons  to  whom  his  conveyance  is  intrusted,  the  carrier's  implied 
promise  is  broken,  and  his  legal  duty  is  left  unperformed,  and  he 
is  necessarily  responsible  to  the  passenger  for  the  damages  he 
thereby  sustains.  The  passenger's  remedy  may  be  either  in 
assumpsit  or  tort,  at  his  election.  In  the  one  case,  he  relies  upon 
a  breach  of  the  carrier's  common-law  duty  in  support  of  his 
action ;  in  the  other,  upon  a  breach  of  his  implied  promise. 
The  form  of  the  action  is  important  only  upon  the  question  of 
damages.  In  actions  of  assumpsit,  the  damages  are  generally 
limited  to  compensation.  In  actions  of  tort,  the  jury  are 
allowed  greater  latitude,  and,  in  proper  cases,  may  give  exem- 
plary damages." 

The  liability  of  a  carrier  of  passengers  for  insults  inflicted  upon 
its  passengers  was  ably  discussed  in  a  Wisconsin  case.' 

In  that  case  the  plaintiff,  a  young  lady,  was  a  passenger  upon 
the  defendants'  road,  and,  for  a  portion  of  the  way,  -was  the  only 
passenger  in  the  car,  and  while  so  pursuing  her  journey  the  con- 
ductor of  the  train,  without  her  consent,  forcibly  kissed  her.  In 
an  action  against  the  railroad  company,  to  recover  for  the  injury,  a 
verdict  for  $1,000  was  rendered  in  her  favor,  which  was  sustained 
upon  appeal.  Ryan,  C.  J.,  remarking  upon  the  question  ^vhether 
the  master  is  generally  liable  for  the  willful  or  wanton  acts  of  his 
servant,  said  :  "  However  that  may  be  in  general,  there  can  be  no 
doubt  of  it  in  those  employments  in  which  the  agent  performs  a 

?  Craker  v.  The  Chicago  &  N.  W.  R.  Co.,  36  Wis.  657  ;  17  Am.  Rep.  504 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      771 

duty  of  the  principal  to  third  persons,  as  between  such  third  per- 
sons and  the  principal.  Because  the  principal  is  responsible  for  the 
duty,  and  if  he  delegates  it  to  an  agent,  and  the  agent  fails  to  per- 
form it,  it  is  inunaterial  whether  the  failure  be  accidental  or  will- 
ful, in  the  negligence  or  in  the  malice  of  the  agent.  It  would 
be  cheap  and  superficial  morality  to  allow  one  owing  a  duty  to 
another  to  commit  the  performance  to  a  third  person,  without 
responsibility  for  the  malicious  conduct  of  the  substitute  in  the 
performance  of  the  duty.  If  one  owe  bread  to  another,  and 
appoints  an  agent  to  furnish  it,  and  the  agent,  of  malice,  furnishes 
a  stone,  instead,  the  principal  is  responsible  for  the  stone  and  its 
consequences." 

"  If,"  says  Mr.  Wood  (Law  of  Master  and  Servant,  p.  648  et 
seq.),  "  a  carrier  of  goods  for  hire  should  commit  the  carriage  of  the 
goods  to  a  servant,  and  the  servant  should  steal  them,  or  wantonly 
destroy  them,  or,  through  his  negligence,  injure,  or  suffer  them 
to  be  injured,  there  is  no  question  but  that  the  master  would  be 
liable  therefor,'  and  it  would  be  a  singular  rule,  and  an  absurd 
one,  that  did  not  hold  the  carriers  of  passengers,  intrusted  not 
only  with  their  comfort,  but  the  safety  of  their  persons,  and  their 
lives,  during  the  journey,  to  as  strict  performance  of  this  duty  as 
of  the  other,  and  it  will  be  seen  by  an  examination  of  the  cases 
that  they  are.  They  are  bound  to  look  out  for  the  comfort  of 
their  passengers,  and,  as  far  as  possible,  save  them  from  annoy- 
ance." This  rule  has  been  held  to  extend  to  cover  an  implied 
stipulation  that  such  carriers  are  bound  to  protect  passengers 
against  "  obscene  conduct,  lascivious  behavior,  and  every 
immodest  and  libidinous  approach,'  and  this  has  been  held  to 
amount  to  a  contract  duty.  In  the  language  of  Story,  J.  : *  'It 
is  a  stipulation  not  for  toleration,  but  for  respectful  treatment, 
for  that  decency  of  demeanor  which  constitutes  the  charm  of 
social  life,  for  that  attention  which  mitigates  evil  without 
reluctance,  and  tliat  promptitude  which  administers  aid  to 
distress.  In  respect  to  females,  it  proceeds  yet  further;  it 
includes  an    implied  stipulation  against   general  obscenity,  that 

'  Alden  v.  Pearson,  3  Gray  (Mass.),  '  Day  v.  Owen,  5  Mich.  520. 

342  ;    Klauber  v.  Am.  Ex.  Co..  21  Wis.  »  Nieto  v.  Clark.  1  Cliff.  (U.  S.)  145 

21  ;  Am.  Ex.  Co.  v.  Sands,  55  Pa.  St.  ''  Chamberlain  v.  Chandler,  3  Mas 

140.  (U.S.)  343. 


772  Pkivate  Corporations. 

immodesty  of  approach  that  borders  on  lasciviousness,  and  that 
wanton  disregard  of  the  feelings  which  aggravates  every  evil.' 
In  commenting  upon  the  rights  and  duties  of  carriers  of  passen- 
gers, Shaw,  C.  J.,'  said:  '  An  owner  of  a  steamboat  or  railroad 
is  in  a  condition  somewhat  similar  to  that  of  an  innkeeper,  whose 
premises  are  open  to  all  guests,  yet  he  is  not  only  empowered, 
hut  he  is  hound  so  to  regulate  his  house,  as  well  with  regard  to 
the  peace  and  comfort  of  his  guests,  who  there  seek  repose,  as  to 
the  peace  and  quiet  of  the  vicinity,  as  to  repress  and  prohibit  all 
disorderly  conduct  therein  ;  and,  of  course,  he  has  a  right,  and  is 
bound  to  exclude  from  his  premises  all  disorderly  persons  not 
conforming  to  the  regulations  necessary  and  proper  to  secure  such 
quiet  and  good  order."  ' 

From  these  brief  extracts  from  the  opinions  of  eminent  jurists,  as 
well  as  from  an  examination  of  the  cases  referred  to  in  the  notes  to 
this  section,  it/ will  be  seen  that,  in  all  cases  where  the  master  owes 
a  duty  to  third  persons,  or  the  public,  he  cannot  shirk  or  evade  it 
by  committing  its  performance  to  another,  but  is  bound  absolutely 
to  perform  the  duty,  and  is  liable  for  a  failure  so  to  do,  in  any  re- 
spect, whereby  injury  results  to  others,  whether  such  failure  results 
from  the  negligence  or  from  the  willful,  wanton,  or  criminal 
conduct  of  the  agent  to  whom  the  duty  is  committed.'  This 
rule  was  well  illustrated  in  the  case  referred  to  in  the  last  note. 
In  that  case  the  plaintiff,  with  his  wife,  took  passage  on  the 
defendants'  train,  and,  through  the  willful  conduct  of  their 
conductor  and  servant,  the  train  was  detained  over  night  in  an 
unhealthy  locality,  and  the  passengers  were  thereby  exposed  to 
great  dangers  and  hardships.  The  plaintiff's  wife,  in  consequence 
of  such  exposure  and  hardships,  was  taken  ill  during  the  night 
and  suffered  greatly.  In  an  action  to  recover  for  the  injury,  the 
defendants  were  held  liable,  notwithstanding  the  injury  arose 
from  the  willful  act  of  the  conductor,  the  court  very  properly 
holding  that  the  defendants  were  bound  to  discharge  their  con- 
tract with  the  plaintiff  absolutely,  and  could  not  defend  upon 
the   ground   that  they    had   committed   its   performance   to  an 

iCom.  V.  Power,  7  Mete.  (Mass.)  601.         »  Weed  v.  Panama  R.  Co.,  17  N.  Y 
^  See,  also,  Markham  v.  Brown,  8  N.    363. 
H.533. 


l^EGLIGENCE    AND   WRONGFUL   AcTS   OF    AgENTS,    ETC.       773 

agent,  who  had  wantonly  disregarded  the  duty.  In  reference 
to  the  application  of  this  rule,  so  far  as  railroad  companies  and 
carriers  of  passengers  are  concerned,  it  may  be  said  that  they  are 
not  only  bound  to  protect  their  passengers  against  injury  and 
unlawful  assault  by  third  persons  riding  upon  tlie  same  convey- 
ance, so  far  as  due  care  can  secure  that  result,  but  they  are  bound 
absolutely  to  see  to  it  that  no  unlawful  assault  or  injury  is  inflicted 
upon  them  by  their  own  servants,  in  the  one  case  their  liability 
depends  upon  the  question  of  negligence,  whether  they  improp- 
erly admitted  the  passenger  inflicting  the  injury  upon  the  train,' 
while  in  the  other,  the  simple  question  is,  whether  the  act  was 
unlawful,  and  the  question  of  negligence  is  not  an  element  of 
liability.^  In  a  Massachusetts  case'  the  plaintiff  was  a  passenger 
upon  the  defendant's  steamboat  from  Boston  to  Gardiner,  Maine, 
and  while  upon  the  trip  he  was  unlawfully  assaulted  by  the 
steward  of  the  boat  and  some  of  the  table  waiters.  In  an  action 
to  recover  for  the  injuries,  the  plaintiff  had  a  verdict  for  $8,000 
which  was  upheld  on  appeal,  Chapman,  J.,  remarking :  "  As  a 
general  rule,  the  master  is  liable  for  what  his  servant  does  in  the 
course  of  his  employment ;  but,  in  regard  to  matters  wholly  dis- 
connected from  the  service  to  be  rendered,  the  master  is  under 
no  responsibility  for  what  the  servant  does  or  neglects  to  do. 
The  reason  is  that,  in  respect  to  such  matters,  he  is  not  a  ser^ 
vant.*  If,  therefore,  any  of  the  oflficers  or  men,  connected  with 
the  running  of  the  defendants'  boat,  had  met  the  plaintiff  in  the 
street  or  elsewhere,  in  a  position  wholly  discoTinected  with  their 
duties  to  the  defendants,  and  committed  an  assault  and  battery 
upon  him,  it  is  clear  that  the  defendants  would  not  have  been 
liable. 

"  There  are  two  views  which  may  be  taken  in  the  present  case. 
One  is  the  view  which  was  taken  by  the  court  in  Philadelphia 
and  Reading  Railroad  Co.  v.  Derby."  The  plaintiff  in  that 
action  was  riding  gratuitously,  and  the  court  held  that  the 
company  were  liable  to  him,  not  on  the  ground  of  a  contract 

'  R.  Co.  V.   Hinds.  53  Pa.   St.  512;  'Bryant  «.  Rich,  106  Mass.  180;  8 

Stephen  v.  Smith,  2!)  Vt.  160.  Am.  Rep.  311. 

5  Goddard  v.  Grand  Trunk  Railway,  "'Aldrich  v.The  Boston  &  Worcestei 

ante  ;  Sherley  y.  Billings,  a/i^e  /  Bryant  R.  Co. ,  100  Mass.  31. 

V.  Rich,   ante.  » 14  How.  468. 


774  Private  Cokpobations. 

between  the  parties,  but  because  he  was  injured  by  their  care- 
lessness when  he  was  where  he  had  a  lawful  right  to  be.  But 
as  the  plaintiff  in  this  case  was  a  passenger  for  hire,  we  think  it 
better  to  consider  what  the  contract  was  between  them.  This 
has  been  discussed  in  the  following  eases. '  It  has  also  been 
thoroughly  discussed  in  Goddard  v.  Grand  Trunk  Railway^ 
These  cases  were  cited  by  Clittobd,  J.,  in  Pendleton  v.  Kins- 
ley^ Rhode  Island  Circuit,  June,  1870,  not  yet  reported,  and 
the  terms  of  the  contract  for  carriage  by  water  are  well 
stated  by  him  in  conformity  with  the  authorities,  as  follows: 
'Passengers  do  not  contract  merely  for  ship-room  and  trans- 
portation from  one  place  to  another,  but  they  also  contract 
for  good  treatment,  and  against  personal  rudeness  and  every 
wanton  interference  with  their  persons,  either  by  the  carrier 
or  his  agents  employed  in  the  management  of  the  ship  or 
other  conveyance. "  In  respect  to  such  treatment  of  passen- 
gers, not  merely  the  officers,  but  the  crew,  are  the  agents  of 
the  carriers.'  In  Chamberlain  v.  Chandler^  cited  above,  Stoey, 
J.,  says  :  '  That  kindness  and  decency  of  demeanor  is  a  duty 
not  limited  to  the  oiHcers,  but  extends  to  the  crew.' 

"The  interpretation  of  the  contract  of  the  carrier,  which  is  given 
in  the  cases  above  cited,  is  not  unreasonable.  It  is  not  more 
extensive  than  the  necessities  of  passengers  require.  Nor  is  it 
difficult  to  perform.  The  cases  in  which  it  is  violated  by  ser- 
vants, even  of  the  lowest  grade,  on  board  a  ship  or  engaged  in  the 
management  of  a  railroad  train,  and  the  carrier  rather  than  the 
passenger  ought  to  take  the  risk  of  such  exceptional  cases,  the 
passenger  being  necessarily  placed  so  much  within  the  power  of 
the  servants. 

"In  this  case,  the  servants  who  committed  the  wrong,  being  the 
steward  and  table  waiters,  were  those  who  were  engaged  in  pro- 
viding meals,  waiting  on  the  tables  and  collecting  the  pay  for 
meals.      They   were  treating   the  plaintiff's   relative  with  gross 

'Chamberlain  b.  Chandler,  3  Mas.  yard  and  Nantucket  Steamboat  Co.,  97 

242  ;  Nieto  ri.  Clark,  1  Cliff.  145  ;  Bal-  Mass.  361,  and  100  id.  34;  Milwaukee 

timore  &  Ohio   R.  Co.  ■».   Blocker,  27  &    Mississippi  R.   Co.  v.   Finney,  10 

Md.   277;    Pittsburgh,  Fort  Wayne  &  Wis.  388. 

Chicago  R.   Co.  v.  Hinds,  53  Pa.  St.  ^  Bupra,  57  Me.  202  ;  2  Am.  Rep.  39. 

512  ;  Simmons  «.  New  Bedford,  Vine-  '  3  Mason,  242. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.      775 

rudeness  in  connection  with  this  business,  and  the  plaintiff 
interfered  only  by  a  remark  that  was  proper,  whereupon  the 
assault  was  committed.  It  was  not  as  if  a  quarrel  had  occurred 
on  shore  and  disconnected  with  the  duties  of  persons  on  ship- 
board. It  vioLated  the  contract  of  the  defendants,  as  to  how 
the  plaintiff  should  be  treated  by  their  servants,  who  were 
employed  on  board  the  ship  and  during  the  passage.  For  a 
violation  of  such  a  contract  either  by  force  or  negligence,  the 
plaintiff  may  bring  an  action  of  tort,  or  an  action  of  con- 
tract." 

Sec.  504 .  Liability  of  railroad  corporations  for  delay  in  running  trains. 
—  A  railroad  company  is  held  chargeable  with  damages  for  delay 
in  the  running  of  its  trains  according  to  schedule  time,  and  any 
person  sustaining  damage  from  a  failure  on  its  part  to  run  its  trains 
u2)on  such  time  is  entitled  to  recover  the  same.'     By  issuing  its 


'  Sears  v.  Eastern  R.  Co.,  14  Allen 
(Mass.),  433. 

In  England  the  same  doctrine  is 
held  ;  thus  in  Buckraaster^.  The  Great 
Eastern  Railway  Co.,  23  Law  J.  Rep. 
(N.  S.)  Exch.  471,  an  action  was  brought 
for  damages  sustained  by  the  plaintiff 
by  reason  of  the  company  not  starting 
a  train  as  advertised  in  their  time  bills, 
and  in  which  the  plaintiff  obtained  a 
verdict,  Baron  Martin  said  :  "  That  it 
was  mere  nonsense  for  companies  to 
say,  as,  in  effect,  the  company  in  that 
case  had  said,  '  We  will  be  guilty  of 
any  negligence  we  think  fit,  and  we 
will  not  be  responsible  ; ' "  and  with 
respect  to  the  notice  in  this  case  the 
learned  judge  of  the  Marylebone 
county  court  thus  concludes  :  "  I  am 
of  opinion  that  it  is  ultra  vires  so  far 
as  it  professes  to  attach  to  the  right  of 
traveling  on  their  own  line  the  con- 
dition that  the  company  will  not  be 
responsible  for  any  shortcomings  of 
their  servants  not  amounlingto  willful 
misconduct,  whatever  that  term  may 
mean."  In  this  view  as  to  the  invalidity 
of  the  stipulation  in  question  I  fully 
concur.  It  seems  to  me  to  be  a  mon- 
strous proposition  that  the  railway 
companies,  who  are  bound  by  their 
special  Acts  and  the  Railway  Clauses 
Consolidation  Act,  1845,  section  tSO,  to 
carry  passengers  at  rates  fixed  within 
certain  limits,  should  be  able  to  affix 


to  their  contracts  with  the  passengers 
a  stipulation  which,  if  valid,  would 
deprive  the  passengers  of  their  com- 
mon-law right  to  the  performance 
with  due  diligence  of  the  company's 
contract  with  them.  Tiiere  is  one 
other  remark  I  would  wish  to  add, 
viz.,  that  the  restrictions  as  to  the 
company's  liability  for  not  correspond- 
ing with  other  trains  contained  in  the 
notice  and  regulation  in  question  only 
extends  to  cases  where  their  trains  fail 
to  correspond  witli  trains  of  other  com- 
panies and  not  with  other  trains  of 
their  own,  which  is  the  present  case. 
Having  stated  my  opinion  as  to  the 
liability  of  the  company  at  common 
law  and  of  the  invalidity  of  the  above 
notice  and  regulation  so  far  as  it 
restricts  such  liability  in  the  present 
case,  it  still  remains  for  me  to  consider 
the  last  point  raised  by  the  defendants, 
viz.  :  Whether,  if  the  notice  and  regu- 
lation were  valid,  and  the  plaintiff  was 
bound  by  it  to  show  willful  misconduct 
on  the  part  of  the  defendants'  servants, 
he  has  shown  it  in  the  present  case  ;  in 
other  words,  whether  the  absence  of 
the  porters  through  their  own  fault,  or 
by  the  orders  of  superior  servants  of 
the  company,  was,  under  all  the  circum- 
stances of  the  present  case,  in  point  of 
law.  '  willful  miscouduct,'  and  1  think 
with  some  doubt  that  it  ougl.  t  to  be 
ao  held,  and  on   this  point   I   wish  to 


776 


PkIVATE    C0KPOEATION8. 


time  tables  it  is  treated  as  contracting  with  its  passengers  that  its 
trains  shall  leave  and  arrive  at  its  stations  at  the  time  named 
therein,  and  failing  to  perform  in  this  respect  it  is  chargeable  with 
the  damages  that  ensue  in  consequence  thereof.'  It  may  change  its 
schedule  time,  but,  as  to  the  holders  of  season  tickets,  it  is  bound 
to  give  reasonable  notice  of  such  change,  and  a  me:-e  advertise- 
ment of  such  change  in  public  journals,  or  posting  notice  thereof 
in  its  stations  or  cars,  is  held  not  sufficient  to  relieve  it  from 
liability." 

The  company  is  liable  even  though  the  delay  resulted  from  the 
willful  acts  of  its  servants.^  The  issue  of  a  time  table,  indicating 
the  time  of  the  arrival  and  departure  of  trains,  is  held  to  amount 
to  an  express  promise  to  run  to  the  places  and  at  the  times  named, 
and  nothing  but  accidents  resulting  from  causes  which  reason- 
able care  could  not  have  provided  against,  will  excuse  liability.* 


refer  once  more  to  the  judgment  of  the 
learned  judge  of  the  Marylebone  coun- 
ty court  in  Turner  v.  The  Great  Wes- 
tern Railway  Company, and  the  author- 
ities therein  cited,  as  to  the  legal 
interpretation  of  the  words  '  willful 
misconduct.'  The  only  case  that  lam 
aware  of  that  militates  against  my 
view  is  that  of  Russell  v.  The  Great 
Western  Railway  Company,  before  the 
learned  judge  of  the  Bath  county 
court  —  to  whom  I  have  already  refer- 
red —  in  which  he  held  that  the  altered 
notice   or   regulation    was   valid    and 


operative  to  restrict  the  defendants, 
liability  to  cases  of  proved  willful 
misconduct  on  the  part  of  their  ser- 
vants, but  from  what  I  have  said  it 
will  be  seen  that  I  cannot  concur  in 
his  view.  Upon  the  whole,  I  am  in 
favor  of  the  plaintiif  on  all  the  points 
of  law  and  facts  involved  in  this  case, 
and  a  verdict  will,  therefore,  be  en- 
tered for  the  plaintiff  for  the  amount 
claimed,  with  costs,  and  with  liberty 
to  the  defendants  to  appeal  within  one 
month.'  " 


*  Gordon  v.  Manchester,  etc.,  R.  Co., 
52  N.  H.  596. 

"  Sears  «.  Eastern  R.  Co.,  ante. 

3  Weed  v.  Panama  R.  Co.,  17  N.  Y. 
362. 

''Denton  v.  Great  Northern  R.  Co.,  5 
El.  &  Bl.  860. 

In  Turners.  Great  Western  Railway 
Company,  decided  in  the  Marylebone 
county  court  (England),  in  May,  1874, 
Wheeler,  J.,  said  :  "  The  question  of 
reasonable  time  is  no  longer  left  at 
large,  but  is,  in  fact,  fixed  by  the  com- 
panies themselves,  subject,  of  course, 
to  accidents  which  reasonable  care 
could  not  provide  against.  In  the 
present  case  it  is  quite  clear  that  the 
absence  of  porters  at  the  Reading  sta- 
tion, which  reasonable  care  might  (as 
far  as  appears)  have  prevented,  occa- 


sioned the  detention  of  the  plaintiff  at 
Twyford,  and  as  he  was  able  to  pro- 
cure a  conveyance  by  which  he  got  to 
Henley,  substantially  half  an  hour 
sooner  than  the  railway  company  were 
prepared  to  convey  him  by  the  next 
train,  I  think  that  he  was  justified  in 
hiring  it,  and  that  (subject  to  the  next 
question)  he  is  entitled  to  recover  its 
cost  against  the  defendants.  The  next 
question  which  remains  for  me  to  con- 
sider is,  whether  the  notice  and  regu- 
lation contained  in  the  defendants' 
tables  deprive  the  plaintiff  of  his  right 
to  recover  against  the  defendants. 
Now,  this  notice  and  regulation  aa 
altered  came  before  the  learned  j  u  ige 
of  the  Marylebone  county  court  in  the 
case  I  have  already  referred  to,  and  he 
there  commented  upon  it  so  fully  and 


Negligence  and  Wrongful  Acts  of  Ac!knt8,  etc.      777 

Sec.  505.  Liability  for  negligence  in  constructing  or  repairing  rail- 
roads, and  for  nuisances. —  A  niilroad  compHiiy  is  bouiul  U>  exerciftt; 
ordinaiy  care  to  prevent  injury  either  to  the  person  or  property 


so  ably  that  I  cannot  do  better  than 
quote  his  remarks.  Referring  to  the 
notice  and  regulation  which  cauie  be- 
fore him  in  Mr.  Forsyth's  case,  he  ob- 
serves :  '  The  company's  notice  of 
August  commenced  with  tliese  words, 
'  Every  attention  will  be  paid  to  insure 
punctuality  as  far  us  practicable.'  This 
really  is  all  that  the  law  requires. 
'  But,'  continued  the  notice,  '  the  di- 
rectors do  not  undertake  that  the  trains 
shall  arrive  at  the  time  specified  in  the 
time  table.'  Here  I  may  remark  that, 
irrespective  of  any  notification  by  the 
company,  the  law  does  not  imply  any 
such  undertaking,  its  requisitions  be- 
ing simply  that  there  shall  be  no  fail- 
ure of  punctuality  for  want  of  reason- 
able care  and  diligence.  The  notice 
then  adds,  '  Nor  will  the  directors  be 
accountable  for  any  loss,  inconvenience 
or  injury  which  may  arise  from  delay 
or  detention ;  '  and  subject  to  their 
paying  every  reasonaljle  attention 
they  have  eypressly  fixed  on,  which, 
if  not  ao  fixed,  juries  may  determine. 
Before  the  introduction  of  railways 
there  were  frequently  coach  proprie- 
tors who  agreed  to  perform  their 
promises  in  so  many  hoars,  and,  there- 
fore, to  use  every  reasonable  means 
and  diligence  for  that  purpose  ;  and  if, 
by  reason  of  their  neglect  of  such 
means  or  want  of  such  diligence,  they 
failed  to  complete  their  contracts, 
there  can  be  no  doubt  that  actions 
must  have  lain  against  them.  Of 
course  the  condition  of  the  roads, 
which  were  not  under  their  control, 
and  many  other  circumstances,  and 
especially  sudden  accidents,  would 
have  been  valid  defenses  to  such  ac- 
tions; and,  therefore,  they  were  often 
very  difficult  to  try.  Moreover,  the 
proprietors  seldom,  if  ever,  entered  in- 
to these  special  contracts  as  to  time 
excepting  when  there  was  great  com- 
petition, and  then  they  used  their  best 
endeavors,  as  did  also  their  servants 
(who  were  often  stimulated  by  a  sys- 
tem of  premiums  or  fines),  to  perform 
these  contracts  vpith  the  greatest  ex- 
actitude. Actions  for  the  breach  of 
Buch  contracts  were  consequently  very 
are,  and  I  have  not  been  able  to  find 

98 


a  report  of  any  case  of  the  kind.  In 
most  cases,  liowever,  the  coach  pro- 
prietors merely  contracted  to  convey 
would  not  be  accountable  for  the  con- 
sequences of  any  delay  or  detention. 
Since  August  the  notice  has  been  ma- 
terially changed.  The  passage  about 
paying  every  attention  to  insure 
punctuality  is  omitted,  and  the  com- 
pany expressly  promise  nothing  ;  but 
the  omission  is  immaterial,  because 
what  they  do  not  promise  the  law  im- 
plies against  them.  The  next  change 
is  the  addition  to  the  stipulation  that 
they  will  not  be  responsible  for  delay, 
in  the  words,  '  unless  upon  proof  that 
it  arose  from  the  willful  misconduct 
of  their  servants.'  Upon  the  faith  of 
their  present  notice,  the  defendants 
contend  in  effect  that  they  are  unfet- 
tered as  to  times  of  starting  and 
arrival,  notwithstanding  their  time 
tables,  in  the  absence  of  proof  of  will- 
ful misconduct  on  the  part  of  their 
servants.  To  such  a  proposition  it  is 
somewhat  difficult  to  listen  with  pa- 
tience.' " 

See,  also,  Burke  v.  Great  Western 
Railway  Co.,  London  Law  Jour,  for  Oc- 
tober 24,  1874,  in  which  the  court  con- 
sidered the  questions  involved  as  to 
the  actual  contract  of  the  company  and 
their  liability  under  it.  The  court 
said  :  "  I  will  consider,  firstly,  the  con- 
tention of  the  defendants  that  the  con- 
tract between  them  and  the  iiliiiutiff 
was  merely  to  convey  him  to  Henley 
in  a  reasonable  time,  and  the  contract 
was  not  broken  by  a  delay  at  Twyford, 
inasmuch  as  there  was  another  train 
to  Henley  at  the  expiration  of  an  hour 
which  would  have  conveyed  him  there 
in  a  reasonable  time.  Now,  1  at  once 
concede  that  the  contract  between  the 
defendants  and  the  plaintitl'  was  to 
convey  the  latter  to  Henley  in  a  reason- 
able time.  Such  was  the  liability  of 
carriers  of  passengers  at  common  law, 
and  railway  companies  have  only  the 
same  liabilities.  This  is  expre.-^^ly  de- 
clared by  section  89  of  the  Railway 
Clauses  Act,  1845  (which,  I  presume,  is 
incorporated  in  the  Great  Western 
Railway  Act ;  at  all  events,  so  far  aa 
the  Henley  Branch  l\ailway) ;  but,  in- 


778  Private  Oobporations, 

of  any  person.  Deriving  its  authority  to  exercise  its  ftmctions 
from  the  legislature,  and  its  rights  being  in  derogation  of  pri- 
vate rights,  it  is  bound  so  to  prosecute  its  business  that  in- 
jury shall  not  result  to  others  by  reason  of  its  own  fault  or 
negligence.  The  same  rigid  degree  of  care  required  to  be  ex- 
ercised toward  its  passengers  is  not  called  for,  but  it  must  con- 
duct its  business  as  a  man  of  ordinary  prudence  would  conduct 
a  similar  business,  and  whether  it  has  done  so  or  not  in  a  given 
case  is  essentially  one  of  fact  for  the  jury,'  and  the  question  is  to 
be  determined  in  view  of  the  agencies  employed,  and  the  conse- 
quences of  their  negligent  use  or  management.'  In  the  construc- 
tion of  its  road  it  is  liable  for  all  injurious  consequences  that 
ensue  from  a  negligent  or  improper  execution  of  the  work. 
Authority  given  for  the  construction  of  its  road  does  not  carry 
with  it  authority  to  construct  it  in  any  manner  it  pleases,  but 
simply  to  construct  it  in  such  a  manner  as  to  do  the  least  injury 
to  others. 

Mr.  AYood,  in  his  treatise  upon  the  Laws  of  Nuisances  (p. 
783),  has  very  carefully  treated  this  question,  and  lays  down 
what  we  conceive  to  be  the  true  doctrine  warranted  by  the  cases. 
He  says : — 

"  The  question  as  to  how  far  legislative  authority  to  do  an  act, 
which  otherwise  would  be  a  nuisance,  operates  to  shield  those  to 

dependeutly  of  that  clause,  I  do  not  their  contracts,  I  think  that  they  are 
think  that  railway  companies  would  clearly  liable  in  the  same  manner  aa 
be  further  liable  than  any  other  car-  coach  proprietors  under  similar  cou- 
riers of  passengers  at  common  law.  tracts.  Having  the  absolute  control  of 
What,  then,  is  the  liability  of  carriers  their  lines,  and  their  lines  being  less  lia- 
of  passengers  at  common  law  ?  Sim-  ble  to  be  affected  by  the  weather  than 
ply  to  use  all  reasonable  means  to  the  roads,  they  have  in  these  respects 
convey  passengers  to  their  destina-  much  less  difficulty  in  performing  their 
tions  in  the  reasonable  times  which  the  express  contracts  than  coach  proprie- 
passengers  to  a  particular  place  desire,  tois.  On  the  other  hand,  they  are  open 
without  specifying  any  time,  and  were  probably  to  more  numerous  and  serious 
only  bound  to  perform  their  contract  accidents  as  to  their  engines  and  carri- 
within  a  reasonable  time,  which,  as  I  ages  than  the  coach  proprietors  were  as 
have  already  said,  was  for  a  jury  to  de-  to  their  coaches  and  horses.  But,  hoxo- 
termine,  regard  being  had  to  all  the  ever  this  may  be,  the  effect  of  weather 
circumstances  of  the  case.  Railway  on  the  lines  and  accidents  of  many 
companies,  on  the  other  hand,  have  in-  kinds  will  doubtless  constitute  valid  de- 
variably  fixed  their  own  times  of  ar-  fenses  to  actions  brought  against  them, 
rival,  and  thereby  fixed  what  are  as  they  did  against  actions  brought 
reasonable  times,  and  if  they  fail,  against  coach  proprietors  under  sim- 
from  want  of  due  diligence,  to  perform  ilar  circumstances.''' 

»  Davis  V.  R.  R.  Co.,  ante.  2  phila..  etc.,  R.  R.  Co.  «.  Derby,  ante. 


Negligence  and  "Wrongful  Acts  of  Agents,  etc.      779 


whom  the  aiitliority  is  given,  from  liability  for  damages  sustained 
by  others  therefrom,  is  one  of  great  importance,  and  one  which 
has  often  engaged  the  attention  of  courts,  and  which  is  now  far 
from  being  definitely  settled. 

"It  may,  however,  be  stated  that  a  person  or  corporation  author- 
ized by  law  to  do  a  particular  thing,  as  to  build  a  railroad,'  a 
turnpike,"  a  bridge  across  a  navigable  stream,'  or  to  carj-y  on  a 
particular  class  of  business,  as  for  the  manufacture  of  gas  to  sup- 
ply the  people  of  a  town  or  city  therewith,*  so  long  as  they  keep 
within  the  scope  of  the  power  granted,  are  completely  protected 
from  indictment  and  punishment  for  a  public  nuisance,  and  from 
proceedings  either  at  law  or  in  equity  in  behalf  of  the  public 
therefor,*  But  this  is  subject  to  this  qualification,  that  the 
nuisance  arises  as  a  natur^al  and  probable  result  of  the  act 
authorized,  so  that  it  may  fairly  be  said  to  be  covered  in  Ugal 
contemplation  by  the  legislature  conferring  the  power."     If  the 


1  Rex  v.  Pease,  4  B.  &  A.  30;  Rex  v. 
Morris,  1  id.  441. 

'  State  v.  Williamstown  Turnpike 
Co.,  4  Zabr.  (N.  J.)  247  ;  State  v.  Clarks- 
ville  R.  &  T.  Co.,  2  Sneed.  (Tenn.)  8^; 
Com.  V.  Hancock  Free  Bridge,  2  Gray 
(Mass.),  58 ;  State  v.  Scott,  2  Swan. 
(Tenn.)  332;  Beckett  v.  Upton,  33 
Eng.  L.  &  Eq.  108. 

^  Jolly  V.  Terre  Haute  Drawbridge 
Co.,  6  McLean  (U.  S.),  237;  Attorney- 
General  v.  Hudson  River  R.  Co.,  1 
Stark.  (N.  J.)  526;  State  v.  Parrott,  71 
N.  C.  311. 

■»  People  V.  Gas-light  Co.,  64  Barb. 
(N.  Y.)  55;  Broadbent  v.  Imperial  Gas 
Co.,  7  H.  L.  605  ;  Carbart  v.  Auburn 
Gas-light  Co.,  22   Barb.  (N.  Y.)  294. 

5  People  V.  Law,  34  Barb.  (N.  Y.) 
294;  People  v.  N.  Y.  Gas-light  Co., 64 
id.  55  ;  Carhart  v.  Auburn  Gas-light 
Co.,  22  id.  297;  People  v.  Piatt,  17 
Johns.  (N.  Y.)  195;  Davis  v.  Mayor, 
14  N.  Y.  506 ;  Com.  v.  Reed,  34  Pa. 
St.  275  ;  Harris  v.  Thompson,  9  Barb. 
(N.  Y.)  350  ;  Rex  v.  Pease,  4  Brad.  30. 

*  In  Attorney-General  v.  Bradford 
Navigation  Co.,  6  B.  &  S.  631,  the  de- 
fendants were  authorized  to  construct 
and  maintain  a  canal,  which  tbey  pro 
ceeded  to  do  in  1774.  In  1802  they 
erected  a  dam  across  a  stream  calle<l 
Bradford  Beck,  and  made  a  reservoir 
of  stone  at  the  head  of  the  canal,  into 
«hich  the  water  was,  and  held  in  re- 


serve to  supply  the  canal  when  the 
water  therein  was  low.  The  water 
thus  turned  into  the  canal  was  im- 
pregnated with  sewage,  and  by  stand- 
ing in  the  canal  emitted  noxious  and 
unwholesome  odors  to  the  nuisance  of 
tho.se  living  in  the  vicinity  of  the  canal. 
This  action  was  brought  to  restrain 
the  company  from  turning  into  this 
canal  any  further  sewage  or  other 
matter  calculated  to  create  a  nuisance. 
The  defendants  admitttd  that  the  nui- 
sance existed,  but  iut<isted  that  as  they 
had  the  right  to  use  the  water  of 
Bradford  Beck  for  the  purposes  of 
their  canal,  and  that,  as  they  did  not 
pollute  the  water  of  the  stream  or 
impregnate  it  with  sewage,  they  could 
not  be  made  answerable  for  the  nui- 
sance resulting  from  its  use.  It  ap- 
peared that  when  the  canal  was  built, 
and  down  to  within  three  or  four 
years  before  the  commencement  of 
the  action,  the  water  of  Bradford  Beck 
had  been  pure,  and  that  the  impurity 
arose  from  leading  into  the  13tck  the 
sewage  from  the  town  of  Bradford, 
which,  within  a  few  years,  had  largely 
increased  in  population,  so  that,  al- 
though the  water  was  impure,  no  de- 
posit of  an  offensive  kind  took  place. 
The  water  in  the  canal  was  stagnant, 
and  there  was  no  current  or  flow  of 
water,  and  the  sewage  was  deposited 
in  the  canal,  so  that  when  bouts  passed 


T80 


Pkivate  Cokpokations. 


nuisance  is  not  the  necessary  result  of  the  act  or  worh  authorized^ 
or  if  it  might  he  exercised  in  such  a  way  as  to  obviate  the  nui- 
sance^ legislative  authority  will  not  he  inferred  from  the  grant  to 
create  the  nuisance^  and  will  not  operate  as  a  ^protection  or  excuse 
therefor  either  against  an  indictment  or  a  suit  in  hehalf  of  the 
■puMic  at  law  or  in  equity  to  abate  the  miisance. '  Hence  it  is 
only  when  the  nuisance  is  a  necessary  and  probable  result  of  the 
act  done  in  pursuance  of  legislative  authority  that  the  grant 
operates  as  a  protection  against  indictment  or  suit  therefor.  Other- 
wise it  cannot  be  said  to  have  been  contemplated  by  the  grant, 
and,  therefore,  is  not  authorized  by  it."  ^ 

The  rule  seems  to  be,  as  stated  by  Mr.  "Wood  in  the  same 
work  (p.  784),  that  "  if  negligence  can  in  any  measure  he  pre- 
dicated of  their  acts,  they  are  liable  for  all  the  consequences  re- 
sulting therefrom.''^  And  he  proceeds  to  illustrate  this  proposition 
thus  :  "  Where  a  railroad  company  are  authorized  to  make  excava- 


through  it  it  emitted  very  offensive 
smells  aud  gases.  The  court  held  that 
although  the  company  was  authorized 
by  parliament  to  construct  the  canal, 
and  feed  it  with  the  water  from  Brad- 
ford Beck,  yet,  as  at  that  time  the 
water  was  clear  and  pure,  it  could  not 
be  held  as  having  been  contemplated 

'  Attorney-General  -y.  Metropolitan 
Board  of  Work,  1  H.  &  M.  320  ;  Clark 
«.  R.  Co.,  36  Mo.  203.  in  which  it  was 
held  that  an  action  would  not  lie  for 
damages  arising  from  the  overflow 
of  laud,  occasioned  by  the  proper  con- 
struction of  their  roadbed.  But  this 
applies  to  only  inj  uries  sustained  by  one 
whose  land  is  taken  and  whose  dam- 
ages have  been  assessed.  Attorney- 
General  V.  Birmingham,  4  K.  &  J.  528  ; 
Imperial  Gas  Co.  v.  Broadbent,  7  H.  L. 
Cas.  605 ;  Stainton  v.  Woolrych,  23 
Beav.  225  ;  Hutton  v.  R.  Co.,  7  Ha. 
259  ;  R.  Co.  v.  Archer,  6  Paige  (N.  Y.), 
83  ;  Sandford  v.  R.  Co.,  24  Pa.  St.  378, 
while  companies  acting  under  legisla- 
tive power  are  the  best  judges  of  the 
manner  in  which  their  works  are  to 
be  constructed,  yet,  if  they  are  pro- 
ceeding to  execute  them  in  such  a 
manner  as  to  do  unnecessary  damage, 
or  inflict  unnecessary  injury,  they  are 
liable  therefor.  London,  etc.,  R.  Co. 
v.  Canal  Co.,  1  Ra.  Cas.  225  ;  Coates  v. 
Clarence   R.  Co.,  1  R.  &  M.  181  ;  Rex 


by  parliament  that  the  water  would 
become  so  impure  as  to  make  its  use 
in  the  canal  a  public  nuisance,  and  the 
use  of  the  water  was  enjoined,  as  well 
as  a  use  of  the  canal  in  any  way  so  aa 
to  create  a  public  nuisance  by  reason 
of  noxious  smells  emitted  from  the 
water  used  therein. 

V.  East  and  West  India  Docks  R.  Co.,  3 
Ra.  Cas.  380. 

'  See,  also,  Attorney-General  v.  Brad- 
ford Navigation  Co.,  6  B.  &  S.  631; 
People  V.  Gas-light  Co.,  64  Barb.  (N. 
Y.)  55. 

In  Clark  v.  Mayor  of  Syracuse,  13 
Barb.  (N.Y.)  32,  the  legislature  declared 
a  stream  navigable,  and  afterward  au- 
thorized the  plaintiff  to  erect  a  dam 
upon  it.  It  was  held  by  the  court  that 
this  authority  only  protected  the  plain- 
tiff from  the  consequences  of  the  nui- 
sance to  navigation,  and  was  no  pro- 
tection for  nuisances  occasioned  by  the 
dam  in  other  respects. 

In  Richardson  -y.  Vermont  Central 
R.  Co.,  25  Vt.  465,  it  was  held  that 
where  the  defendant  in  the  erection  of 
its  railroad  made  an  excavation  upon 
its  own  land  so  near  to  the  plaintiff's 
land  adjoining,  that  his  land  slid  into 
the  excavation,  the  defendants  were 
liable  for  the  injury,  the  court  holding 
that  their  charter  gave  them  no  author 
ity  to  remove  the  plaintiff's  soil. 


Negligence  and  Wkongful  Acts  of  Agents,  etc.       781 

done  for  their  road-bed,  it  is  liuld  that  they  nre  hound  to  make 
them  with  reasonable  regard  to  the  rights  of  adjoiinvig  owners  / 
and  if  they  attempt  to  perform  the  work  without  taking  reason- 
able precautions  in  that  regard,  a  court  of  e<j[uity  will  restrain 
them  from  proceeding  until  such  reasonable  precautions  are  taken.' 
When  the  company  can  exercise  its  rights  in  a  way  that  will  not 
he  productive  of  injury  to  private  rights,  it  is  hound  so  to  ex- 
ercise it,  and  a  court  of  equity  will  always  interfere  to  prevent 
their  exercise  in  a  vexatious  or  careless  way."  " 

If  there  are  two  modes  in  ivhich  the  work  can  he  done,  one  of 
which  would  create  a  nuisance  and  the  other  not,  they  are  hound 
to  choose  the  mode  that  would  obviate  the  nuisance^ 


'  Rickett   -».    Metropolitan   Railway, 
L.  R.,  2  H.  L.  175. 

^  R.  Co.  ij.  Canal  Co.,  1  Railway  Cas. 
225. 

^  In  the  Freehold  General  Invest- 
ment Co.  v.  The  Metropolitan  R.  Co., 
Weekly  Notes,  186G,p.  66,  the  defend- 
ants in  the  construction  of  their  road 
were  building  tunnels  under  valuable 
houses,  and  among  the  rest,  under  the 
plaintiff's  house.  Upon  a  bill  for  an 
injunction  to  restrain  them  from  pro- 
ceeding until  they  had  provided  proper 
means  for  securing  the  house  from 
further  injury — the  walls  having  al- 
ready begun  to  crack  —  the  Vice  Chan- 
cellor in  disposing  of  the  question 
said :  "  The  legislature  has  given 
power  to  the  defendants  to  make  their 
works  by  means  of  a  tunnel,  close  to 
and  through  the  midst  of  valuable 
houses,  and  must  have  foreseen  that 
Bome  damage  would  be  done.  *  *  * 
But  the  company  are  not  only  bound 
to  make  compensation  for  the  dam- 
age sustained,  but  are  bound  to  prose- 
cute the  work  skillfully,  and,  if  there 
are  two  ways  of  doing  the  work,  to 
choose  the  one  that  will  do  the  least 
injury." 

In  North  Staffordshire  R.  Co. «. Dale, 
8  E.  &  B.  836,  it  was  held  that  a 
railroad  company,  having  carried  a 
highway  over  its  road  by  a  bridge, 
was  bound  at  all  times  not  only  to 
keep  the  bridge  in  repair,  but  also  all 
approaches  thereto. 

In  Hamdeu  v.  N,  H.  R.  Co  ,  27  Conn. 
158,  it  was  held  that  a  railroad  com- 
pany, altering  a  highway  for  the  pur- 


poses of  its  road,  is  bound  to  restore  it 
to  its  former  condition,  and  that  this 
liability  continues  until  it  is  so  re- 
etored,  and,  until  that  is  done,  that  it 
remains  a  continuing  nuisance  render- 
ing it  liable  for  all  damages,  either  to 
the  town  or  individuals. 

In  Eegina  ■».  Train,  2  B.  &  S.  640,  an 
iron  tramway  laid  in  a  highway  so  as 
to  cause  the  wheels  of  vehicles  to  skid 
and  to  frighten  horses,  hitting  their 
feet  on  them,  is  a  nuisance,  and  that 
no  degree  of  public  benefit  will  op- 
erate as  a  defense. 

In  Johnson  v.  Atlantic  R.  Co.,  35  N. 
H.  509,  it  was  held  that  it  is  the  duty 
of  a  railroad  company  to  construct 
culverts  and  ditches  sufficiently  low  to 
carry  off  water  set  back  upon  lands  by 
the  construction  of  its  road,  when  this 
can  be  done  without  difficulty. 

In  S^bin  i\  Vermont  Central  R.  Co., 
25  Vt.  363,  defendant  held  liable  for 
not  removing  stones  thrown  upon 
laud  in  process  of  blasting  for  their 
road-bed. 

In  Pittsburgh,  etc.,  R.  Co.  v.  Gielle- 
land,  56  Pa.  St.  445,  it  was  held  that  a 
culvert,  so  unskillfully  constructed  as 
to  be  insufficient  to  carry  off  the  water 
of  a  stream  in  ordinary  high  water, 
renders  the  company  liable  for  all  in- 
juries resulting  therefrom.  Terre 
Haute,  etc.,  R.  Co.  v.  McKinley, 
33  Ind.  274;  Taylor  v.  Grand  Trunk 
R.  Co.,  48  N.  H.  304;  Attorney-Ueu- 
eral  d.  Metropolitan  Board  of  Works, 
1  H.  &  M.  320;  and  the  quej^tiou 
of  proper  execution  of  the  works 
is  a  question  of  fact.   Ware  v.  Regents 


T82 


Private  Cokpoeations. 


Sec.  506.  Engines  and  machinery.— A  railroad  company,  fronj 
its  grant  to  operate  the  road  by  steam,  does  not  thereby  acquii-e 
authority  to  use  engines  thereon  that  are  defective  in  construction 
so  as  to  scatter  coals  along  the  line  of  its  road,  endangering  the 
property  of  those  through  whose  land  it  passes,*  nor  with  smoke- 
stacks so  defectively  constructed  as  to  permit  the  free  escape  of 
sparks  from  its  engines,  thus  exposing  property  on  the  line  of  its 
road  to  imminent  danger  from  fire ;  ^  but  in  this  respect  it  is 
bound  to  adopt  the  latest  improvements  in  screens  or  spark  pro- 
tectors, and  exercise  the  highest  degree  of  care  to  prevent  disas- 
trous consequences ; '  and  it  is  held  by  a  very  respectable  class  of 
cases  that  the  very  fact,  that  a  fire  results  from  sparks  emitted 
from  the  engine,  hj)rima  facie  evidence  that  the  spark  protector 


Canal  Co.,  .3  De  Gex  &  Jones,  227 ;  Coats 
«.  Clareuce  E.  Co.,  1  R.  &  M.  181. 

In  Matthews  v.  West  London  Water 
Works  Co.,  3  Camp.  402,  the  defend- 
ants were  authorized  to  make  excava- 
tions in  the  street  to  lay  their  water 
pipes.  In  doing  so  they  threw  up 
rubhish  without  properly  guarding  the 
same,  whereby  a  stage  coach,  which 
the  plaintiff  was  driving,  was  over- 
turned and  injured,  and  he,  plaintiff, 
severely  injured.  Lord  Ellenbor- 
OUGH  held  that  the  company  was 
clearly  liable,  even  though  the  work 
was  done  by  a  contractor. 

In  Waterman  v.  Conn.  &  Pass.  River 
R.  Co.,  30  Vt.  610,  damages  were 
allowed  for  injuries  from  surface 
water,  through  the  unskillful  manner 
in  which  the  road  was  constructed. 
But  see  Henry  -u.Vt.  Central  R.  Co.,  30 
id.  638,  where  injury  to  land  resulting 
from  change  in  the  course  of  a  river 
by  a  railroad  company  in  necessary 
erection  of  their  road,  was  held  not 
recoverable,  though  such  erections 
were  unskillfully  made.     Robinson  ». 

'  King  v.  Morris  and  Essex  R.  Co., 
18  N.  J .  Eq.  397  ;  Cleavelands  v.  Grand 
Trunk  R.  Co.,  42  Vt.  449. 

•^  Bedell  v.  L.  L  R.  Co., 44  N.  Y.367; 
Gandy  v.  Chicago,  etc.,  R.  Co.,  30  Iowa, 
420  ;  Kellogg  v.  Chicago,  etc.,  R.  Co.,  26 
Wis.  223  ;  Case  v.  Northern  Cent.  R. 
Co.,  59  Barb.  (N.  Y.)  644;  Rood 
f}.  N.  Y.  Cent.  R.  Co.,  18  id.  80; 
Jackson  v.  Chicago,  etc.,  R.  Co.,  31 
Iowa,  176 ;  Kansas,  etc..  R.  Co.  ■».  Butts, 


N.  Y.  &  Erie  R.  Co.,  27  Barb.  (N.  Y.) 
512. 

It  must  lay  its  track  skillfully  in  a 
public  street,  and  is  liable  for  injuries 
resulting  from  unskillfulness  in  that 
respect.  Worster  v.  Fortv-second 
Street  R.  Co.,  50  N .  Y.  203. 

It  must  not  let  down  the  lands  of  an 
adjoining  owner,  whether  by  skillful 
or  unskillful  prosecution  of  its  work. 
Richardson  v.  Vt.  Central  R.  Co.,  25 
Vt. 

Authority  to  erect  a  bridge  over  a 
navigable  stream,  if  the  navigation  is 
not  impeded,  does  not  authorize  it 
even  temporarily  to  obstruct  it  while 
erecting  the  bridge.  Memphis  «&  Ohio 
R.  Co.  «.  Hicks,  5  Sneed  (Tenn.),  427. 

In  Lawrence  v.  Great  Northern  R. 
Co.,  4  Eng.  Law  &  Eq.  265,  held  liable 
for  not  providing  proper  flood-gates 
for  escape  of  water,  which  by  erection 
of  its  road-bed  were  prevented  from 
spreading  as  former!}',  even  though 
the  act  did  not  provide  for  their  being 
made. 


7  Kans.  308 ;  Spaulding  v.  Chicago, 
etc.,  B.  Co.,  30  Wis.  110;  111.,  etc.,  R. 
Co.  V.  McClelland,  42  111.  355;  Huyett 
v.  Phila.,  etc.,  R.  Co.,  23  Pa.  St.  373  ; 
Fero  V.  Buffalo,  etc.,  R.  Co.,  22  N,  Y. 
209. 

^  It  must  employ  the  best  precau- 
tions in  use.  Fraukford,  etc..  Turn- 
pike Co.  V.  Phila,,  etc.,  R.  Co.,  54  Pa. 
St.  345. 


Negligence  ai^d  Wrongful  Acts  of  Agents,  etc.      783 

is  defective  and  throws  the  burden  upon  the  company  of  proving 
the  contrary.' 

But  there  is  considerable  conflict  upon  this  question,  and  in 
several  of  the  states  it  is  held  that  negligence  will  not  be  inferred 
from  the  mere  fact  that  a  fire  is  set  f j-oni  sparks.'  And  even 
in  those  states  where  such  a  presumption  is  raised,  it  is  held 
that  the  presumption  may  be  overcome  by  slight  evidence  of 
diligence  in  this  respect.' 

Sec.  507.  Application  of  the  maxim,  sic  utere  tuo  ut  alienum,  non 
leedas.  —  The  time-honored  maxim,  sic  utcre  tuo  lit  alieniun,  noti 
Icedas,  has  the  same  application  to  railway  companies  and  other 
corporations  that  it  has  to  individuals,  qualified  in  some  respects  by 
the  grant  of  authority  to  It  and  extended  in  others  because  of  the 
dangerous  agencies  employed  and  the  consequent  disaster  from 
their  negligent  management.  The  application  of  this  maxim  can- 
not, perhaps,  be  better  illustrated  than  in  the  case  of  fires  resulting 
from  the  accumulation  of  dry  grass  and  other  combustibles  in  the 
vicinity  of  railroads.  Because  the  company  employs  fire  as  one  of 
the  agencies  of  its  business,  and  because  by  its  employment  the 
property  of  all  persons  upon  its  line  is  placed  in  peril  of  being 
destroyed  by  fire,  it  is  held  bound,  at  its  peril,  to  exercise  great 
care  to  prevent  such  consequences.  Thus,  it  has  been  held  that, 
if  in  dry  times  it  permits  the  accumulation  of  grass  and  weeds 
upon  its  roadway,  and  by  reason  of  their  ignition  fire  spreads  to 
adjoining  premises,  it  ia  liable  for  the  injuries  that  ensue  there- 
from,* even  though  the  plaintiif  has  permitted  such  vegetation  to 
accumulate  or  grow  upon  his  own  land,  and  that  such  vegetation 
is  a  secondary  cause  of  the  damage  done  thereby.  The  owners  of 
land  adjoining  railways  have  a  right  to  presume  that  the  railway 
company  will  discharge  its  duty,  and  it  is  not  negligence ^^rse  on 
their  part  to  assume  that  he  is  not  exposed  to  dangers  that  can  only 

*  Bedell  v.  L  .1.  R.  Co.,  ante;  St.  Louis,         '  Spaulding  v.  Chicago,  etc. ,  R.  Co., 
etc.,    R.   Co.   V.  Montgomery,    39   111.     ante. 

335  ;  Case  v.  R.  Co.,  ante;  Spaulding^.        ■•  Webb   v.  Rome,    Watertown,  etc., 

Chicago,  etc.,    R.    Co.,   30   Wis.   110;  R.  Co.,  49  N.  Y.  420  ;  Kellogg  t'Chica- 

Clemens^.   Hannibal,  etc.,  R.  Co.,  53  go,  etc.,   R.  Co., ff//<f;  Bass  r.  Chicago 

Mo.  366  ;  Cleavelands  v.  Gd.  Trunk  R.  etc.,   R.    Co.,  28  111.  9  ;   Flynn   v.  Pan 

Co.,  42  Vt.  449.  Francisco,  etc.,  R.  Co.,  40  Cal.  14  •   M. 

*  Indianapolis,   etc..  R.  Co.  c.    Para-  Central  R.Co.  c.  Nunn,  51  111.  78  ;  Fiich 
more,    31  Ind.  143  ;  Gandy  v.  Chicago,  v.  Pacific  R.  Co.,  45  Mo.  322. 

etc.,  R.  Co.,  30  Iowa,  420. 


784  Private  Coepoeations. 

occur  as  a  result  of  a  neglect  of  duty  on  the  part  of  the  company.' 
It  is  not,  perhaps,  proper  to  say  that  the  com]3any  is  guilty  of 
negligence  per  se,  to  permit  the  accumulation  of  such  vegetation 
and  combustible  materials  along  its  road,  as  some  of  the  cases 
would  seem  to  hold,  but  it  is  evidence  to  go  to  the  jury  to  estab- 
lish negligence,  and  will  sustain  a  verdict,  if,  from  all  the  facts 
and  circumstances,  they  shall  find  it  negligence  in  fact. " 

So,  too,  in  the  use  of  fuel  for  its  engines,  the  company  is  bound 
to  exercise  due  care,  and  employ  that  which  is  the  least  likely  to 
produce  ill  results  ; '  and  the  question  as  to  whether  the  employ- 
ment of  certain  kinds  of  fuel  is  negligent,  or  whether  it  was 
negligently  used,  is  for  the  jury  in  view  of  the  circum- 
stances. ■* 

Sec,  508.  Contributory  negligence.  —  The  question,  as  to  whether 
the  plaintiff  has  been  guilty  of  such  contributory  negligence  as 
disentitles  him  to  a  recovery,  is  a  question  of  fact  for  the  jury  in 
view  of  all  the  circumstances,  as  in  leaving  stubble  and  dry  grass 
standing  in  his  fields  along  the  track  of  the  railway,*  and  the 
question  is  to  be  determined  in  view  of  the  circumstances,  the  uses 
to  which  the  field  is  devoted,  and  as  to  what  is  usual  and  ordinary 
under  such  circumstances.'  It  is  held  in  some  of  the  cases,  that 
the  owner  of  adjoining  lands,  in  dry  times,  is  bound  to  plough 
around  them  to  guard  against  the  destruction  of  his  property  by 
fires  originating  from  the  company's  negligence,'  and  that  the 
jury  are  to  say  which  was  the  most  negligent,  the  plaintiff"  or  de- 
fendant,* but  this  doctrine  is  not  believed  to  be  predicated  upon 
principle  or  to  be  consistent  with  sound  public  policy.  The  idea 
that  a  person  devoting  his  property  to  its  ordinary  and  usual  pur- 
poses, is  bound  to  devote  it  to  some  other  use,  or  to  devote  it  to 

'  Kellogg  v.  Chicago,  etc.,  R.  Co.,  26  *  Lackawanna,  etc.,  R.  Co.   v.  Doak, 

Wis.  223;  Webb  v.  Rome,  etc.,  R.  Co.,  52  Pa.  St.  379. 

ante ;    Flynn  v.  San  Francisco,  etc.,  R.  *  Flynn    -o.  San   Francisco,    etc.,    R 

Co.,  ante;  Fitch  «.  Pacific,  etc.,  R.  Co.,  Co.,  40   Cal.   14;  111.  Cent.  R.   Co.  ■». 

ante.  Nunn,  51  111.  78. 

^  Webb  •».   Rome,  etc.,  R.  Co.,  ante;  *  Kellogg s.  Chicago,  etc.,  R.  Co.,  26. 

111.   Central   R.   Co.    «.    Nunn,   ante;  Wis.  223. 

Fitch   «.  Pacific,  etc.,  R.    Co.,  ante;  '  Keese  v.  Chicago,  etc.,  R.  Co.,  30 

Spaulding  «.   Chicago,    etc.,   R.   Co.,  Iowa,  78;   111.,   etc.,  R.  Co.  u.   Nunn, 

ante.  51  111.  78. 

*  Chicago,  etc.,  R.  Co.  v.  Quaintance,  ^  111.,  etc. ,  R.  Co.  ■».  Nunn,  ante.  See 

58  111.  390.                                     '  also.  Field  on  Dam.,  eh. 


Negligence  and  "Wrongful  Acts  of  Agents,  etc.     785 

no  use  at  all,  because  possibly  by  devoting  it  to  its  usual  lawful 
purposes,  through  the  negligence  of  some  other  person  owning 
adjoining  lands  it  may  be  injured,  is  imposing  burdens  upon  inno- 
cent parties,  that  the  law  is  not  accustomed  to  impose,  and,  not- 
withstanding the  fact  that  some  courts  have  seen  fit  to  hold  a 
different  rule,  there  can  be  no  question  that  that  is  the  soundest 
and  most  consistent  doctrine,  that  permits  adjoining  owners  to 
presume  that  railroad  companies  will  exercise  due  care  in  the 
management  of  their  business,  and  that  negligence  cannot  be  pre- 
dicated against  him  because  he  relies  upon  such  presumption.' 

Sec.  509 .  Consequential  damages.  —  For  merely  consequential 
damages,  from  constructing  or  maintaining  their  works,  where 
corporations  are  vested  with  the  right  of  eminent  domain, 
and  the  injury  is  the  natural  and  probable  result  thereof, 
no  liability  exists,''  except  so  far  as  the  charter  or  the  statute 
gives  a  remedy.'  But  if  they  are  not  invested  with  the 
right  of  eminent  domain  they  are  liable  for  injuries  result- 
ing to  others  either  from  the  erection  of  their  works  or  the 
prosecution  of  their  business.*  So,  it  has  been  held,  that  where 
a  corporation  is  authorized  to  erect  factories  and  mills,  the  act 
does  not  shield  it  from  liability  for  injuries  resulting  from  the 
improper  blasting  of  rocks  in  excavating  to  lay  the  foundation 
of  their  buildings ;  ^  nor  where  it  is  authorized  to  erect  and 
maintain  dams,  from  the  injuries  resulting  to  upper  owners  from 
the  flooding  of  their  lands.'  So,  a  religious  corporation,  having 
authority  to  erect  and  maintain  a  church,  does  not  thereby  acquire 
the  right  to  maintain  unsafe  buildings  alongside  a  public  street ; ' 
and  so,  generally,  in  all  cases,  a  corporation  is  liable  for  any  act 
done  by  it,  or  by  its  agents,  within  the  scope  of  their  authoritv, 
precisely  the  same  as  an  individual  is,  except  so  far  as  the  act 
is  fairly  covered  by  the  grant  of  authority  to  it  by  the 
legislature. 

'Kellogg  V.   Chicago,  etc.,  .R.   Co.,  *Pottstown  Gas  Co.  «.  Murphy    39 

ante.    See,  also,  Field  on  Dam.,  §  604.  Pa.  St.  257. 

«  N.  Y.   &  Erie  R.  Co.  v.  Young,  33  »  jjay  v.  Cohoes  Co.,  2  N.  Y.  ICO. 

Pa.  St.  175.  6  Hooksett  v.  Amoskeag  Man.  Co.,  44 

*  Monongahela  Bridge  Co.  v.  Kirk,  N.  H.  105. 

46  Pa.  St.  112.  '  Church  of  the  Ascension  v.  Buck 


hart,  3  Hill  (N.  Y.),.  193. 


99 


786  Private  Corporations. 

Sec,  510.  Iiyury  to  persons  and  property  by  running  of  trains. — 
A  railroad  company,  irrespective  of  any  statute,  is  bound  to 
exercise  due  care  in  the  running  of  its  trains,  and,  while  it  may- 
run  its  trains  at  any  rate  of  speed  it  deems  necessary,  either  at 
road-crossings  or  elsewhere,  and  at  common  law  is  not  absolutely- 
bound  to  ring  the  bell  or  blow  the  whistle  of  its  engine,  yet,  if, 
in  consequence  of  a  neglect  on  its  part  to  take  proper  precautions 
to  signal  its  approach  to  a  highway  crossing,  a  person,  in  the 
exercise  of  due  care,  himself,  is  injured,  it  is  liable  in  damages 
therefor.  It  is  bound  to  do  no  specific  act,  hut  7nust,  at  its  peril, 
do  every  thing  that  ordinary  prudence  requires  should  be  done  by 
it,  to  prevent  injury  to  parties  not  in  fault.  Therefore,  while, 
as  previously  stated,  by  the  common  law  there  is  no  absolute  duty 
imposed  upon  it  to  signal  its  approach  to  a  road  crossing,  yet, 
if  ordinary  prudence  required  that  it  should  do  so,  and  because 
of  a  failure  to  do  that  or  som.e  other  equally  effective  act  to  indicate 
the  approach  of  its  trains,  a  person  in  the  exercise  of  due  care 
is  injured,  the  jury  may,  from  its  failure  in  these  respects,  find 
it  guilty  of  negligence  and  it  becomes  liable  for  the  conse- 
quences.' 

Even  where  the  statute  requires  that  it  shall  ring  the  bell  or 
blow  the  whistle  of  the  engine  within  a  certain  distance  of  a  road 
crossing,  a  neglect  to  comply  with  such  regulation  is  not  of  itself 
suflicient  to  establish  its  liability  for  an  injury  inflicted  at  the  cross- 
ing,* nor,  on  the  other  hand,  does  a  compliance  with  such  statutory 
requirement  necessarily  constitute  the  full  measure  of  its  duty  in 
a  given  case,  and  absolve  it  from  liabihty.  It  is  bound  to  exercise 
due  care,  and  if,  under  the  circumstances,  ordinary  prudence  re- 
quired that  it  should  take  other  precautions,  it  is  bound  to  do 
so.^  It  must  exercise  due  care,  and  as  to  what  is  due  care,  is  a 
question  for  the  jury,  in  view  of  the  circumstances,  taking  into 

'  Penn.   R.  Co.  «.  Barnett,  59  Pa.  St.  Allyn   v.    Boston  and   Albany   R.  Co. 

259.  105   Mass.  77;    Chicago,  etc.,   Co.   v. 

2  Butterfield   «.  Western   R.  Co.,  10  McKean,  40  111.  218  ;  Hanover  R.  Co.  «. 

Allen  (Mass.),  532  ;  Spencer  i).  111.  Cent.  v.  Coyle,  55  Pa.  St.  396. 
R.  Co.,  29  Iowa,  55 ;  Toledo,  etc.,  R.  Co.        »  Richardson  «.  N.Y.Cent.  R.Co.,  45  N. 

v.  Goddard,  25  Ind.  185  ;  North.  Penn.  Y.  846  ;  O'Mara  «.  Hudson  R.  Co.,  38 

R.  Co.  w.  Heilman,49  Pa.  St.  60;  Galena,  id.  445  ;   Dufly  v.  Chicago,  etc.,  R.  Co, 

etc.,  R.  Co.  V.  Dill, 22  111.  264  ;  Warner  32  Wis.  269. 
r.  N.  Y.  Cent.   R.  Co.,  44  N.  Y.   465  : 


Negligence  and  Wkongful  Acts  of  Agents,  etc.     787 

consideration  the  location  of  the  crossing  and  its  surroundings, 
the  situation  of  the  track  in  reference  to  the  highway,  and  all  the 
attendant  circumstances.*  Greater  caution  is  required  in  tlie 
streets  and  at  crossings  of  cities  and  villages  than  in  rural  dis- 
tricts,* and  at  crossings  where  the  track  is  obstructed  or  hidden 
from  view  of  a  person  approaching  it  from  the  highway,  than 
where  an  approaching  train  can  be  seen.' 

Because  the  legislature  has  conferred  authority  upon  the  com- 
pany to  build  and  operate  its  road  across  highways,  it  does  not 
thereby  acquire  the  exclusive  right  to  a  free  passage  which  makes 
it  incumbent  upon  travelers  upon  the  liighway  to  keep  off  the 
track  at  their  peril,  but  its  franchise  is  restricted  by  public  neces- 
sity and  convenience  and  must  be  exercised  with  due  regard 
thereto,*  and  the  rights  of  the  company  and  of  travelers  are  cor- 
relative, and  neither  has  a  right  superior  to  the  other,*  and  both 
must  exercise  due  care  in  the  exercise  of  their  respective 
rights.  In  order  to  entitle  a  person  to  recover  he  must  show 
due  care  on  his  own  part,  and  a  want  of  due  care  on  the  part 
of  the  company.'  The  mere  fact  that  the  company  was 
negligent,  that  it  omitted  to  give  the  signals  required  by 
statute,  or  to  take  other  proper  precautions,  will  not  entitle 
the  plaintiff  to  a  recovery,  if  he  was  also  guilty  of  negli- 
gence contributing  to  the  injury.  The  duty  of  being  careful 
rests  upon  hoth,  the  company  and  the  traveler.  The  rule  seems  to 
be  well  established  that  a  traveler  approaching  a  crossing  is  bound 
to  exercise  ordinary  care,  such  care  as  is  fairly  commensurate 
with  the  nature  of  the  risk.  If  he  can  see  for  a  long  distance  up 
and  down  the  track  he  is  hound  to  look  to  see  whether  a  train 
is  approaching^  and  if  the  track  can  only  be  seen  for  a  short 
distance,  he  is  hound  to  look  and  listen,  for  an  approaching 
train,    and   where,   hy   the   exercise   of    the  senses  of   hearing 

'  West -B.  New  Jersey,  etc.,  R.  Co.,  32  T.  C.   'R.Qo.,ante;    Allyn  «.  Boston, 

N.  J.    91  ;   Milwaukee,  etc.,   R.  Co.   v.  etc.,  R.  Co.,  105  Mass.  77;  Brendell  v. 

Hunter,  11  Wis.  160.  Buflalo,  etc.,  R.  Co.,  27  N.  Y.  5^4. 

«  Warner  v.  N.  Y.  C.  R.  Co.,  4-4  N.  Y.  ^  Pittsburg,   etc..  R.  Co.  v.  Dunn,  58 

465.  Pa.  St.  280;  Toledo,  etc.,  R.  Co.  v.  God- 

3  Mackay  v.  N.  Y.  C.  R. Co.,  35  N.  Y.  dard,  25  Ind.  185. 

75  ;    Duffy   v.  Chicago,  etc.,  R.  Co.,  32  *  Galena,  etc.,  R.  Co.  v.  Dill,  ante. 

Wis.  269  ;  Chicago,  etc. ,  R.  Co.  v.  Trip-  «  Grippen  c.  N.  Y.  C.  R.  Co.,  40  N.  Y 

lett,  38   111.  482  ;    Milwaukee,  etc..  R.  34. 
Co.  ■».  Hunter,  <tnte;  Richardson  v.  N. 


788  Private  Cokpoeations. 

and  seeing,  he  might  have  avoided  the  injury,  no  recovery 
can  be  had.  No  person  has  a  right  to  depend  entirely  upon 
the  care  and  prudence  of  others ;  but  is  bound  himself  to 
exercise  due  care,  which  must  be  measured  by  the  nature  ol  the 
risk  and  the  consequences  of  inattention  to  his  duty.  If  after  hav- 
ing exercised  his  senses,  without  hearing  or  seeing  an  approaching 
train  near  the  crossing,  he  is  injured,  by  reason  of  the  negligence 
of  the  company  to  blow  the  whistle  or  ring  the  bell,  or  to  sig- 
nal its  approach  in  some  equally  efficient  manner,  the  com- 
pany is  responsible  therefor.*  Every  person  is  bound  to  know 
that  a  railroad  crossing  over  a  highway  over  which  trains  are 
often  running  is  a  place  of  more  than  ordinary  danger,  and  is 
bound  to  exercise  a  degree  of  care  commensurate  therewith,*  and 
no  presumption  can  be  drawn  in  favor  of  the  plaintiff,  but  he 
must  show  due  care  on  his  part.^  But  if  negligence  on  the 
defendant's  part  is  established,  the  court  will  not  presume  that 
the  plaintiff  was  negligent,  but  will  leave  it  for  the  jury  to  say 
whether  there  is  any  evidence  of  his  negligence.*  He  is  bound 
to  look  out  for  the  crossing,  and  the  fact  that  he  did  not  see  it,  or 
know  that  he  was  approaching  it,  will  not  excuse  him.^  But  if  he 
was  a  stranger  in  that  section  and  did  not  know  that  there  was  a 
crossing  over  the  road,  and  the  company  neglected  to  signal  its 
approach,  the  rule  would  be  otherwise,*  as  would  also  undoubtedly 

»  Artz  V.  Chi  cago,  etc.,   R.    Co.,  34  ton  v.  Erie  R.  Co.,  45  N.Y.  660  ;  Rothe 

Iowa,  153;   St.   Louis,  etc.,  R.  Co.  v.  v.   Milwaukee   R.  Co.,  21    Wis.   256; 

Manly,  58  111.  300;  Dodge  v.  R.   Co.,  Eaton   v.   Erie   R.  Co.,   51  N.Y.  545; 

34  Iowa,  279 ;  McCall  v.   N.  Y.  C.  R.  Mentz   v.   Second  Av.  R.  Co.,  3   Abb. 

Co..  54  N.  Y.  642  ;  Haight  «.  N   Y.  C.  App.     Cas.    (N.     Y.)    274;     Sweeney 

R.  Co.,  7  Lans.  (N.  Y.)  11 ;  Gonzales  v.  v.  Old  Colony  R.  Co.,  10  Allen  (Mass.), 

N.  Y.  &  Harlem  R.  Co., 38  N.  Y.  440;  368;  Morse   v.   Erie  R.  Co.,  65   Barb. 

Warner  v.  N.  Y.  C.  R.  Co.,  44  N.  Y.  (N.  Y.)491  ;  Detroit  v.V&n  Steinburgh, 

465;   Spencer   v.  111.  Cent.  R.  Co.,  29  17  Mich.  99;  Beisiegel  v.  R.Cc,  40  N. 

Iowa,  55  ;  Wilcox  v.  Rome,  etc.,  R.  Co.,  Y.  9  ;  Baxter  v.  T.  &  B.  R.  Co.,  41  id. 

89   N.  Y.  358;    W  heelock   v.  Boston,  502. 

etc.,  R.  Co.,  105   Mass.  203;   Ernst   «.        «  ^  Ce^t  jj     q^   ^    Baches,  55  III. 

Hudson   R.  Co.,  39  N.  Y.  61 ;  Illinois,  379. 

etc.,  R.  Co.  V.  Baches.  55  111.  379;   To-        »  Warner  v.   N.  Y.  Cent.  R.  Co.,  44 

ledo,  etc.,  fi.  Co.  v.  Goddard,  25  Ind.  N.  Y.  146. 

185  ;  Allyn  v.  Boston  &  Albany  R.  Co.,        *  Lehigh,  etc.,  R.  Co.  v.  Hall,  ante. 
105  Mass.  77;   Lehigh,    etc.,  R.  Co.  i).        ^  Allyn  v.  Boston,  etc.,  R.  Co.,   105 

Hall,  61  Pa.  St.  361 ;  Mackey  v.  N.  Y.  Mass.  77;   Butterfield  v.  Western,  etc., 

C.  R.  Co.,  35  N.  Y.  75  ;  Cleveland,  etc.,  R.  Co.,  10  Allen  (Mass.),  532  ;  Hanover 

R.  Co.  V.  Terry,  8  Ohio  St.  570  ;  Wilds  R.  Co.  v.  Covle,  55  Pa.  St.  396. 
V.  N.  Y.  C.  R.  Co., 29  N.  Y.  315  ;   Cen-        «  Hanover  R.    Co.   v.   Coyle.  ante; 

tral  R.  Co.  v.  Dixon,  42  Ga.  327  ;   Gor-  Butterfield  v.  Western  R.  Co.,  ante 


Negligence  and  Wkongful  Acts  of  Agents,  etc.     789 

be  the  case  if  the  injury  happened  at  night,  or  upon  a  very  foggy 
day,  when,  from  the  darkness  or  fog,  the  traveler  was  unable  to  see 
the  crossing.'  If  he  exercises  his  senses  the  best  he  can,  and  can 
neither  see  nor  hear  an  approaching  train,  lie  has  a  right  to  pre- 
sume that  none  is  approaching,  because  he  has  a  right  to  presume 
that  the  company  would  discharge  its  duty  by  giving  the  necessary 
signals,'  The  traveler  must  use  his  eyes  and  ears  as  a  prudent 
man  would  do ; '  but  if  the  company  has  built  its  track  in  such  a 
way,  or  has  erected  obstructions,  or  left  cars  standing  in  such  a 
manner  as  to  prevent  the  traveler  from  seeing  an  approaching 
train,  he  is  excused  from  looking,  because  the  law  does  not 
require  a  person  to  do  a  useless  act,  and  if  he  listens  and  does  not 
hear  the  train,  he  cannot  be  charged  with  contributory  negli- 
gence/ But  if  the  proper  signals  are  given,  if  he  ventures  upon 
the  track,  although  he  miscalculated  as  to  the  chances  of  crossing, 
the  risk  is  his,  unless  negligence  in  some  other  respect  is  charge- 
able to  the  company,"  as  if  the  train  is  being  run  at  a  greatly 
increased  rate  of  speed."  But  if  a  view  of  the  track  can  be  had, 
the  mere  fact  that  no  signals  of  the  approach  of  the  train  were 
given  will  not  excuse  the  traveler  fi'om  looking  and  listening.'' 
If  the  company  is  required  by  statute  or  municipal  ordinance  to 
keep  a  flagman  at  a  crossing,  or  if  it  has  usually  done  so,  to  warn 
travelers  of  the  approach  of  trains  and  when  it  was  unsafe  to  pass, 
its  neglect  to  do  so,  or  the  giving  of  a  false  signal  by  the  flagman 
will  rendea"  it  liable  for  injuries  resulting,  although  the  train  is 
approaching  in  plain  sight.*  If  a  person,  in  the  exercise  of  due 
care  in  attempting  to  cross  a  railway,  through  no  fault  of  his  gets 
the  wheels  of  his  vehicle  caught  in  the  track  so  that  he  cannot 
extricate  them  in  season  to  avoid  an  injury,  he  is  not  precluded 

1  Hackford  v.  N.  Y.  Cent.  R.  Co.,  13  ^  Van  Scbaick  v.  Hudson  R.  Co., 
Abb.  Pr.  (N.  S.  N.  Y.)  18.  43  N.  Y.  527  ;  Chicago,  etc.,  R.  Co.  v. 

■  Tabor  v.  Missouri  Valley  R.  Co.,  46  Fears,  53  111.  115. 
Mo.    353 ;     Kennayde    v.    Pacific    R.         ^  Madison,  etc.,   R.  Co.  v.  TaflFe,   37 

Co.,  45    id.  255;   Eagan  v.  Fitchburg  Ind.  364;  Ricbardson  v.  N.  Y.  Cent.  R. 

R.  Co.,  101  Mass.  315  ;   James  v.  Great  Co.,  45  N.  Y.  846. 

Western  R.  Co.,  L.  R.,2  C.  P.  634  ;t.,-        ''Gorton     v.    Erie     R.     Co.,    antej 

Kennayde  v.  Pacific  R.  Co.,  45  Mo.  255.  Havens  v.  Erie  R.  Co.,  41  N.  Y.  296. 

2  Nicholson  v.  Erie  R.  Co.,  41  N.  Y.  «  Newson  v.  N.  Y.  C.  R.  Co.,  29  N.Y 
525;  Baxter  v.  T.  &  B.  R.  Co.,  41  id.  383;  Sweeny  «.  Old  Colony  R.  Co.,lC 
502  Allen  (Mass. ),  368  ;  Spencer  v.  111.  C«iit 

•»McQuire    v.    H.    R.    Co.,     2   Daly     R.  Co.,  29  Iowa,  55. 
(N.  Y.  C.  P.),  76. 


790  Private  Cobpoeations. 

from  a  recovery,  if  by  due  care  on  the  company's  part  the  injury 
could  have  been  avoided/  and  where  the  railway  is  carried  across 
the  highway  in  such  a  manner  that  a  person  approaching  can 
neither  see  nor  hear  the  train  distinctly,  until  too  late  to  avoid  the 
injury,  the  company  is  liable.''  The  mere  fact  that  a  person  sees 
or  hears  an  approaching  train  does  not  preclude  him  from  an  at- 
tempt to  cross  if  he  had  ample  time  to  do  so,  except  for  the  fact 
that  the  train  was  being  run  at  an  unusual  rate  of  speed.  The 
simple  question  is  whether,  hnowing  the  usual  length  of  tune  it 
took  the  train  to  reach  the  crossing,  as  a  jprudent  man,  he  was 
justified  in  making  the  attempt.'  A  person  is  not  bound  to  stop 
his  team  to  look  and  listen,^  as  is  held  in  Pennsylvania,^  but  is 
merely  bound  to  do  that  which  is  suggested  by  common  prudence 
in  view  of  the  peril  to  which  he  may  be  exposed.  If  he  hears 
the  signal,  but  does  not  see  the  train  and  does  not  know  the  dis- 
tance at  which  it  is  from  the  crossing,  as  a  prudent  man  there 
would  seem  to  be  no  doubt  that  it  would  be  his  duty  to  wait  until  it 
passed,  and  if  he  is  induced  to  attempt  to  pass  by  reason  of  a  false 
signal  given  by  a  flagman,  he  cannot  be  charged  with  negligence  ;  , 
nor  can  he  be  charged  with  negligence  if  he  knows  the  distance 
at  which  the  law  requires  the  signal  to  be  given  by  the  train 
before  it  reaches  the  crossing,  but  is  injured  by  reason  of  the 
unusual  speed  at  which  the  train  is  being  driven,  if,  except  for 
that,  he  would  have  had  ample  time  to  pass,  or  if  the  signal  was 
not  given  as  early  as  it  should  have  been,"  unless  the  plaintiff 
knew,  or  could  have  known  by  the  exercise  of  due  care,  that  the 
train  was  being  run  at  an  unusual  rate  of  speed.'  The  mere  fact 
that  he  confidently  believed  that  he  had  ample  time  to  cross,*  or 
that  he  might  have  done  so  except  that  his  horse  became  fright- 
ened does  not  excuse  him.     The  question  is  whether  he  was  in 

'  Milwaukee   R.    Co.    «.    Hunter,  11  the   plaintiff  is   not   bound    to   prove 

Wis.   160 ;    Pittsburg,  etc.,    R.    Co.  v.  atRrmatively  .  that     he    stopped    and 

Dunn,  50  Pa.  St.  280.  looked  and  listened,  but  that  the  jury 

^Richardson   v.  N.  Y.  Cent.    R.  Co.,  may  say  from   (ill    the  circumstances 

45  N.  Y.  846  ;  Gillett  w.Western  R.  Co.,  whether  he  exercised  due  care.     Peun. 

8  Allen  (Mass.),  560.  R.  Co.  v.  Weber,  72  Pa.  St.  27. 

^  Detroit,  etc.,    R.  Co.  v.  Van  Stein-  *  Spencer  v.  111.  Cent.  R.  Co.,  27  Iowa, 

burg,  17  Mich.  99.  55  ;  Havens  v.  Erie  R.  Co.,  afite;     De- 

■»  Davis  ».  N.  Y.  Cent.  R.  Co.,  47  N.  Y.  troit,    etc.,    R.   Co. -y.  Van  Steinburg, 

400  ;    Duffy  v.  Chicago,  etc. ,  R.  Co.,  33  ante. 

Wis.  269.  '  Langhoff  v.  Milwaukee,  etc.,  R.  Co., 

*  Lehigh  Valley  R.  Co.  v.  Hall,  61  Pa.  23  Wis.  43. 

St.  361 ;  Pittsburg,  etc.,  R.  Co.  v.  Dunn,  »  Wilds  v.  Hudson  R.  Co.,  29  N.  Y. 

56  id.   280.     But  it  is  now  held  that  315. 


Negligence  and  Wkongful  Acts  of  Agents,  etc.      791 

tlie  exercise  of  such  care  as  a  prudent  man  would  have  exercised 
under  the  same  circumstances.' 

The  liability  of  the  company  depends  upon  the  question 
whether  the  act  producing  the  injury  was  nef^ligent,  and  whether 
the  plaintiff .  was  free  from  fixult  contributory  thereto,  and  this 
question  is  for  the  jury  in  view  of  all  the  circumstances  material 
to  the  issue.^ 

Sec.  511.  Trespassers  on  the  tracks.  —  The  fact  that  a  person  is 
a  trespasser  on  its  track  does  not  absolve  the  company  from  pre- 
venting the  infliction  of  an  injury  upon  him,  if  possible.  They 
cannot  run  over  a  person  or  cattle  or  horses  upon  its  track,  simply 
because  they  have  no  right  there,  or  because  they  do  not  leave 
the  track  when  signals  for  that  purpose  are  made  ;  but,  as  to  per- 
sons, at  least,  they  have  a  right  to  presume  that  they  will  obey 
the  ordinary  instincts  of  humanity  and  self-preservation,  and  avoid 
impending  danger  if  possible,  but  if  he  exhibits  no  inclination  to 
do  so,  and  there  is  time  to  stop  the  train^  o/tid  it  can  he  done 
without  danger  to  those  upon  it,  after  it  becomes  patent  that  the 
person  or  animals  will  not  leave  the  track,  they  are  bound  to  stop. 
What  is  due  care  under  such  circumstances  is  a  question  depend- 
ent upon  the  facts  of  each  case,  and  is  essentially  one  for  tlic  jury. 
From  all  the  facts  and  circumstances  of  the  case  the  jury  must 
say  %vhether  the  company  failed  to  discharge  its  duty.'  In  such 
cases  the  negligence  of  the  company  must  be  so  gross  as  to  imply 

1  Eagan  v.   Fitchburg   R.    Co.,   101  bell  v.  St.  Joseph,  etc.,  R.  R.  Co.,  GO 

Mass.  315.    "  Mo.   475.     The  company  is  bound  to 

'^  McGuire  v.  Hudson  R.  Co.,  2  Daly  use  reasonable  care  to  prevent  injury 

(N.  Y.  C.   P.),  76  ;  Baltimore,  etc..  R.  to  persons  on  its  track,  and  as  to  what 

Co.  V.  The  State,  29  Md.  252.  is   reasonable  care  is  a   question  for 

^  In     Houston,  etc.,  R.     R.    Co.   v.  the  jury   in  view  of  all    the    circum- 

Sympkins,  51    Tex.  615,  the   defend-  stances  ;     Baltimore,    etc.,   R.   R.    Co. 

ant  was  held  liable  for  running  over  v.  State,  33  Md.  542;   and  even  if  he 

a  person  who  was  lying  on  the  track  is  intoxicated   the  same  rule  prevails, 

in  plain  sight  of  approaching  trains,  Weymire  v.  Wolf,    52    Iowa,  533 ;  as 

he  having  fallen  there  in  a  fit  while  it  also  was  with  reference  to  children 

walking  on  the  track,  the  court  saying,  playing  on    the    track;   Kansas,   etc., 

however,  that  the  rule  would  be  dif-  R.   R.  Co.   v.   Fitzsimmons,  22  Kan. 

ferent  if  he  had  fallen  there  from  in-  686  ;    Finlason    v.     Chicago,   etc.,    R. 

toxication,  as  in  the  latter  event  the  Co.,  1   Dill.  (U.   S.  C.   C.)  579;  Stout 

person   injured   would    be   treated  as  v.  Sioux  City,  etc.,  R.  Co.,  2  id.  294; 

guilty    of     contributory    negligence.  Toledo,  etc.,   R.  Co.    v.  Riley,  47  111. 

Herring   v.    Wilmington,  etc.,  R.  R.  408;  Brand  v.  Troy,  etc.,  R.   Co.,  8 

Co.,  10  Ired.  (N.  C.)  402;  Houston,  etc..  Barb.  368. 
R.  R.  Co.  V.  Smith,  52  Tex.  178 ;  Isa- 


792  Pkivate  Corporations. 

a  disregard  of  consequences  and  a  willful  disregard  of  duty,  and 
that  to  such  an  extent  as  to  entirely  overcome  the  effect  of  the 
contributory  negligence  of  the  person  injured,^  under  the  rule  that 
the  party  guilty  of  the  greatest  wrong  must  be  considered  the 
aggressor.''  But  to  have  that  effect,  the  negligence  of  the  company 
must  be  so  much  greater  than  that  of  the  person  injured,  as  to 
clearly  preponderate.' 

Sec.  512.  Different  rule  as  to  children. —  The  same  rule  as  to  con- 
tributory negligence  does  not  apply  to  children  that  is  applied  to 
adults,  but  in  actions  in  their  own  name,  or  for  their  own  benefit, 
their  age  is  to  be  considered,*  although  in  some  states  it  is  held 
that  no  distinction  exists  on  account  of  age,*  and  in  others,  that 
contributory  negligence  cannot  be  imputed  to  a  child,  too 
young  to  appreciate  or  comprehend  the  danger.* 

But  when  an  action  is  brought  in  the  name  of  a  parent^  no 
recovery  can  be  had  if  negligence  can  be  imputed  to  him  in  per- 
mitting the  child  to  be  at  large  at  the  place  where  the  injury 
happened,'  but  the  negligence  of  the  parent  cannot  be  imputed  to 
the  child.*  The  question  whether  a  railroad  company  is  guilty 
of  negligence  for  injuries  inflicted  upon  a  child  is  one  of  fact,  to 
be  determined  according  to  the  circumstances  of  each  case.  It  is 
for  the  jury  to  say  whether  the  injury  resulted  from  the  omission 
by  the  defendant  of  any  duty.  If  so,  liability  attaches  ;  if  not,  it 
does  not." 


'Lafayette,   etc.,  R.  Co.  v.  Adams,  R.    Co,    49    Barb.    539;    Bannon    v. 

26  Ind.  76  ;  Illinois  Central  R.  Co.  v.  Baltimore,  etc.,  R.  Co.,  24  Md.  108. 

Hutchinson,  47  111.  408.  « Chicago,  etc.,  R.  Co.  v.  Gregory,  58 

2  Macon,  etc.,  R.  Co.  v.  Davis,  27  111.  226;  Mahouey  v.  Railr.  Co.,  ante; 
Qa.  113.  Schmidt  V.Milwaukee,  etc.,  R.  Co.,  23 

3  Chicago,  etc.,  R.  Co.  v.  Payne,  49  Wis.  186;  Kav  v.  Peun.,  etc.,  R.  Co., 
111.  499  ;  State  v.  Manchester,  etc.R.  65  Penn.  St.  269;  Glassey  v.  Railr.  Co., 
Co.,  52   N.    H.    528:  Macon,   etc.,   R.  57  id.  172. 

Co.  v.  Winn,  26  Ga.  250.  ■>  Jeffersonville,  etc.,  R.  Co.  v.  Bo  wen, 

■*Bellefontaiue,   etc.,   R.  Co.  v.  Sny-  40  Ind.  545  ;  Pittsburg    etc.R.   Co.  v. 

der,  18  Ohio  St.   399;    Warner  v.  R.  Pearson,  72  Penn.  St.  169 ;  Ihl  v.42dSt. 

Co.,   6  Phila.    (Penn.)  537  ;  Railr.  Co.  Railw.  Co.,  47  N.  Y.  317. 

V.  Stout,  17  Wall.  (U.  S.)  657  ;  Daley  »  Glassey  v.  Railr.  Co.,  ante;  Daley 

v.   Norwich,  etc.,    R.    Co.,  26   Conn.  v.  Norwich,  etc.,  R.  Co.,  26  Conn.  591; 

591;  Boland  V.  Missouri,  etc.,  R.  Co.,  Bellefontaine,  etc.,   R.  Co.  v.  Snyder, 

36  Mo.  484.  18  Ohio  St.  399  ;  Field  on  Dam..  §  195. 

^Honegsbergerv.  Railr.  Co.,  1  Keyes  *  Glassev  v.  Railr.  Co.,  ante  ;  Kay  v. 

(N.  Y.),  570;  IBurke  v.  Broadway,  etc.,  Penn.  R.  Co..  65  Penn.  St.  269;  Meyer 

V.  Midland,  etc.,  R.  Co.,  2  Neb.  319. 


Negligence  and  Weongful  Acts  of  Agents,  etc.       793 

Sec.  513.  injuries  to  animals.  —  For  injuries  to  animals  tres- 
passing upon  its  track,  through  no  fault  of  the  company,  the  com- 
pany is  not  liable,  unless  the  injury  was  inflicted  through  gross 
negligence  of  its  servants,  or  willfully,'  but  if  the  injury  was  the 
result  of  accident,''  or  tlie  plaintiff  contributed  thereto  by  permit- 
ting his  cattle  to  run  at  large,  no  recovery  can  be  had  unless  the 
negligence  of  the  company  was  gross.' 

But  if  by  statute  the  company  is  required  to  erect  cattle-guards 
at  highway  crossings '  or  fences  to  keep  cattle  off  its  track,  it  is 
liable  for  injuries  resulting  from  a  failure  on  its  part  to  erect  and 
maintain  the  same.^ 

But  its  neglect  to  erect  and  maintain  fences  only  inures  to  the 
benefit  of  adjoining  owners,  or  those  ha%'ing  cattle  upon  his  prem- 
ises by  his  consent,  and  does  not  enable  one  whose  cattle  have 
escaped  upon  his  land  from  the  highway  or  from  adjoining  prem- 
ises, to  maintain  an  action.'  In  Missouri  it  is  held  that  when 
the  statute  requires  the  company  to  maintain  a  fence,  and  it 
neglects  to  do  so,  the  adjacent  owner  is  entitled  to  recover  irre- 
spective of  the  question  of  negligence,'' 

Sec.  514.  We  have  thus  briefly  reviewed  the  liability  of  rail- 
road corporations  for  the  negligent  or  wrongful  acts  of  its  agents, 
because  such  corporations  are  the  most  prominent  in  litigation 
involving  these  questions.  The  same  pi-inciples  apply  to  all  cor- 
porations with  different  degrees  of  intensity,  according  to  the 
purposes  of  the  corporation,  and  the  consequences  of  negligent  or 
improper  conduct  on  the  part  of  its  agents.     Corporations  must 

'Indianapolis,  etc.,  R.  Co.  v.  Petty,  *  Bradly  v.  Buffalo,  etc.,  R.  Co.    34 

SOInd.  361;  Antisdell  v.  Chicago,  etc.,  N.  Y.  427  ;  McDowell  v   N.  Y    C  'r 

26  Wis.   145;  Jackson  v.  R.   &  B.  R.  Co.,  37  Barb.  195;  Tracy   v     N     Y 

Co.,  25  Vt.  150;  Quimby  v.  Vt.  Central  C.  R.  Co.,38N.  Y.   4;^3. 

R.  Co.,   23  id.   387  ;  Pittsburgh,  etc.,  «  Shepard  v.  Buffalo,  etc.,  R.  Co    35 

R.   Co.   V.  Methoen,  21  Ohio  St.  586;  N.  Y.  041  ;  Tallman  v.  Syracuse,  etc. 

Tower  v.  Providence,  etc.,  R.  Co.,  2  R.  R.  Co  ,  4  Keyes,  128.                      '         ' 

1.404;  Stearns  v.  Old  Colony,  etc.,  R.  ^  Town  v.   Cheshire,  etc.,  R.  Co.,  21 

Co.,  1  Allen  (Mass.),  493;  Knight  v.  N.  H.  363;  Horn  v.  Atlantic,  etc.',' R. 

New  Orleans,  etc.,  R.  Co.,  15  La.  Ann.  Co.,  35  id.  169  ;  Jackson  v    R.  k  B.  R. 

105;  New  Albany,  etc.,  R.  Co.  v.  Mc-  Co.,  25  Vt.  150.     Contra,  see  Browne 

Namara,  11  Ind.  543.  v.   Providence,  etc.,  R.  Co.,  12  Gray 

'^  Garris  v.  Portsmouth,  etc.,  R.  Co.,  (Mass.),  55. 

2  Ired.  (N.  C.)  324.  '  Powell  v.  Hannibal,  etc.,   R.  Co., 

3  Trow  V.  Vt.  Central  R.  Co. ,  24  Vt.  35  Mo.  457  ;  Bigelow  v.  Northern  Mo 

487;  Hance   v.  Cayuga,    etc.,  R.  Co.,  R.  Co.,  48  id.  510. 
36N.  Y.  428. 

100 


794  Pkivate  Cobpokations. 

necessarily  act  through  agents,  and  the  acts  of  those  agents  within 
the  scope  of  their  express  or  implied  authority  are  binding  upon 
them,  whether  arising  out  of  contracts  or  tortious  acts.  The 
agents,  within  the  line  of  their  duty,  are  treated  as  the  corpora- 
tion itself,  and  the  corporation  is  liable  therefor  as  much  as 
though  the  officers  of  the  corporation  had  themselves  performed 
the  act.  The  principal  conflict  in  the  cases  has  arisen  mainly 
from  the  fact  that  a  proper  distinction  has  not  always  been  taken 
between  the  agents  of  corporations  and  individuals.  In  the  very 
nature  of  things  corporations  can  only  discharge  their  functions 
through  agents  ;  that  is  contemplated  by  the  law  creating  them,  and 
in  the  peculiar  sphere  of  his  duty  each  agent,  from  the  highest  to 
the  lowest,  stands  in  the  place  of  and  represents  the  corporation. 
His  acts  are  the  acts  of  the  Gorj)orat{on  itself.  For  all  ^practical 
purposes  as  to  such  duties  he  is  the  corporation.  Potter,  J.,  in 
a  very  able  opinion  in  a  New  York  case,'  which  is  approvingly 
cited  by  Mr.  Wood  in  his  Law  of  Master  and  Servant  (p.  887), 
gives  expression  to  the  real  distinction.  He  says :  "  A  corporation 
cannot  act  personally.  It  requires  some  person  to  superintend 
structures,  to  purchase  and  control  the  running  of  cars,  to  employ 
and  discharge  men  and  provide  all  needful  appliances.  This  can 
only  be  done  by  agents.  When  the  directors  themselves  person- 
ally act  as  such  agents,  they  are  the  representatives  of  the  corpo- 
ration ;  they  are  the  executive  head  or  master ;  their  acts  are  the 
acts  of  the  corporation ;  the  duties  above  described  are  the  duties 
of  the  corporation.  When  these  directors  appoint  some  other 
person  than  themselves  to  superintend  and  perforin  all  these 
executive  duties  for  them^  then  such  appointee  equally  with 
themselves  represents  the  corporation  as  master  in  all  these 
respects.''''  The  real  test  of  the  liability  is,  whether  the  act  was  one 
within  the  scope  of  the  agenfs  authority,  real  or  apparent.  Was 
it  an  act  done  in  doing  that  which  he  was  authorized  to  do  and  as 
an  incident  to  it  ?  "^  The  principal  in  all  cases  takes  the  risk  of 
all  the  consequences  of  a  wrongful  execution  of  duties  on  the  part 
of  any  person  whom  he  employs  in  whatever  capacity.^ 

'  Brickner  v.  Railr.  Co.,  3  Lans.  (N.  *  Ramsden  v.   Bost.  &  Alb.  R.  Co., 

T.)  506,  and  affirmed,  49  N.  Y.  673.  ante  ;  Passenger  R.  Co.  v.  Young,  21 

2  Wood's  Law  of  Master  and  Serv-  Ohio  St.  518  ;  8  Am.   Rep.    78  ;  Little 

ant,  chap.  13.  Miami  R.  Co.  v.  Wetmore,  19  Ohio  St. 


Negligence  and  Wrongful  Acts  of  Agents,  etc.       795 

"  The  question  usually  presented,"  saj's  Mr.  Wood  (Law  of 
Master  and  Servant,  p.  533),  "  is  whether,  as  a  matter  of  fact,  or 
of  law,  the  injury  was  received  under  such  circumstances  that, 
under  the  employment,  the  master  can  be  said  to  have  authorized 
the  act,  for  if  he  did  not,  either  in  fact  or  in  law^  he  cannot  be 
made  chargeable  for  its  consequences,  because,  not  having  been 
done  under  authority  from  him,  express  or  implied,  it  can,  in  no 
sense,  be  said  to  be  liis  act,  and  the  maxim  qui  facit  per  alium 
facit  per  se  does  not  apply.  The  test  of  liability  in  all  cases 
depends  upon  the  question  whether  the  injury  was  committed  by 
the  autliority  of  the  master  expressly  conferred,  or  fairly  implied 
from  the  nature  of  the  employment  and  the  duties  incident  to 
it."^ 

Sec.  515.  instances  of  liability  for  other  torts  of  servants. —  A 
corporation  may  be  held  chargeable  for  a  trespass  commit- 
ted by  its   servants  or  agents  upon  the  lands  of   another ; '   for 


131  ;  Limpus  v.  Gen.  Omnibus  Co.,  1 
H.  &  C.  5-11;  Higgins  v.  VVatervliet 
Turnpike  Co.,  46  N.  Y.  23  ;  Slierley  v. 
Billings,  8  Bush  (Ky.),  147;  8  Am. 
Rep.  541  ;  Howe  v.  Newmarch,  12 
Allen  (Mass.),  49  ;  Bryant  v.  Rich,  106 
Mass.  180;  8  Am.  Rep.  311  ;  Jefferson- 
ville  R.  Co.  V.  Rogers.  38  Ind.  116;  10 
Am.  Rep.  103 ;  Hewett  v.  Switt,  3 
Allen  (Mass.),  420  ;  Holmes  v.  Wake- 
field, 12  id.  580  ;  Moore  v.  Fitcbburg 
R.  Co., 4  Gray  (Mass.),  465;  Seymour  v. 
Greenwood,  7  H.  &  N.  356;  Sauford  v. 
Eighth  Ave.  R.  Co.,  23  N.  Y.  343  ; 
Gotf  V.  Gt.  Northern  R.  Co.,  3  El.  & 
El.  672;  Poulion  v.  London,  etc.,  R. 
Co.,  L.  R.,  2  Q.  B.  534;  Pickens  v. 
Diecker,  21  Ohio  St.  212  ;  8  Am.  Rep. 

'  Reedie  v.  London,  etc.,  Railway 
Co.,  4  Exch.  244  ;  Bartonshill  Coal  Co. 
V.  Reid,  post ;  Cosgrove  v.  Ogden,  49 
N.  Y.  255;  O'Conuell  v.  Strong,  Dud- 
ley (S.  C),  265  ;  Audrus  v.  Howard,  36 
Vt.  248  ;  Luttrell  v.  Hazen,  3  Sneed 
(Tenn.),  20;  Drew  v.  Sixth  Av.  R.  Co., 
26  N.  Y.  49  ;  Brown  v.  Purviance,  2  H. 
&G.  (Md.)316;  Howe  v.  Newmarch, 
12  Allen  (Mass.),  49  ;  Southwick  v. 
Estes,  7  Cush.  (Mass.")  385  ;  Duggins  v. 
Watson,  15  Ark.  118;  Armstrong  v. 
Cooley,  10  111.  509;  Weed  v.  Panama 
K.   Co.,   17   N.    Y.    362;  Wanstall  v. 


55.  The  master  is  liable  for  what  his 
servant  does  in  the  course  of  his  em- 
ployment, but  not  for  acts  entirely  dis- 
connected with  it,  for,  in  the  first  in- 
stance, the  act  is  the  act  of  the  mas- 
ter, while  in  the  latter  it  is  the  act  of 
the  servant  ;  Aldrich  v.  Boston,  etc., 
R.  Co.,  100  Mass.  31 ;  and  the  difficulty 
in  determining  who  is  liable  is  in  de- 
termining whose  act  produced  the  in- 
jury. That  is,  whether  the  act  is 
properly  chargeable  to  the  master  or 
is  purely  that  of  the  servant.  Bryant 
V.Rich,  ante.  No  precise  rule  for  de- 
termining this  question  can  be  given 
and  in  each  case  it  is  a  question  for 
the  jury  in  view  of  the  facts  and  cir- 
cumstances. 

Pooley,  6  CI.  &  F.  910  n;  Priester  v. 
Augley,  5  Rich.  (S.  C.)  44  ;  Jones  v. 
Glass,  13  Ired.  (N.  C.)  305;  Patten  v. 
Rea,  2C.  B.  (X.  S.)  606;  Yates  v. 
Squires,  19  Iowa,  26  ;  Qoss  v.  Coblens, 
43  Mo.  377  ;  Page  v.  Defries,  7  B.  &  S. 
137;  Wilson  v.  Peverly.  2  N.  H.  548; 
McKeon  v.  Citizens'  R.  Co.,  42  Mo.  80; 
Haack  v.  Fearing,  4  Abb.  N.  S.  (N.  Y.) 
297;  Goodman  v,  Kennell,  3  C.  &  P. 
167. 

■•'  Louisville  R.  Co.  v.  Faulkner,  3 
Head  (Tenn.),  65  ;  How  v.  Canal  Co., 
5  Harr.  (Del.)  245. 


796  Pktvate   Corpoeations. 

false  imprisonment ; '  for  a  libel  published  by  its  servants ; '  for 
a  nuisance  committed  by  them ; '  for  a  conversion  of  the  goods 
of  another  by  them;*  or  for  any  act  done  by  them  within  the 
scope  of  their  authority;  but  the  question  of  liability  always 
depends  upon  the  circumstance,  whether  or  not  the  act  was  within 
the  scope  of  the  servants'  authority,  express  or  implied. 

Sec.  516.  Liability  to  indictment.  —  A  corporation  is  liable  crim- 
inally for  the  acts  of  its  agents,  wlien  the  acts  done  are  within  the 
scope  of  the  authority  delegated  to  the  agent.  Thus,  where  the 
servants  or  agents  of  a  corporation,  in  the  operations  of  its  works, 
pollute  the  waters  of  a  stream,"  or  obstruct  a  highway,*  or  commit 
any  nuisance  that  is  a  legitimate  result  of  doing  that  which  they 
were  employed  to  do,  the  corporation,  as  well  as  the  servants  or 
agents,  are  liable  to  indictment  therefor.l  So  a  corporation  may 
be  indicted  for  an  assault  committed  by  its  servants,*  or  a  libel 
published  by  its  orders,^  or  for  any  non-feasance,  by  the  omission 
by  its  servants  to  perform  a  duty  imposed  upon  it  by  statute,  or 
by  the  common  law,'"  or  for  a  misfeasance  by  doing  that  which 
they  are  intrusted  to  do,  contrary  to  statute,  or  in  violation  of  the 
common  law.^'  Thus,  a  turnpike  company  is  liable  to  indictment 
for  permitting  its  turnpike  to  be  and  remain  out  of  oi*der.'^  So  a 
railroad  company  authorized  to  obstruct  a  highway  in  a  certain 
mode  is  liable  to  indictment  for  obstructing  it  in  any  other  mode." 
'  And,  generally,  when  the  act  done  is  made  an  offense  by  statute  or 
the  common  law,  and  is  within  the  scope  of  the  powers  conferred 
upon  its  officer,  agent  or  servant  doing  it,  the  corporation  is  crim- 
inally liable  therefor, 

'  Owsley  V.  Montgomery,  etc.,  R.  Co.,  ^  Whitfield  v.  S.  E.  Railway  Co.,  E. 

37  Ala.  560.  B.  &  E.  115. 

^  Aldricli   V.   Press   Printing   Co.,  9  i"  Regina  v.  Birmingham  R.  Co.,  9  C.  & 

Minn.  133.  P.  469;  Com.  v.  Nashua  &  Lowell  R. 

3  Terre  Haute  Gas  Co.  v.  Teel,  20  Co.,  2  Gray  (;Mass.),  54;  Regina  v.  G. 
Ind.  131;  Taylor  v.  Boston  Water  N.  of  England  Railway  Co.,  9  Q.  B. 
Power  Co.,  12  Gray  (Mass.),  415.  315. 

4  Beach  v.  Fulton  Bank,  7  Cow.  (N.  "  State  v.  Vt.  Central  R.  Co.,  27  Vt. 
Y.)485.  103;   Regina  v.  North  of  England  R. 

^  Rex  V.  Medly,    6  C.  &  P.  437 ;  Re-  Co.,  9  Q.  B.  315;  Com.  v.  New  Bedford 

gina  V.  Stephens,  L.  R..  1  Q.  B.  701.  Bridge  Co.,  2  Gray  (Mass.),  339. 

6  Regina  v.  Sheffield  Gas  Co. ;  Louis-  "^  Red  River  Turnpike  Co.  v.  State,  1 

ville,   etc.,    R.    Co.   v.  State,  3    Head  Sneed  (Tenn.),  474  ,    Waterford,  etc. , 

(Teun.),  523  ;  State  v.  Morris  &  Essex  Turnpike  Co.  v.  People,  9  Barb.  (N.  Y.) 

R,  Co.,  23  N.  J.  360.  161. 

'Rex   V.   Medly,  ante;    Regina   v,  '^  Regina  v.  Scott,  3  Q.  B.  543.     See 

Stephens,  ante.  also  §  549  and  notes. 

®  Eastern  Counties  R.  Co.  v.  Broom, 
6  Exch.  314. 


INDEX. 


Refers  to  Sections. 

A. 

ACCEPTANCE  (see  Private  Corporations)  :  Sec. 

of  a  grant  of  incorporation 23 

mode  of  acceptance 24 

formal  acceptance  not  necessary n.  3,  24 

unconditional 26 

under  general  laws 27 

may  be  inferred n.  1,  25,  n.  2,  27 

the  doctrine  has  no  application  to  municipal  corporations,  23,  n.  4,  30 
of  charter  of  private  corporation  constitutes  a  contract  which  the 

state  cannot  violate 32 

corporate  act  need  not  be 32 

ACCOMMODATIONS : 

duty  of  railroad  companies  to  furnish  reasonable  and  safe 500 

ACKNOWLEDGMENT: 

corporate  instruments,  by  whom  made 257 

AGENTS      (see    Officers;      Directors;     Corporations;     Torts  ; 
Negligence  ;  Contracts)  : 

directors  as 143 

authority  of , 145 

ratification  of  acts  as   147 

implied  when 148,  150 

effect  of 150 

when  personally  liable  for  acts  as 152,  153,    190 

when  not,  for  acts  of  other  agents 193 

compensation  of     196 

meetings 164,  207 

corporate  liability  for  negligence  of,  generally 480 

wrongful  acts  of 480 

illustration  of  doctrine  of  liability  in  such  cases 481 

maxim  applicable  to 483 


798  Index. 

AGENTS  —  (Continued).  Sec. 

corporate  liability,  illustration  oi 483-487 

test  of  liability  for     487 

matters  to  be  considered  in  determining 489 

as  contractors 490 

in  case  of  contractees 490 

nuisances 491 

liability,  the  same  care  as  natural  persons 492 

for,  in  relation  to  engines,  cars,  track,  etc 494,  495 

instances  of  negligence  when  the  corporation  was  held  liable,  496 

neglect  of  duty  in  case  of 497 

in  case  of  injuries  received  in  getting  upon  a  train 499 

as  affected  by  the  duty  of  passengers 501 

willful  wrongs,  when 503 

negligence  of,    in  constructing  works 505 

repairing 505 

nuisances - 505 

corporate,  necessity  for 165 

general  law  of  agency  applicable  to 165 

officers  are 165 

limitations  on  authority  of 166 

directors  as 167 

appointment  of 168 

may  be  appointed  without  the  use  of  the  corporate  seal 169 

what  is  within  the  scope  of  their  authority 170 

powers  imjDlied  by  virtue  of  office 171,  174 

where  he  exceeds  his  authority  in  the  execution  of  contracts 174 

limitations  of  authority  as  to  time 175 

mode  of  executing  contracts  by 176 

contracts  tdtra  vires,  executed  by 179,  180,  229-241 

parties  dealing  with,  must  take  notice  of  authority 181,  182 

delegation  of  authority  by 183 

powers  expressly  conferred  upon 184 

ratification  of  acts  of 185-187 

personal  liability  of 188 

Avhere  there  is  no  principal 191 

in  case  of  no  authority 192-194 

for  violation  of  duties 195 

compensation  of 196 

frauds  of 197 

proof  of 198 

corporate  liability  for  negligence  of,  in  relation  to  engines  and  ma- 
chinery      494,  506 

application  of  maxim,  sic  utere  tuo  ut  alienum  non  Icedas,  to 507 

negligence  of,  as  affected  by  the  doctrine  of  contributory  negli- 
gence   508 

consequential  injury  by 509 


Index.  799 

AGENT8  —  (Continued).  Sec. 

negligence  of,  in  running  trains 510 

in  case  of  trespassers  upon  the  track  of  railroads 511 

in  case  of  injury  to  children^ 512 

animals 513 

of,  for  various  torts 514 

AMALGAMATION  (see  Consolidation)  : 

meaning  of 384 

English  doctrine  relating  to 385 

doctrine  of,  in  this  country 386 

must  be  authorized  by  statute    387 

when  authority  of,  is  conferred  after  the  creation  of  the  corpora- 
tion     388,  389 

result  sometimes  effected  by  the  exercise  of  the  right  of  eminent 

domain 390,  391 

when  authority  to,  exists  at  the  time  of  the  creation  of  a  corporation,  392 
rule  as  to  requisite  concurrence  where  no    statutory  authority  is 

given 393 

the  rights  and  powers  of  the  new  organization  in  case  of 394 

doctrine  as  to  creditors  in  case  of 395 

of  corporations  organized  in  different  states 396 

ANIMALS  (see  Negligence  ;  Torts)  : 

injuries  to,  by  negligence  of  corporations 513 

care  of  corporations  in  ct  to 514 

B. 

BANKS: 

national,  taxation  of,  under  the  act  for - 478 

BANKING: 

insurance  companies  cannot  engage  in 47 

(See  Corporations  ;  Contracts.) 

BILLS  AND  NOTES  (see  Corporate  Contracts): 

corporate,  negotiable  quality  of 227 

BRIDGE : 

charter  for,  when  it  does  not  prevent  the  legislature  from  granting 

another  charter  for  another  bridge,  across  the   same  river 38 

case  of  Charles  River  Bridge 38 

Warren  Bridge 38 

Binghamton  Bridge n.  2,  38 

BY-LAWS: 

general  principles  relating  to 261 

requisites  of,  and  construction 262 


800  Index. 

BY-LAWS  —  (Continued).  Sec. 

must  be  reasonable 263 

not  be  oppressive 263 

contrary  to  the  laws  of  the  state 263 

in  restraint  of  trade,  void 264 

when  adopted  by  the  corporate  body 265 

directors 266 

distinction  between 257 

void,  when  contrary  to  the  general  laws  of  the  land 268 

matters  that  may  be  regulated  by 269,  270 

how  they  are  made 272 

repeal  of 273 

functions  of 274 

effect  on  third  persons 274 

regulating  the  transfer  of  corporate  stock    275  -278 

providing  for  a  lien  on  stock 277,  278 

notice  conferred  by , 279 

cannot  affect  rights  secured  by  the  incorporating  instruments . . . ,   280 

c. 

CARS  (see  Railroad  Corporations  ;  Negligence)  : 

railroad,  liability  of,  for  defects  in 494 

for  negligence  in  construction  of 494,  495 

instance  where  held  liable  for 496 

CASHIER  (see  Officers)  : 

powers  of,  implied notes,   170 

CERTIFICATES  (see  Stock  ;  Stockholders  ;  Shares)  : 

of  shares,  nature  of 56a 

income  on 96 

character  and  quality  of 114 

transfer,  how  made 118 

corporation  may  be  compelled  to  transfer  on  books 125 

right  of  action  against  corporation  for  failure  to  transfer  , 127 

CHARTERS: 

of  private  corporations  a  contract  irrevocable 3 

of  public  corporations  revocable  by  the  state 3 

not  necessarily  public  because  of  public  interest n.  2,  3 

repeal  of,  by  the  legislature  under  statutory  provisions 33,  44 

CHILDREN  (see  Negligence)  : 

corporate  liability  for  injuries  to,  by  the  negligence  of  agents. . .   512 

doctrine  as  to  contributory  negligence  of 512 

distinction  between  action  by  the  parent  and  action  for 
the  child notes,  512 


Index.  801 

CITIZENS  (see  Suits  at  Law)  :  Sec. 

corporations  not  included  in  the  constitutional  provision  of  the  U. 
S.  conferring  upon  citizens  of  each  state  certain  privileges  and 

immunities 330-334 

corporations  are,  under  the  provisions  of  the  constitution  of  the  U. 

S.  relating  to  judicial  powers 33o-337 

corporations  are,  under  the  provisions  of  the  U.S.  judiciary  acts,   338-341 
under  the  act  of  congress   for  the  removal  of  causes  from 
the  state  to  the  federal  courts 342-345 

COMMON  SEAL  (see  Seal;    Corporate  Seal): 

incident  of  a  corporation 247 

former  doctrine  in  relation  to 248 

origin  of  law  relating  to 249 

present  doctrine  relating  to 251 

what  is 254,  255 

by  whom  it  should  be  affixed 256,  257 

relating  to  agents 258 

as  evidence 260 

COMPENSATION  (see  Eminent  Domain)  : 

for  land  taken  under  right  of  eminent  domain 407,  408 

mode  of  i^roceeding  to  determine 409 

estimating  damages 409 

elements  which  may  be  considered 410 

CONDITIONAL  SUBSCRIPTIONS  (see  Stock  ;    Stockholders)  : 

condition  in  constating  instruments 67 

conditions  in  writing 70 

may  be  waived 72 

when  void 73,     74 

CONDITIONS  (see  Stock  ;    Stockholders)  : 

to  subscriptions  provided  by  the  constating  instruments 67 

provided  by  the  contract  of  subscription 70 

may  be  waived 72 

of  the  contract  of  subscription,  when  void 73 

which  avoid  the  whole  contract 74 

CONSOLIDATION  (see  Amalgamation)  : 

meaning  of,  same  as  amalgamation  in  England 384 

English  doctrine  relating  to 385 

doctrine  of,  in  this  country 386 

must  be  authorized  by  statute 387 

where  authority  is  conferred  after  the  creation  of  the  corpora- 
tion   388,  389 

in  the  absence  of  legislative  authority  the  same  result  is  sometimes 

accomplished  by  the  exercise  of  the  right  of  eminent  domain,  390,  391 
when  the  right  exists  at  the  time  of  the  creation  of  the  corporation,   393 
101 


802  Index. 

CONSOLIDATION  —  (Continued).  Sec. 
rule  as  to  requisite  concurrence  in  the  absence  of  statutory  provis- 
ions therefor 393 

the  powers  and  privileges  of  the  consolidated  corporation 394 

rights  of  creditors  of  the  consolidating  corporations  in  case  of  .  . .  395 

of  companies  organized  in  different  states 396 

CONSTATING  INSTRUMENTS: 

use  and  meaning  of  the  term. . . n.  3,  28 

CONSTRUCTIOJT  (see  Contracts): 

of  corporate  power  to  make  contracts 219 

incidental 221,  222 

scope  of  authority 224 

CONTRACTS  (see  Corporate  Contracts)  : 

the  power  to  make,  a  corporate  incident 219 

mode  of  executing  tlie  power 220 

executed  by  agents 220 

when  necessary  to  be  in  writing -. .  , 220 

generally  not  necessary  to  be  in  writing notes,  220 

construction  of  instruments  relating  to 221,  222 

relating  to  bailments 223 

depends  upon  its  character ' 223 

what  would  not  be  within  the  scope  of  the  agent's  authority  in 

relation  to 224,  225 

place  of  making,  by  the  corporation 225 

by  the  directors 226 

corporate  bills  and  notes 227 

bonds,  negotiable  quality  of 227 

coupons,  their  incidents  and  qualities 228 

ultra  vires 229-241 

doctrine  of 229 

different  senses  in  which  the  term  is  used 230 

are  all  such  contracts  void 231,  233 

distinction  in  case  of,  between  executed  and  unexecuted  con- 
tracts    233,  234 

form  of  action  In  case  of 237 

doctrine  of,  applied  to  agents 238 

in  case  of  negotiable  instruments 239 

as  to  implied  powers ...  240 

conclusion  as  to 241 

CONTRACTORS  (see  Contracts;  Negligence;  Torts;  Agents): 

when  liable  for  negligence 480 

CONTRACTBES : 

liability  for  negligence,  etc 490 

CONTRIBUTORY  NEGLIGENCE  (see  Negligence  ;  Torts)  : 

effect  of,  in  case  of  negligence 508 


Index.  803 

CONTRIBUTORY  NEGLIGENCE  —  (Continued).  Sec. 

question  of,  usually  for  the  jury 508 

in  case  of  fire,  originated  by  negligence 508 

in  case  of  negligence  of  railroad   companies,  by  which  a  fire  is 

started 302-311 

CORPORATIONS    (see  Private   Corpokations  ;    Public  Corpora- 
tions ;  Railroad  Corporations  ;  Torts  ;  Damages)  : 

how  defined  ...    1 

various  kinds 2,  3 

distinction  between  public  and  private 3 

quasi  corporations 4 

origin  and  early  history  of  private  corporations 5 

variety  and  importance  of  modern  corporations  for  pecuniary  gain,  5 

creation  of,  an  act  of  sovereignty 6 

by  royal  charter 6 

act  of  parliament 8 

by  prescription,  and  at  common  law 9 

how  created  in  this  country 10 

power  of  congress  to  create 11 

legislatures  to  create 12 

general  statutes  of  incorporation 13 

advantage  of 13 

of  the  general  power  to  delegate  authority  to  create 15 

of  territorial  legislatures 16 

by  prescription  in  this  country 17 

foreign  joint-stock  companies  may  be. 18 

the  name  of 19 

the  location  of 20 

words  of,  in  royal  grants 21 

common-law  incidents  of 22 

acceptance  of  the  grant  of  incorporation 23 

mode  of  acceptance  of  grant 24 

acceptance  must  be  unconditional 26 

under  general  laws 28 

implied  powers  of,  under  general  or  special  statutes 45 

powers  conferred  or  limited  by  statutes 46 

powers  limited  to  those  conferred  by  charter n.  3,  46 

powers  limited  to  the  objects  of  the  grant ...  47 

insurance  corporations  cannot  engage  in  banking 47 

confined  to  business  for  which  they  were  created 47 

distinction  between,  and  partnerships 48 

composition  of  private 51 

private,  government  may  constitute  member  of 52 

admission  and  election  of  members  and  oflQcers  of 53 

disfranchisement  and  expulsion  of  members  of 54 

quasi,  what  are 55 


804  Ikdex. 

CORPORATIONS  —  (Continued).  Sec. 

private,  membership  of,  under  general  statutes 56 

management  of,  by  directors 57 

shareholders  are  members  of 58 

right  to  vote 58 

by  proxy 61 

must  take  notice  of  vphat 62 

what  they  are  presumed  to  know 62 

personal  liabilities  of,  under  statutes   63 

general  liabilities  of,  on  subscriptions 66 

under  conditions  in  the  constating  instruments 67 

conditional  subscriptions 70 

conditions,  waiver  of 72 

when  void 73 

subscriptions,  when  conditions  avoid  the  whole  contract,  74,  75 

in  contemplation  of  incorporation 77 

fraud  in  relation  to 78 

rules  depend  upon  statutes  or  constating  instruments  79 

defense  to 80 

assessment  and  calls  for 82 

stock,  forfeiture  of ...  .    85 

assessment  of 86 

notices  of,  assessments  of 90 

sufficiency  of 91 

dividends,  right  to 92 

may  sue  for 95 

in  trust 96 

right  to  sell  and  assign  shares 98 

liability  of  assignees  to  corporation.  . 101 

purchasers  from  trustees 102 

stockholders,  right  to  vote 105 

liability  in  equity  to  creditors 129 

right  of  access  to  books  .  .' 106 

action  against  corporation 127 

preferred  stock,  rights  of  holders  of 108 

when  it  can  be  issued 108 

dividends  on 107 

scrip  and  preliminary  subscriptions 109 

stock  of,  defined 110 

issuing  certificates  of  shares  of Ill 

fraud  in 112,  113 

shares  and  income 114 

character  and  quality  of 114 

certificates 117 

transfer  of 118 

how  made 118 


Index.  805 

CORPORATIONS  —  (Continued).  Sue. 

stock  of,  refusal  of  corporation  to  transfer 120 

liens  of  corporation  on 122 

corporation  may  be  compelled  to  transfer 125 

when  subject  to  attachment  in  hands  of  assignee 126 

over-issued  and  watered  stock 130 

when  liable  for  torts 283 

general  principles,  relating  to 281 

may  do,  or  cause  to  be  done,  wrongful  acts 285 

frauds  of 286 

frauds  of  agents,  for  wliich  they  are  liable 286,  288,  290 

when  the  corporation  is  the  occasion  of  a  loss 291 

enjoying  the  benefit  of  a  contract  secured  by  fraud 292 

right  to  repudiate  a  contract  for,  limited  to  original  party 294 

ratification  of  contract,  secured  by  fraud  of  agent 295 

liability  for  other  wrongs  of  agents 297 

assault  and  battery  of  agents 298 

trespass  to  property  .    300 

in  case  of  negligence  of  agents 302 

limitation  of,  in  certain  cases 303-307 

in  case  of  successive  negligence,  when 307 

complications  arising  from 307 

torts,  damages  generally 311-324 

exemplary .   313 

exemplary  damages  not  applicable  to  corporations 315 

damages,  extreme  doctrine  of 316 

for  gross  negligence,  damages 317 

not  consistently  applicable  to  corporations 318 

for  exemplary,  recent  examination  of  the  doctrine 319 

conflict 322 

damages  resulting  in  death 328 

elements  of 324 

what  is  competent  to  show 324 

foreign,  not  citizens 330 

private,  causes  for  which  they  may  be  dissolved 436 

which  constitute  a  dissolution  of 436 

dissolution  of,  reserved  power  in  the  legislature  to  dissolve. .   437,  438 

where  the  reserved  power  is  subject  to  a  condition 439 

on  expiration  of  the  time  limited  for  their  continuance 440 

for  neglect  or  abuse  of  powers 441,  442 

mode  of  proceeding  in  such  cases 443,  444 

dissolution  by  the  voluntary  acts  of  its  members 445 

where  the  majority  may  surrender  its  franchise 446 

under  statutes  providing  for  the  winding  up  of  corporations.  447,  448 
by  the  death  of  all  of  its  members 449 


806  Index. 

CORPORATIONS  —  (Continued).  Sec. 

effect  of,  generally  at  common  law 450 

effect  of,  upon  creditors 451 

under  proceedings  for  forfeiture,  by  quo  warranto 452 

under  proceedings  not  the  subject  of  collateral  inquiry 452 

under  certain  circumstances  may  be  inquired  into  collaterally  ....   453 

liability  for  negligence 480 

illustration  of  the  doctrine  of 481 

maxim,  relating  to 482 

cases  relating  to 483^86 

real  test  of 487 

implied  powers  of  agents  in  such  cases 488 

matters  to  be  considered  in  determining 488 

whether  the  act  is  within  the  scope  of  agent's  authority,  488 

of  contractors,  stated 490 

of  contractees,  when 490 

in  case  of  nuisance 491 

bound  to  same  degree  of  care  as  natural  persons 492 

not  insurers  against  all  casualties 493 

railroad,  duty  required  in  relation  to  engines,  cars,  track,  etc. . . .   494 

instances  where  held  liable  for  negligence 496 

duty  of 497 

when  liabilities  for  injury  received  in  getting  upon  the  train,  499 

duty  to  furnish  reasonable  accommodations 500 

passengers 501,  502 

liability  for  wrongs  of  agents  generally 503 

railroad,  liability  for  delay  in  running  trains 504 

negligence  in  constructing  road 505 

repairing 505 

nuisances 505 

defects  in  engines  and  machinery 506 

application  of  maxim  sic  utere  tuo  ut  alienum  non  Icedas  to. . . .   507 

liability,  in  case  of  contributory  negligence 508 

for  consequential  damages 509 

damages  in  the  running  of  trains 510 

in  case  of  injuries  to  trespassers  upon  tracks 511 

children 512 

animals 513 

other  cases 515 

CORPORATE  MEETING  (see  Dikectoks)  : 

mode  by  which  the  will  of  the  corporation  is  expressed 199 

members  should  have  an  opportunity  to  be  present 199 

right  to  a  voice  on  all  questions  of  corporate  policy 199 


Index.  807 

CORPORATE  MEETING  —  (Continued) .  Sec. 

members'  will,  the  will  of  the  corporation 1  J>9 

doctrine  applies  to  by-laws 1*J9 

when  they  may  prescribe  the  time  and  place  of  meeting 1*J'J 

no  one  bound  without  consent li)0 

notice  of 200 

when  required  to  be  personally  given 200 

not  required    wiien  time  and  place  of  meeting  are  provided 

in  the  constating  instruments 200 

by-laws  relating  to,  void  when  repugnant  to  the  fundamental 

law 200 

absence  of  members  from  home  no  excuse  for  failure  togive,n.4,  200 

but  mental  imbecility  might  be n.  4,  200 

may  not  be  required  when  they  are  fixed  by  usage n.  5,  200 

common-law  doctrine  relating  to 201 

in  the  absence  of  any  provision  as  to  the  length  of  notice,  it 

should  be  reasonable 201 

not  required  where  the  meetings  are  stated  and  general,  n.  5,   201 

should  state  the  time  and  place  of 201 

waiver  of 202 

presumptions ii-  2,   202 

presumed  by  attendance  of  all 202 

required  where  business  of  an  extraordinary  character  is  to 

be  done 204 

validity  of  acts  depend  upon  .  . . '. 202 

distinction  between  general  and  special  as  to 204 

adjourned  meetings 203 

incidental  common-law  right 203 

general  and  special ~'"'^ 

where  business  of  an  extraordinary  character  is  to  be  done 204 

special  meetings,  notice  of,  given  at  general  meetings 204 

majority  present  may  express  corporate  will 205 

rights  of  stockholders  under  statutes  cannot  be  divested  by  by- 
laws, resolutions  or  contracts 205 

right  of  the  trustee  or  pledgee  of  stock  to  vote  at 206 

of  directors 207 

if  unusual,  notice  must  be  given 207 

notice  usually  prescribed  by  the  by-laws  or  constating  instru- 
ments     207 

acts  at  an  irregular  meeting  may  be  valid 208 

can  they  only  act  as  a  board  ? 209 

what  constitutes  a  quorum 211 

majority  of  the  quorum  may  bind  the  corporation 211,  212 

if  a  quorum  are  present,  a  majority  of  that  quorum  may  act. .   213 


808  Index. 

CORPORATE  MEETING  —  (Continued).  Sec. 

of  directors,  general  powers  of,  at  meetings 214 

mode  of  expressing  their  assent 215 

cannot  be  held  outside  the  state  creating  them 216 

directors  may 215,   216 

equity  jurisdiction  of  the  courts  to  enjoin  corporate  elections. . .  .   218 

CORPORATE  PROPERTY  (see  Corporations  ;  Private  Corpora- 
tions ;  Taxation)  : 

subject  to  taxation 467-479 

of  railroads,  diiScult  of  taxation 469 

taxation  of,  statutes  regulating 470,  471 

what  is  subject  to  taxation 472 

exempt 472 

contracts  exempting  from  taxation  sustained 473 

against  public  policy 473 

taxation,  doctrine  exempting  from,  will  not  be  extended 474 

exemption  of  U.  S.  bonds  from 477 

under  the    national  banking  law 478 

CORPORATE  SEAL  (see  Seal  ;  Contracts): 

definition  of,  history 244 

history  of  private  seals 245 

how  they  came  into  use 246 

incident  of  a  corporation 247 

former  doctrine  as  to 248 

origin  of  the  law  relating  to 249 

present  doctrine  in  reference  to 251 

what  is 254,  255 

by  whom  it  sliould  be  affixed 256 

where  an  acknowledgment  is  required 257 

doctrine  of,  in  relation  to  agents 258 

authority  may  be  conferre"d  without 259 

as  evidence 260 

COUPONS  (see  Contracts): 

their  incidents  and  qualities 288 

may  be  detached  from  the  bonds 288 

may  be  transferred  like  negotiable  instruments 288 

are  secured  by  the  mortgage  given  to  secure  the  bond 288 

statute  of  limitations  in  reference  to 288 

do  not  lose  their  validity  if  bonds  are  paid  off  before  their  maturity. .  288 

CREDITORS: 

rights  in  equity  for  misappropriation  of  the  corporate  funds 365 

may  pursue  corporate  funds  into   the  hands  of  any  person  not  a 
'bonafide  holder 365 


Index.  809 

CEEDITORS  —  (Continued).  Sec. 

dividends  to  stockholders  cannot  defeat  rights  of 365 

division  of  proceeds  among  stockholders  on  sale  of  stock  cannot 

defeat  rights  of 365 

property  of  the  corporation  held  in  trust  for  their  payment 365 

in  equity,  may  reach  unpaid  subscriptions  to  satisfy  claims 366 

D. 

DAMAGES  (see  Torts  ;  Corporations  ;  Fraud  ;  Contracts  ;  Neg- 
ligence) : 

generally  in  cases  of  torts 311-324 

exemplary 318-323 

whether  applicable  to  private  corporations 315,  316 

consideration  of  the  doctrine 315,   316 

extreme  cases 316 

for  gross  negligence 317 

inconsistency  of,  in  its  application  to  corporations 317 

recent  examination  of  the  doctrine  of 318-322 

conflict  growing  out  of 322 

for  injury  resulting  in  death 323 

elements  in  case  of  death 324 

in  case  of  the  exercise  of  the  right  of  eminent  domain 409 

mode  of  estimating  in  case  of 409 

elements  of .    410 

in  case  of  lands  not  taken  but  damaged 411 

DEATH  (see  Torts  ;  Damages  ;  Negligence)  : 

damages  for  injury  resulting  in 323 

elements  of  damages  in  case  of 324 

exemplary  damages  not  generally  allowable,  what  it  is  competent 

to  show   324 

dissolution  of  a  corporation  by  death  of  all  its  members 449 

DEFINITIONS  (see  Corporations)  : 

of  corporations 1 

various  kinds  of  corporations 2 

constating  instruments 28 

DESCRIPTION  (see  Definitions;  Corporations): 

of  corporations 1 

of  various  kinds  of  corporations 2 

DISTINCTION  (see  Corporations)  : 

between  public  and  private  corporations 3 

DIRECTORS  (see  Corporations  ;  Agents  ;  Private  Corporations  ; 
Corporate  Meetings)  : 

management  of  corporations  by 57 

102 


810  Index. 

DIRECTORS  —  (Continued).  Skc. 

election  of 131 

powers  of,  provided  by  the  fundamental  laws 133,  134,  136 

implied  powers  of 137 

acts  not  within  the  scope  of  their  powers 138 

powers,  when  they  depend  upon  interpretation  of  instruments. . .    140 
corporate  powers  not  conferred  upon,  remain  in  the  corporate  body,   141 

cannot  change  the  character  and  objects  of  the  corporation 142 

as  agents 143 

doctrine  in  England  as  to  authority  of  directors 145 

delegation  of  authority  of 146 

ratification  of  acts  of 147,   148 

when  implied 147,   148 

implied  from  knowledge,  when. 149 

effect  of 150 

under  the   national   banking  law 151 

personal  liability  of 152,  153 

fiduciary  character  of 154,  155 

cannot  manage  affairs  for  their  personal  benefit 156 

contracts  with  corporations  viewed  with  suspicion 157,   158 

when  not  personally  liable  for  frauds  of  other  agents 158 

generally  liable  where  they  act  without  authority 159 

most  effectual  remedy  in  such  cases  is  by  injunction n.  1,   159 

liability  of,  as  partners,  in  certain  cases 160 

de  facto,  acts  of,  cannot  be  collaterally  impeached 161 

compensation  of 161 

cannot  be  increased  by  themselves 162 

meetings  of 163 

cannot  benefit  themselves  to  the  prejudice  of  creditors n.  3,   154 

in  case  of  the  insolvency  of  the  corporation  cannot  set  off  against 
a  claim  due  the  corporation,  an  amount  due  from  the  corpora- 
tion to  him n.  1,   156 

cannot  gain,  by  taking  advantage  of  their  position  to  the  prejudice 

of  the  corporation,  stockholders,  or  creditors,    notes,  157,  notes  158 
deal  with  the  corporation  for  his  own  benefit,  n.  1,  157,    158,  and 

notes,  364 

as  agents 167 

meetings  of    207 

acts  of  an  irregular  meeting  of,  may  be  valid 208 

can  they  act  only  as  a  board? . 309 

what  constitutes  a  quorum  at  a  meeting 311 

their  powers 314 

the  mode  of  expressing  their  assent 315 


Index.  811 

DIRECTORS  —  (Continued).  Sec. 

may  hold  meetings  outside  the  state  of  their  creation 216 

place  of  contracting  by 226 

rights  and  liabilities  of 359 

remedies  against 359 

trustees  of  bondholders  and  creditors 359 

corporation,  right  to  services  of 359 

opinion  of ... , 359 

injunction  to  restrain  unlawful  acts  of 370 

in  favor  of  shareholders 371 

DISSOLUTION  (see  Quo  Warranto)  : 

causes  for  which  corporations  may  be  dissolved 436 

whicb  constitute 436 

reserve  power  in  the  legislature  to  dissolve 437,  438 

where  it  is  subject  to  a  condition 439 

on  the  expiration  of  the  time  limited  for  its  continuance 440 

for  neglect  or  abuse  of  powers 441,  442 

mode  of  proceeding  in  such  cases 443,  444 

by  the  voluntary  act  of  members 445 

by  the  voluntary  surrender  of  the  franchise 446 

under  statutes  for  winding  up  of  corporations 447,  448 

by  the  death  of  all  the  members 439 

effect  of,  at  common  law 450 

upon  creditors 451 

for  forfeiture,  not  the  subject  of  collateral  inquiry 452 

when  the  corporate  existence  may  be  inquired  into  collaterally. . .  453 
DOMAIN  (see  Eminent  Domain)  : 

eminent,  what  is 398 

how  right  can  be  enjoyed 399 

authority  of  legislature  to  grant 400 

what  public  uses  justify  it 401 

who  to  determine  the  question  of  public  use 402 

limit  of  the  rigiit  of 403 

extent  of  right 404,  405 

amount  or  quantity  of  land  to  be  taken 404 

where,  under  general  laws,  a  corporation  takes  more  land  than 

required 406 

compensation  in  case  of 407,  408 

damages,  mode  of  estimating 409 

elements  of 410 

where  lands  are  damaged  but  not  taken 411 

E. 

ELECTIONS  (see  Corporate  Meetings  ;  Stock)  : 

members'  right  to  vote  at 58-61 

of  members  and  corporate  officers 53 


812  Index. 

ELE  CTIONS  —  (Continued).  Sec. 

members'  right  to  vote  at 199 

how  the  will  of  the  corporation  is  expressed  at 199 

notice  of 200 

common-law  doctrine  in  reference  to 201 

rights  of  pledgee  and  jiledgor  at 206 

of  corporation  cannot  be  held  outside  the  state  where  it  is  created,  216 

jurisdiction  of  courts  of  equity  to  restrain 218 

EMINENT  DOMAIN  (see  Domain)  : 

what  it  is,  right  of 398 

how  it  can  be  enjoyed 399 

authority  to  grant  rights  of,  vested  in  the  legislature 400 

what  are  public  uses  which  justify  the  exercise  of  it 401 

who  is  to  determine  the  question  of  public  use 402 

limit  of  the  right  of 403 

who  to  determine  in  reference  to  the  extent  of  the  right 404 

amount  or  quantity  to  be  taken '. 404 

where  the  corporation  takes  more  than  is  required 404,  406 

compensation  in  case  of  exercising 407,  408 

damages 409 

mode  of  estimating 409 

elements  of 410 

lands  injured  by,  but  not  taken 411 

EQUITY  (see  Suits  in  Equity  ;  Injunction)  : 

suits  in,  by  and  against  corporations 857 

remedies  of  various  parties  in 358 

in,  against  directors    359-363 

stockholders'  rights  in,  for  misappropriation  of  corporate  funds. .    365 

doctrine  as  to  proper  parties  in  suits  in 367-369 

where  an  injunction  will  be  granted  in 370 

not  be  granted 371 

suits  in,  for  specific  performance 372 

ESTOPPEL: 

doctrine  of,  in  case  of  party  dealing  with  a  corporation 348 

when  the  corporation  denies  its  corporate  existence 349 

corporate  records  an 354,  855 

EVIDENCE: 

of  incorporation 29 

in  qvx)  warranto 421 

in  mandamus 457,  465,  466 

estoppel,  in  case  of  a  party  dealing  with  corporations 348 

corporation  denying  its  existence 349 

corporate  records  as 354,  355 

EXECUTION  (see  Process)  : 

common-law  doctrine  in  reference  to 373 


Index.  813 

EXECUTION  —  (Continued).  Sec. 

where  the  state  provides  for  a  sale  of  the  corporate  franchise  on . .   374 

subjection  of  stocks  to,  doctrine 375 

statutory   provisions   for   the   garnishment  of   interests  of  stock- 
holders      376 

where  returned  unsatisfied  —  appointment  of  a  receiver,  when. . . .    377 

where  returned  unsatisfied,  creditor's  right  to  receive 378,  379 

unsatisfied,  rights  and  duties  of  a  receiver 381 

EXEMPTION : 

of  corporate  property  from  taxation 472 

statutes  sustained  by  the  current  of -legal  decisions 473 

compensation  in  lieu  of  corporate  taxation 473 

contract  for,  apparently  against  public  policy 473 

many  respectable  authorities  and  protests  against  the  doctrine  of.  473 
dissenting  opinions  of  the  supreme  court  of  the  U.  S.  against  the 

policy 473 

doctrine  sustaining  in  case  of  corporate  contracts,  not  likely  to  be 

extended 474 

recent  decision  of  the  supreme  court  of  the  U.  S.  relating  to .   474,  475 

of  U.  S.  stocks,  etc 476 

under  the  national  banking  law 477 

provisions  of  the  banking  act  of  U.  S 477 

decisions  relating  to,  under  U.  S.  banking  act 477 

F 

FIDUCIARY  CHARACTER  (see  Directors  ;  Suits  in  Equity)  : 

of  directors 154 

FORFEITURE  (see  Stock  ;  Stockholders  ;  Members)  : 

of  corporate  rights,  not  usually  the  subject  of  collateral  inquiry .  .   452 

453 
of  stock  in  corporations 85 

FRAUD  (see  Stockholders  ;  Directors  ;  Suits  in  Equity  ;  Torts  ; 
Negligence)  : 

in  relation  to  subscriptions 78 

in  issuing  stock  certificates 95 

liability  of  corporations  for 281-283 

for  frauds  of  agents 286 

particular  acts  of  fraud 290 

loss  occasioned  by 291 

where  they  enjoy  the  benefit  of  contracts  secured  by 292 

right  to  repudiate  contract  for,  limited  to  original  parties 294 

ratification  of  contract  secured  by , 295 


814  Index. 


G. 


GROSS  NEGLIGENCE  (see  Torts  ;  Negligence)  :  Sec. 

which  authorizes  exemplary  damages 317 

I. 

INJUNCTION  (see  Suits  in  Equity  ;  Equity)  : 

an  effectual  remedy  to  restrain  the  unlawful  acts  of  agents.  ,   n.  1,  159 

shareholders'  right  to,  against  directors 360 

as  a  remedy  for  stockholders,  to  prevent  directors  from  divest- 
ing the  corporation  of  its  funds 364 

to  prevent  a  violation  of  the  corporate  franchise 364 

to  act  ultra  vires 366 

where  it  will  be  granted 370 

not  be  granted 371 

INJURY  (see  Negligence  ;  Fraud  ;  Torts)  : 

by  agent,  liability  of  corporations  for 480-516 

INSURANCE : 

companies  cannot  engage  in  banking 47 

are  limited  to  business  for  which  they  were  incorporated 47 

J. 
JUDGMENT : 

in  proceedings  by  quo  warranto 432 

JUDGMENT  CREDITOR  (see  Receiver  ;  Execution)  : 

his  right  to  a  receiver 378-381 

L. 

LAW  (see  Suits  at  Law)  : 

suits  at 325-356 

LEGISLATURE     (see     Corporations  ;      Private     Corporations  ; 
Charter)  : 

power  of,  to  regulate  charges  of  railroads 31-39 

reservation  of  power  in.  . . .    39 

rights  to  resume  grants,  based  upon  abuse  of  franchise 40 

power  of,  cannot  be  exhausted 41 

general  statutes,  reserving  power  of 43 

power  of,  to  amend  charters 43 

to  repeal  charters 44 

reserved  power  iu,  to  dissolve  corporations 437 

where  it  is  subject  to  a  condition 439 

LEGISLATIVE  CONTROL  (see  Private  Corporations)  : 

over  public  corporations 28 

private 39 


Index.  815 

LEGISLATIVE  CONTROL  —  (Continued).  Sec. 

power  of  legislature  to  regulate  charges  of  railroad  and  rights  of 
public  interest 31-39 

LIENS  (see  Liens  on  Corporate  Property  ;  Priority  op  Liens)  : 

of  the  corporation  on  stock 122 

of  corporate  mortgages  and  bonds  secured  thereby 424 

on  corporate  property,  can  they  be  given  on  property  thereafter  to 

be  acquired  ? 425 

what  may  be  conveyed  by  corporate  mortgages 426 

rolling  stock,  how  considered  as  subject  to 427 

of  mechanics'  and  constructors' ...    429 

priority  between  a  mortgage  and  a  mechanic's  or  contractor's,  432-435 

provisions  of  statutes  in  reference  to 424,  425 

as  an  expedient  for  raising  money 424 

practice  of  issuing  preferred  stock  in  lieu  of 424 

corporations  may  mortgage  property  thereafter  to  be  acquired.  . . .  425 

by  mortgage,  what  liens  created  by 426 

on  rolling  stock,  character  of,  and  how  liens  created  on  ....   427,  428 

M. 

MANAGEMENT  (see   Members  ;  Corporate  Meetings)  : 

by  directors 57 

MANDAMUS  (see  Suits  at  Law  ;  Writ  ;  Remedy)  : 

the  writ  and  its  functions 454 

in  this  country 455 

when  issued 456 

in  the  discretion  of  the  court 456 

practice  and  proceedings  in  case  of 457 

office  of 458 

to  compel  the  performance  of  duty 458 

corporations  and  officers  to 458 

when  proceedings  have  been  commenced  in  equity  for  the  same 

purpose 458 

will  not  issue  where  the  duty  cannot  be  performed 458 

the  party  will  be  thereby  involved  in  doubtful  litigation,  458 

to  control  a  discretion 458 

instances  where  it  would  be  a  proper  remedy 458 

concurrence  of  facts  necessary  to  authorize  it 459 

when  it  will  not  be  issued 460 

resemblance  and  distinction  between,  and  injunction 461 

the  right  arm  of  law ^ 461 

against  private  corporations  and  officers 462 

to  compel  the  keeping  of  a  register  of  the  names  of  stockholders . .  462 
the  admission  of  a  director 462 


816  Index. 

MANDAMUS  —  (Continued).  Sec. 

to  compel  the  admission  of  members  to  privileges  of 463 

the  performance  of  any  specific  duty 463 

corporations  may  invoke  its  aid 463 

to  compel  supervisors  to  subscribe  for  stock  in  a  railroad  corpora- 
tion      463 

to  issue  county  bonds,  as  required  by  law 463 

the  return  of  bonds  unlawfully  issued 463 

commissioners  of  lands  to  issue  certificates 463 

county  officers  to  levy  a  tax 463 

inspection  or  delivery  of  corporate  books  or  papers 464 

will  not  be  granted  except  for  beneficial  purposes 464 

against  an  officer,  no  excuse  that  he  purchased  the  books  464 

as  a  remedy  against  railroad  corporations 465 

to  compel  railroad  corporations  to  transport  passengers  to  a 

particular  terminus 465 

in  various  cases 465 

writ,  to  whom  it  should  be  directed 466 

common-law  doctrine  as  to  sei-vice 466 

services  regulated  by  statute 466 

MAXIMS: 

lex  sempei'  debet  remedium 825 

ubi  jus  ibi  remedium 825 

executio  est  finis  etfructus  legis 373 

quifacit  per  aliumfacit  per  se 482 

applicable  to  corporate  agent 482 

illustration  of 481 

sic  utere  tuo  ut  alienum  non  Icedas 507 

damnum  absque  injuria 507 

MEMBERSHIP  (see  Stock  ;  Stockholdeks  ;  Meetings)  : 

under  general  statutes 57 

MECHANICS  (see  Liens)  : 

and  constructors'  liens 429,  430 

priority  between,  and  mortgages 431 

MEETINGS  (sec  Corpokate  Meetings)  : 

corporate,  how  will  of  the  members  of,  is  expressed 199 

notice  of 200 

common-law  doctrine  relating  to 201 

waiver  of 202 

presumption  of , 203 

adjourned 203 

general  and  special 204 

majority  at,  may  express  the  corporate  will 205 

right  of  pledgee  or  trustee  to  vote  at 206 


Index.  817 

MEETINGS  — (.Continued).  Sec. 

of  directors 207 

irregular,  may  be  valid 208 

can  they  only  act  as  a  board? 209,  210 

what  constitutes  a  quorum  at 211,  213,  213 

powers  of  directors  at 214 

mode  of  expressing  their  assent  at 215 

corporate  cannot  be  held  outside  the  state  where  created 216 

of  directors  may  be  held  outside  the  state  where  the  coi-poration 

was  created 216 

jurisdiction  of  courts  of  equity  to  restrain 217 

MEMBERS  (see  Stockholders;  Corporations;  Private  Corpora- 
tions) : 

under  general  statutes 56 

stockholders  in  joint-stock  corporations  are 58 

right  to  vote , 58 

by  proxy 62 

the  state  may  constitute  a  member 52 

admission  and  election  of  members  and  officers 53 

disfranchisement  and  expulsion  of , 54 

MORTAGE  (see  Liens)  : 

corporate  to  secure  bonds 424 

on  property  thereafter  to  be  acquired 425 

what  may  be  conveyed  by 426 

how  rolling  stock  is  to  be  treated  in  reference  to 427 

priority  between,  and  mechanics  and  constructors 229 

MUNICIPAL  SUBSCRIPTIONS  (see  Taxation)  : 

iu  aid  of  corporate  enterprises 

NAME  (see  Corporations)  : 

corporations  should  have 19 

NEGLIGENCE  (see  Torts  ;  Private  Corporations  ;  Railroad  Cor- 
porations) : 

corporate  liability  for 480 

wrongful  acts  of 480 

corporate  liability  for  agents'  assault 481 

battery 481 

maxim  quifacit  per  alium  facit  per  se  considered 482 

liability  of  principal  for  acts  of,  within  the  scope  of  agent's  author- 
ity    482 

maxim  illustrated 483-486 

real  test  of  liability  for 487 

implied  powers  of  agent  in  case  of 488 

^  103 


818  Index. 

NEGLIGENCE  —  (Continued).  Sec. 

not  necessary  that  the  agent  should  have  acted  under  directions . .  488 
liability  for,  if  the  agent  acted  within  the  scope  of  the  authority 

conferred 488 

matters  to  be  considered  in  case  of,  whether  the  act  is  within  the 

scope  of  agent's  authority 489 

liability  of  contractors  and  contractees  in  case  of 490 

corporate  liability  in  case  of  a  nuisance,  when  liable 491 

corporations  bound  to  same  care  as  natural  persons 4!;2 

railroad  corporations  not  insurers  against  all  casualties 493 

care  required  of  railroad  corporations  to  exempt  from  negligence 
on  account  of  injuries  from  defects  in  engines,  cars,  track,  etc.  495 

are  bound  to  keep  stations  and  premises  in  good  repair 496 

instances  where  the  corporation  was  held  liable 497 

duty  of  railroad  corporations,  in  order  to  avoid  liability  for 497 

duty  in  relation  to  the  stopping  of  trains 499 

to   allow   a   reasonable  time  for   passengers  to   leave  cars  at 

stations . . .' 499 

railroad  liability,  for  injuries  received  in  getting  on  train 499 

in  not  affording  reasonable  accommodations 500 

in  case  of  contributory  negligence 500 

duty  to  passengers 501 

implied  obligations  of . .    501 

liability  for  willful  wrongs  of  agents 503 

for  insults  inflicted 503 

delay  in  running  trains  504 

in  constructing  or  repairing  road 505 

nuisances 505 

defects  of  engines  and  machinery  by  which  injury  is  sus- 
tained     506 

application  of  the  maxim,  sic  titere  tuo   tit  allenum  non  Icedas,    in 

case  of 507 

contributory,  cases  relating  to ,    508 

consequential  damages  resulting  from 509 

in  railroad  corporations,  in  the  running  of  the  trains. .    510 

in  case  of  injury  to  persons  trespassing  upon  railroad  tracks 511 

children » 512 

animals 513 

in  various  other  cases 515 

NOTICE  (see  Cokporate  Meetings)  : 

of  meetings  to  be  given  members 200 

when  required  to  be  given  personally 200 

note  not  required,  when  the  time  and  place  of,  is  fixed  by  the 

constating  instruments 200 

by-laws  void,  when  repugnant  to  the  fundamental  law  . , 200 


Index.  819 

NOTICE  — (Continued).  Sec. 

absence  of  members  from  liome  no  excuse  of  notice n.  4,  200 

common-law  doctrine  relating  to ... .    201 

in  absence  of  regulation  by  the  constating  instruments  as  to  time, 

it  should  be  reasonable 201 

not  required  where  the  meetings  are  stated  and  general n.  5,  201 

should  state  the  time  and  place  of 201 

waiver  of 202 

when  presumed n.  2,  202 

presumed  by  attendance  of  all 202 

conferred  by  by-laws 279 

distinction  between  those  made  by  the  corporation  and  those 

mad«  by  directors 279 

NON-USER  (see  Quo  Waukanto;  Dissolution): 

as  a  ground  of  forfeiture  of  corporate  rights 419 

o. 

OFFICERS  (see  Agents;  Dikectors;  Corporations;  Private  Cor- 
porations) : 

implied  jjowers  by  virtue  of  the  office 170 

of  a  president 170 

cashier 170 

contracts  of,  ultra  vires,  when  void 179,  180 

distinction  between  executed  and  unexecuted  contracts  in  this 

respect 174 

P. 

PARTIES: 

to  a  suit  at  law 345 

PARTNERSHIPS: 

distinction  between,  and  corporate  associations 48 

PARTNERS: 

each  generally  liable  for  partnership  obligations 48 

are  agents  for  the  partnership 48 

distinction  between,   and  corporators 48 

PASSENGERS  (see  Nkgligknce)  : 

duty  of 501 

PERPETUAL  SUCCESSION  (see  Corporations)  : 

incident  to  corporations 50-53 

not  strictly  immortal 50 

duration  generally  limited 50 

continuance  of  legal  identity 51 

benefits  of 52 

members  may  change  but  the  corporate  identity  remains 63 

advantages  of,  in  various  entenir^ses 53 


820  Index. 

PERSONAL  LIABILITY    (see  Stockholders;   Members;  Agents; 

DiKEOTORS):  Sec, 

of  stockholders  under  statutes 63 

in  equity  to  creditors 129. 

of  directors,  where  there  is  want  of  good  faith 152,  153 

wliere  there  is  abuse  of  discretion n,  1,  1 52 

for  permitting  false  statements 150 

for  want  of  diligence  and  prudence 153 

where  they  purposely  injure  the  interests  of  the  corporation . .  .notes,  153 

where  they  act  without  authority 153 

for  property  of  the  corporation  acquired  to  the  prejudice  of  stock- 
holders or  creditors 154 

for  the  proceeds  of  stock  wrongfully  sold,  and  received  by  them.  154 

to  creditors,  for  dividends  received  by  them notes,  154 

for  any  fraudulent  or  wrongful  appropriation  of  corporate  funds 

or  property 155 

for  giving  away  corporate  funds  or  property 155 

for  disposing  of  the  stock  of  the  corj^oration  at  a  less  sum  than 

fixed  by  the  charter 155^ 

or  in  a  manner  contrary  to  tlie  provisions  of  the  charter 155 

where  they  disregard  by-laws 155 

where  they  manage  the  affairs  of  the  corporation  for  their  personal 

benefit 156 

as  trustees,  for  funds  or  property notes,  157 

in  case  of  misrepresentation  of  their  authority 192 

PLAINTIFF  (see  Suits  at  Law;  Suits  in  Equity;  Injunction;  Quo 
Warranto;  Mandamus): 

in  suits  against  the  corporation,  may  be  a  member 367 

may  be  a  stockholder  or  creditor 367 

PLEADINGS  (see  Suits  at  Law  ;  Suits  in  Equity  ;  Mandamus)  : 

in  suits  at  law 347 

in  quo  warranto 421 

in  mandaimis 457 

PRACTICE  (see  Quo  Warranto  ;  Mandamus)  : 

in  proceedings  by  quo  warranto 421 

mandamus 457 

PRESIDENT  (see  Officers;  Agents): 

powers  of 170,  and  notes,  171 

PRIORITY  (see  Liens)  : 

between  mortgage  and  mechanics'  and  contractors'  liens 229 

PRIVATE  CORPORATIONS  (see  Corporations;  Railroad  Corpora- 
tions) : 

distinction  between,  and  public ^»    ^^ 


Index.  821 

PRIVATE  CORPORATIONS  —  (Continued).  Sec. 

charter  of,   a  contract 3 

history  of 5 

variety  and  importance  of  modern 5 

objects  embraced  in 5 

nature  and  character  of 30-48 

distinction  between,  and  public  corporations 30 

legislative  control  over,  doctrine  of 32 

immunity  of  corporate  contract  does  not  exempt  property  of,  from 

legislative  control 33 

power  of  legislature  to  regulate  charges  of  railroads 34 

grant  of  franchises  to,  does  not  prevent  future  grants 38 

construction  of  charters  of 38 

charters  of,  reserved  power  to  amend,  alter  or  repeal 39,  42,  45 

in  case  of  mis-use  or  abuse  of 40 

cannot  be  exhausted 41 

under  general  statutes 42 

implied  jjowers  conferred  by 45 

powers  conferred  or  limited  by  statutes 46 

limited  by  the  object  of  the  grant 47 

distinction  between,  and  copartnership  associations 48 

composition  of 51 

government  may  constitute  a  member  of 52 

admission  and  election  of  members  of 53 

disfranchisement  and  expulsion  of  members  of 54 

membership  of,  under  general  statutes 56 

management  of,  by  directors 57 

shareholders  of,  are  members  of 58 

right  to  vote 58 

by  proxy 61 

what  they  are  presumed  to  know 63 

personal  liability  of,  under  statutes 63 

general  liability  of,  on  subscriptions 66 

liability  under  the  constating  instruments 68 

on  conditional  subscriptions 70 

stockholders,  conditional  subscriptions,  waiver  of 72 

when  void 73 

when  the  whole  contract  is  void 74 

subscriptions  in  contemplation  of  incorporation 77 

fraud  in  relation  to 78 

as  affected  by  statutes  or  constating  instruments 79 

defense  to  claim  for 80 

assessments  and  calls  for 83 

stock,  forfeiture  of 85 


822  Index. 

PRIVATE  CORPORATIONS— (Gout) nued).  Sec. 

stockholders,  stock,  assessments  of 86 

notice  of  assessments  of 90 

sufficiency  of 91 

dividends,  right  to 93 

may  sue  for 95 

stock  in  trust , 96 

right  to  sell  and  assign  shares 98 

liability  of  assignee  to  corporation ,■  101 

purcliaser  from  trustee 103 

right  to  vote 105 

liability  in  equity  to  creditors ^ 129 

right  to  access  to  books 106 

of  action  against  the  corporation 127 

preferred  stock,  rights  of  holders  of  107 

when  it  can  be  issued 108 

dividends  on ^ 108 

scrip  and  preliminary  subscriptions 109 

stock  of,  defined 110 

issuing  certificates  of  shares  of „ Ill 

fraud  in 113 

shares,  and  income  of , 114 

character  and  quality  of ...  114 

transfer  of 118 

transfer  refused  by  company 120 

liens  of  corporation  on 123 

corporation  may  be  compelled  to  transfer  on  the  books. .  125 

overissued  and  watered 130 

liability  for  torts,  when 281-285 

frauds 286 

of  agents 288 

particular  acts  of 290 

where  it  is  cause  of  injury 291 

in  case  of  fraudulent  act  of  an  agent,  they  accept  the  con- 
tract thereby  secured 292,  486 

torts,  real  test  of 487,  488 

of  agents,  implied  powers  of 488 

matters  to  be  considered  in 488 

whether  the  act  is  within  the  scope  of  authority 488 

of  contractors 489 

nuisances 491 

negligence   492 

not  insurers  against  all  casualties. 493 

relating  to  engines,  cars,  etc 494 


Index.  823 

PRIVATE  CORPORATIONS  —  (Continued).  *  Sec. 

liability   for   negligence   in   case  of  injury   received   in  getting 

on  and  off  a  train , 499 

negligence,  railroad,  duty  to  furnish  reasonable  accommodations.   500 

of  passengers 501,  503 

liability  for  wrongs  generally 503 

of  railroads  for  delays 504 

in  construction  of  road 505 

repairing  of ; 505 

nuisances 505 

defects  in  engine  and  machinery , 506 

application  of  maxim  sic  utere  tuo,  etc.,  to  case  of 507 

application  of  doctrine  of  contributory  negligence  in  case  of 508 

for  consequential  damages 509 

in  running  trains 510 

liability  in  case  of  injury  to  trespassers  upon  the  track 511 

children 512 

animals 513 

in  other  cases 515 

PROCESS  (see  Suits  at  Law  ;  Suits  in  Equity  ;  Injunction  ;  Execu- 
tion ;  Mandamus)  : 
against  coi'porations,  general  principles  relating  to 346 

PROOF  (see  Evidence  ;  By-Laws  ;  Corporate  Seal)  : 

of  corporation 352 

corporate  records 354 

PUBLIC  CORPORATIONS  : 

distinction  between,  and  private 3,  30 

charter  of,  no  contract  with  the  state 3 

legislative  control  of 31 

instituted  without  consent  of  members 30 

powers  confeiTcd  upon,  are  not  vested  rights  as  against  the  state. .     31 
laws  which  establish,  are  not  contracts  but  ordinary  acts  of  legis- 
lation       31 

PUBLIC  USE  (see  Eminent  Domain)  : 

what  is,  in  case  of  eminent  domain 441 

who  to  determine  the  question  in  case  of  the  exercise  of  the  right 
of  eminent  domain 442 

Q. 

QUASI  CORPORATIONS  (see  Corporations)  : 

provisions  in  reference  to 4 

condition  to  exempt  members 4 

QUO  WARRANTO  (see  Dissolution)  : 

writ  of,  at  common  law 443 


g2'4  Index. 

QUO  WARRANTO  —  (Continued).  Sec. 

proceedings  in  the  nature  of 413 

remedy  regulated  by  constitutions  and  statutes 414 

as  a  remedy  against  private  corporations 415 

for  non-user  and  mis-user  of  the  franchises 416 

in  case  of  unlawful  usurpation  of  an  office  in  a  private  corpo- 
ration   417 

possession  and  user  of  an  office  essential 418 

on  the  ground  of  forfeiture 419 

in  case  of  the  destruction  of  the  objects  of  a  corporation 420 

pleadings  and  evidence 421 

judgment  in  case  of 422 

R. 

RAILROAD  CORPORATIONS  (see  Cokporations  ;  Torts  ;  Negli- 
gence ;  Contracts  ;  Agents)  : 

negligence,  general  doctrine  of  liability  for. .- 480 

of  servants , 480 

illustration  of  doctrine 481 

maxim  relating  to 482 

illustration  of 483-487 

real  test  of  liability  for 487 

implied  powers  of  agents  in  case  of 488 

matters  to  be  considered  in  determining  liability  for 489 

of  contractors 490 

of  contractees 490 

liability  for  nuisances,  when 491 

bound  to  same  degree  of  care  as  natural  persons 492 

degree  of  care  required  of  them 492 

not  insurers  against  all  casualties 493 

care  required  of  them,  relating  to  engines,  cars,  tracks,  etc 494 

instances  of  negligence,  where  held  liable 495 

duty  of 496 

when  liable  for  injuries  in  getting  on  the  train  of 499 

duty  of,  as  to  accommodations 500 

liability,  as  affected  by  contributory  negligence 500 

duty  to  passengers 501 

liability  for  willful  wrongs  of  agents 503 

duty  in  relation  to  the  running  of  trains 504 

liability  for  delay  in 505 

negligence  in  constructing  road 506 

repairing 506 

defects  in  engines  and  machinery 506 

application  of  the  maxim  sic  utero  tuo  ut  alienum  non  loRdas,  to.  507 

as  afiected  by  contributory  negligence 508 


Index.  825 

RAILROAD  CORPORATIONS  —  (Continued).  Sec. 

liability  for  consequential  damages 509 

for  injuries  iu  the  running  of  trains 510 

in  case  of  injuries  resulting  to  trespassers  ujjon  the  track  ....  511 

injuries  to  children 513 

animals 513 

for  torts  of  servants  in  other  cases 515 

RECEIVER  (see  Execution)  : 

■when  appointed 377 

duty  on  appointment 377 

judgment  creditor's  right  to,  when 378 

general  right  to,  of  judgment  creditors 379 

where  an  execution  is  returned  unsatisfied 380 

functions,  powers,  and  duties  of 381 

REMEDY  (see  Suits  at  Law  ;  Suits  in  Equity  ;  Injunction  ;  Man- 
damus) : 

at  law,  by  and  against  corporations  and  others 325-356 

in  equity 357-373 

general  principles  relating  to 357 

against  corporations 357 

by  and  against  various  parties 358 

directors 359 

at  law  325-356 

in  equity 356,  357-373 

of  various  parties 358 

against  stockholders  in  equity 363 

of  stockholders  to  restrain  acts  vXtra  vires 364 

of  creditors  in  eqviity  for  misappropriation  of  corporate  funds ....    365 

where  an  injunction  will  be  granted 370 

not  be  granted 371 

specific  performance : 373 

by  injunction 364 

to  restrain  unlawful  acts  of  directors 364,   365 

in  equity  against  directors 

of  stockholders 364 

of  creditors  for  misapplication  of  corporate  funds 365 

for  unpaid  subscriptions 366 

where  an  injunction  will  be  granted 370 

not  be  granted 371 

for  si^ecific  performance  of  a  contract  for  a  right  of  way 373 

receiver,  right  of  creditor  to 378 

by  execution 373-377 

where  more  land  is  taken  under  right  of  eminent  domain  than 

is  necessary 406 

104 


826  Index. 

REMEDY  —  (Continued).  Sec. 

by  quo  warranto 412-423 

proceedings  in  the  nature  of 411 

regulated  by  law 412 

against  private  corporations 415 

for  mis-user  and  non-user  of  the  franchises 416 

for  unlawful  usurpation  of  an  oflBce  in  a  private  corpora- 
tion       417 

possession  of  the  assumed  office  essential 418 

non-user  as  a  ground  of  forfeiture 419 

in  case  of  the  destruction  of  the  objects  of  the  corporation,  420 

pleadings  and  evidence  in  case  of 421 

judgment  in  case  of 423 

by  mandamus 454 

the  writ  and  its  functions 454 

in  this  country 455 

when  issued 456 

in  the  discretion  of  the  court 456 

practice  and  proceedings  in  case  of 457 

the  writ  and  its  functions,  office  of 458 

to  compel  the  performance  of  duty 458 

corporations  and  officers  to 458 

when  proceedings  have  been  commenced  in  equity  for 

the  same  purpose 458 

will  not  issue  where  the  duty  cannot  be  performed 458 

the  party  will  be  thereby  involved  in  doubtful  liti- 
gation    458 

to  control  a  discretion 458 

instances  where  it  would  be  a  proper  remedy 458 

concurrence  of  facts  necessary  to  authorize  it 459 

■when  it  will  not  be  issued 460 

resemblance  and  distinction  between,  and  injunction 461 

the  right  arm  of  the  law 461 

against  private  corporations  and  officers 463 

to  comjDel  the  keeping  of  a  register  of  the  names  of  stockholders,  462 

the  admission  of  a  director ...    462 

the  admission  of  a  member  to  the  privileges  of 462 

the  performance  of  any  specific  duty 462 

corporations  may  invoke  its  aid 463 

to  compel  supervisors  to  subscribe  for  stock  in  a  railroad  cor- 
poration     463 

to  issue  county  bonds,  as  required  by  law 463 

the  return  of  bonds  unlawfully  issued 463 

^     commissioners  of  lands  to  issue  certificates 463 

county  officers  to  levy  a  tax , 463 


Index.  827 

REMEDY  — (Continued).  Sec. 

by  mandamus,  to  compel  inspection  or  delivery  of  corporate  books 

or  papers 464 

will  not  be  granted  except  for  beneficial  purposes 464 

against  an  officer,  no  excuse  that  he  purchased  the  books 464 

as  a  remedy  against  railroad  corporations 465 

to   compel  railroad   corporations  to  transport  passengers 

to  a  particular  terminus 465 

in  various  cases 465 

writ,  to  whom  it  should  be  directed 466 

common-law  doctrine  as  to  service 466 

service  regulated  by  statute 466 

RESERVATIOIST  (see  Private  Cobporations  ;  Taxation)  : 

of  the  powers  of  the  legislature  in  resjject  to  corporate  grants ....  39 

power  cannot  be  exhausted 41 

general  statutes  of 42 

of  right  to  amend  charter 43 

general  laws  relating  to 44 

RESERVED  POWER  (see  Corporation;  Charters;  Dissolution): 

in  the  legislature  to  alter  or  amend  charters 89-40 

resume 42^4 

dissolve 437 

RIGHT  OF  WAY  (see  Suits  in  Equity)  : 

where  specific  performance  of  contract  for,    may  be  enforced  in 
equity 372 

ROLLING  STOCK: 

what  is 427 

character  and  quality  of 427-429 

how  considered,  as  to  mortgage  liens 424-427 

S. 

SEAL  (see  Corporate  Seal  ;  Contracts)  : 

corporate,  definition  and  history  of 244 

private  history  of 245 

how  it  came  into  use 246 

corporate,  incident  Of  a  corporation 247 

former  doctrine  relating  to 248 

origin  of  the  law  relating  to 249 

present  doctrine , .   251 

what  is 254 

by  whom  it  should  be  affixed 256 

where  an  acknowledgment  is  required 257 

doctrine  as  to,  in  the  appointment  of  agents 258 


828  Index. 

SEAL  —  (Continued).  Sec. 

corporate  authority  may  be  conferred  without 259 

as  evidence 260 

not  necessary  in  the  appointment  of  agents 258,  259 

SERVANTS  (see  Agents;   Officebs;    Negligence;    Tobts;    Con- 
tracts) : 
liability  of  corporations  in  case  of  negligence  of 480-615 

SHARES.    (See  Stock;  Shabeholders ;  Private  Cobpoeations.) 
SHAREHOLDERS  (see  Stockholders  ;  Membebs)  : 

are  members ;  right  to  vote 58-61 

SOLE  CORPORATION  (see  Cobpobations  ;  Definitions)  : 

description  of 2 

the  king  is 2 

an  English  invention 2 

SPECIFIC  PERFORMANCE  (see  Suits  in  Equity)  : 

in  case  of  a  contract  for  a  right  of  vray -. 372 

STOCK  (see  Corporations;  Private   Corporations;  Stockholders): 

ownership  of,  constitutes  membership 58 

right  to  vote 58 

by  proxy 63 

forfeiture  of 85 

assessments  of 82,  86 

notice  of 90 

sufficiency  of 91 

dividends,  owners'  right  to 92 

may  sue  for  95 

on,  in  trust 96 

right  to  sell  and  assign  shares 98 

liability  of  assignee  of,  to  the  corporation 101. 

purchase  from  a  trustee 102 

owners  in  equity  to  creditors 129 

preferred,  rights  of  holders  of 107 

when  it  can  be  issued 108 

dividends  on 108 

defined 110 

certificates  of  shares  of 111 

of,  fraud  in  issuing 113 

income  of 114 

character  and  quality  of 114 

transfer  of,  and  how  made 118 

remedy  where  the  corporation  refuses  to  transfer 120,  125 

liens  of  corporation  on 122 

when  subject  to  attachment  against  an  assignor 126 


Inbrx.  829 

STOCK  —  (Continued).  Sec. 

overissued   and  watered 130 

by-laws  regulating  transfer  of 275,  276 

providing  for  a  corporate  lien  on 277,  278 

STOCKHOLDERS    (see  Stock   Corpouations  ;  Private    Corpora- 
tions) : 

generally  no  personal  liability  of ^,.      48 

liable  on  obligations  to  the  corporation 48,     66 

distinction  between,  and  partners 48 

are  members  of  the  corporation 58 

right  to  vote 58 

by  proxy 61 

what  they  are  presumed  to  know , .     63 

personal  liability  of,  under  statutes 63 

general  liability  of,  on  subscriptions 66 

liability  under  statutes  and  constating  instruments 67 

on  conditional  subscriptions 67-76 

where  the  condition  is  waived    73 

void 73,     74 

on  subscriptions  in  contemplation  of  incorporation 77 

subscriptions  of,  obtained  by  fraud,  generally  void 78 

as  affected  by  statutes  or  constating  instruments 79 

cases  where  defense  to,  may  be  made 80 

assessments  on  and  calls  for 86-91 

stock,  when  it  may  be  forfeited 85 

notice  of  assessment  of 90 

sufficiency  of 91 

dividends,  his  right  to  them 92 

may  sue  for 95 

on  stock  held  in  trust 96 

right  to  sell  and  assign  shares 98 

liability  of  assignee  to  the  corporation 101 

to  the  cestui  que  trust 102-1 04 

right  to  vote  at  corporate  meetings 105 

when  liable  in  equity  to  creditors 129 

right  of  access  to  books 106 

action  against  the  corporation  when 127 

preferred  stock,  rights  of 107 

when  it  may  be  issued 108 

dividends  on 108 

scrip  and  preliminary  subscriptions 109 

rights  in  equity 355 

may  restrain  by  injunction  unlawful  acts  of  directors 360-363 

may  commence  action  for  himself  and  others  having  a  common 

interest  ....   360 

rights  of,  in  equity,  where  the  corporation  refuses  to  sue 360 


830  Indkx. 

STOCKHOLDERS  —  (Continued).                            _  Sec. 

rights  against  rlie  illegal  acts  of  other  stockholders 361 

to  prevent  acts  ultra  vires notes,  361 

shares  and  income,  character  and  quality  of 114 

certificates,  transfer  of,  how  made 118 

■when  refused  on  the  books  of  the  corporation 120 

when  the  corporation  may  be  compelled  to  transfer 125 

of  overissued  and  watered  stock 130 

lien  of  the  corporation  on  their  stock 122 

stock  when  subject  to  attachment  or  execution  against  the  assignor,  126 

right  of  action  against  the  corporation 127 

injunction    may   restrain   unlawful   disposition  of  the  fimds   by 

directors 364 

may  enjoin  a  violation  of  the  corporate  franchise 364 

liability  in  equity  for  dividends  received  on  shares,   where  cred- 
itors remain  unpaid 365 

in  such  cases  may  be  compelled  to  pay  pro  raSa ». 365 

right  of,  to  restrain  directors  from  acts  ^dtra  vires 366 

the  corporation 366 

change  of  the  business 366 

SUCCESSION  (see  Perpetual  Succession)  : 

consideration  of ' 49,  50 

SUITS  AT  LAW  (see  Suits  in  Equity;  Mandamus;  Quo  Warranto): 

right  of  a  corporation  to  sue 325 

liability  to  be  sued 325 

corporation  liable  to  be  sued  by  members.    327,  328 

where  suit  may  be  brought .  . .  , 329 

in  case  of  foreign  corporations,  not  citizens 330 

when  they  may  be  brought  in  the  federal  courts 334 

corporation  may  be  an  alien  under  the  judiciary  act 335 

a  citizen  under  the  U.  S.  constitution 336,  337 

and  under  act  of  congress  for  the  removal  of  causes .  .  338-342 
rights  of  corporations  in  case  of,  under  the  national  banking  law, 

342-344 

parties  to  suit 345 

process  in 346 

pleadings  in 347 

general  denial,  effect  of 351 

in,  when  corporation  is  estopped  to  deny  its  existence 349 

when  party  dealing  with  the  corporation  is 348 

SUITS  IN  EQUITY  (see  Injunction): 

by  and  against  corporations 357 

remedies  of  various  parties  in .' 358 

against  directors 359-  863 

stockholders'  liability  in 363 


Index.  831 

SUITS  IN  EQUITY  —  (Continued).  Seo. 

stockholders'  rights  to  restrain  contracts  ultra  vires 804 

creditors'  rights  in,  for  misappropriation  of  corporate  funds.   3G5,   366 

doctrine  as  to  parties  in , 367-3G9 

where  an  injunction  will  be  granted 370 

not  be  granted 371 

for  specific  performance,  right  of  way 373 

T. 

TAXATION: 

defined,  necessity  of 467 

should  be  equally  imposed 468 

difficulty  of,  attending  railroad  property 469 

statutes  regulating 470,  471 

what  corporate  property  is  taxable ;  double  taxation 473 

corporate  property  and  interest  subject  to 473 

exempt  from 473 

exemption  statutes  sustained .  474 

compensation  paid  in  lieu  of 474 

where  a  sum  is  agreed  upon  in  lieu  of 474 

the  right  to,  cannot  with  safety  be  contracted  away 474 

but  the  current  of  judicial  decisions  sustains  the  right  to  contract 

in  reference  to 474 

the  right  of  the  legislature  to  contract  for  exemption  from,  danger- 
ous to  the  government 474 

exemptions  from,  indications  that  the  doctrine  will  not  be  ex- 
tended    475 

recent  doctrine  of  the   supreme  court  of  the  United  States 

on  the  subject 475 

where  corporate  property  is  used  in  diflferent  states 476 

exemption  of  U.  S.  stocks  from 477 

from,  under  the  national  banking  law 478 

on  account  of  municipal  subscriptions  to  corporate  enterprises. ..  .  479 
TELLER  (see  Officers)  : 

of  a  bank,  authority  of notes,  171 

may  receive  deposits 171 

authority  to  certify  deposits  and  checks 171 

paying,  of  a  bank,  authority  to  certify  to  checks notes,  170 

TORTS   (see   Negligence  ;    Damages  ;    Railroad   Corpokations  ; 
Fraud)  : 

corporate  liability  for 281 

general  principles  relating  to 281,  283 

of  corporations,  when  liable  for 283 

may  do  wrongful  acts,  or  cause  them  to  be  done 285 


832  Index. 

TORTS  —  (Continued).  Sec. 

of  corporations,  frauds  of,  or  their  agents 286,  288 

by  agents 288 

particular  acts  of 290 

occasion  of  loss 291 

in  securing  contracts 292 

when  responsible  for,  on  contracts 292,  293 

right  to  repudiate  contracts  for,  limited  to  original 

parties 254 

ratification  of  contract  eflEected  by  the  fraud  of  the  agent, 

295,  296 

liability  for  other  wrongs 297 

assault  and  battery  of  agents 298,  299 

trespass  to  property 300,  301 

negligence  of  agents 302 

limitation  of,  in  certain  cases 303-307 

complications  arising  from  successive  negligence . .  .   307 

damages  in  case  of 311 

exemplary  damages  in  case  of 313 

are  they  applicable  to  ? 815 

fextreme  doctrine  of 316 

gross  negligence  of,  and  exemplary  damages 317 

inconsistency  of  the  doctrine  of,  as  applicable  to 318 

recent  examination  of  tlie  doctrine  as  applicable  to 319 

conflict  growing  out  of  the  doctrine 323 

damages  against,  for  injuries  resulting  in  death 323 

elements  of  damages  in  such  cases , 324 

liability  of  corporation  for  agents 480-516 

instances  of 481,  515 

TRAIN: 

railroad,  duty  of  corporation  in  reference  to  stopping 497,  498 

liability  for  injuries  in  getting  on 499 

duty  of  passengers  in  reference  to 501 

liability  for  delay  in  running 504 

injury  in  running 510 

injury  to  trespassers  on  the  tracks  by 511 

children 512 

animals 513 

TRESPASSERS  (see  Negligence;    Touts;  Contributory  Negli- 
gence) : 

upon  railroad  tracks,  how  affects  rights  of,  for  injury 511 

in  the  case  of  children 513 

in  case  of  animals 513 

TRUSTEE  (see  Directors;  Injunction;  Suits  in  Equity): 

directors  are,  of  stockholders  and  creditors 359 


Index.  833 

TURNPIKE  CORPORATIONS:  Sec. 

grant  to,  for  the  construction  of  a  road  between  two  places,  does 
not  prevent  grant  to  other  companies  on  different  routes 38 

u. 

ULTRA  VIRES   (see  Contracts;  Corporate  Contracts;  Injunc- 
tion ;  Suits  in  Equity)  : 

doctrine  of 229-241 

different  senses  in  which  the  term  is  used 230 

contracts,  not  always  void,  or  voidable 231-241 

distinction  between  executed  and  unexecuted  contracts  in  the  ap- 
plication of  the  doctrine 233,  234 

when  neither  party  can  avoid  the  contract  though 235 

common  principles  of  justice  require  its  execution 236 

form  of  action  in  case  of.    237 

applied  to  agents 238 

doctrine  of,  in  case  of  negotiable  instruments     239 

necessary  or  implied  powers  not 240 

summary  of  the  law  relating  to 241 

w. 

WRIT  (see  Quo  Warranto  ;  Mandamus  ;  Injunction)  : 

of  quo  warranto,  at  common  law 412 

proceedings  in  the  nature  of .  413 

remedy  regulated  by  constitutions  and  statutes 414 

as  against  private  corporations 415 

on  the  ground  of  mis-user  and  non-user  must  be  clear  . .  416 
for  unlawful  usurpation  of  an  office  in  a  private  corpora- 
tion    417 

on  the  ground  of   assumed  office  possession  and  user,  es- 
sential    418 

non-user  of  the  franchise  as  ground  of  forfeiture 419 

on  the  ground  of  destruction  of  the  object  of  the  corporation.  . .  420 

pleadings  in  case  of 421 

judgment  in  case  of 422 

mandamus 454 

its  functions 454 

in  this  country 455 

when  issued,  discretion  of  the  court 456 

practice  and  proceedings  in  case  of 457 

office  of  the  writ 458 

what  necessary  to  authorize  it 459 

when  it  will  not  be  issued , 460 

resemblance  and  distinction  between,  and  injunction 461 

105 


s34  Iptoex. 

WRIT  — rContlnuuflX  -  Sec, 

^  against  private  corporations  and  its  officers 462 

corporations  may  invoke  its  aid 4G3 

to  compel  inspection  of  corporate  books  and  papers 4G4 

as  a  remedy  against  corporations 465 

to  whom  directed  and  service 466 

WRONGS  (see  Nkgligence  ;  Torts  ;  Fraud  ;  Agents)  :  -. 

of  corporation  by  agent,  liability  for 480-515 

willful 503 


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